Tricks Of The Trade: Lighting ROI Discussions
By B. Kevin Folsom, CEP
Published in the July/August 2014 issue of Today’s Facility Manager
Q What is the most helpful piece of content (or tool) a lighting provider could possibly arm a facility manager with to help them present the return on investment (ROI) case to senior leadership? What are the most convincing arguments a facility manager has to senior leadership when it comes to energy savings or upgrading to LED?
Name withheld by request
AMost institutions plan their funding sources on an annual basis. This can be a challenge for facility managers because facility cost is not needed evenly on an annual basis. Some component life cycle items are five years, others 10 years, and major components such as roofing and HVAC are 20 years. This requires institutions to think long-term for what is called capital renewal, whereby they save a 10th annually of what is needed every 10 years (few actually do this).
Lighting has been one of those items that falls in the middle—not quite enough that it’s needed annually, but too often that it does not fall into the major capital renewal categories because it’s needed every three or so years. All this is about to change for those considering LED lighting since these are expected to last 10+ years; however, we have to make the transition from old to new in order to get there.
Since LED lighting will save a fair amount of energy cost, the best thing a lighting company can do is to help the institution to see the long term capital renewal planning that will be required for LED lighting so they can begin setting aside those funds before the energy savings goes back into the general fund. Don’t help the facility manager see how much money they will save; help them to see how they can fund their lighting maintenance in perpetuity.
Specifically, providers should help facility managers to build a plan under which the project first costs can be covered with the first year of energy savings and to identify how much would be spent on lighting for replacements in that budget year regardless of an upgrade.
Folsom is the director of campus operations at Trinity Christian Academy in Addison, TX. Previously, he was director of facilities & plant operations, and energy procurement & efficiency at Dallas Theological Seminary in Dallas, TX, where he worked for 25 years. He is the recipient of numerous awards from the associations of Higher Education Facility Officers and Energy Engineers for facility and energy management practices, industry leadership and involvement, and writing.