What is lighting total cost of ownership and why is it important?

The lighting industry is a highly dynamic and exciting place to be right now. Why is this? Mainly, it is because of the dramatic changes forced by increasingly tough energy saving and climate change legislation, but also by the very rapid pace of new lighting technology development - particularly LEDs - for general lighting.

Energy saving and climate change are part of the increasingly urgent drive to reduce energy consumption and save money. With lighting representing up to 25% of a household's electricity consumption, it contributes greatly to overall energy consumption and CO2 emission.

In the UK and Europe, the highly inefficient incandescent (GLS) lamp bulb is effectively banned, and the main modern energy saving lamp types that replace incandescents are linear fluorescent tubes, compact fluorescent lamps (CFLs), high intensity discharge (HID) lamps and LEDs. It is the latter that are providing a real revolution in general lighting. LEDs produce instant bright, pure deeply saturated colours, plus warm and cool white. LED lighting may not always be the most efficient available, because they are usually clustered, but even so, the energy consumption is typically reduced by around 50 - 60% compared with equivalent CFLs.

So choosing the most energy efficient lamps - typically LED or CFL - for a given application is a 'no brainer'. Or is it…?

Cost issues:

Well, yes, it is, but certain aspects do have to be considered. To start with, although LED lighting technology has been available for an increasing range of general lighting applications, including in homes, the fact is that the initial relatively high cost (compared with most conventional lamp types) has put many building owners and managers off; householders even more so. Indeed, LED lighting is widely seen as being very expensive.

Firstly, looking at the price issue (first cost), LED light sources are far more expensive up front than the now almost extinct incandescent bulbs. They are also significantly more expensive than most fluorescent lights, including CFLs. In some cases, LED lamps may be a few tens of times more expensive to buy, though this difference is always reducing as LED lighting developments continue unabated, resulting in every high price/performance ratios. So, LED lamps are continuing to become cheaper to buy.

Total cost of ownership:

But they are still expensive to buy, as are - to a lesser extent - other forms of high quality lighting. What will make the difference? The answer is to look carefully at the total cost of ownership (TCOO).

At its most basic, TCOO looks at the cost of running a lamp - the electrical energy consumed compared with that of other lamp types. For example, a 100W incandescent light bulb will, over 50,000 hours (which would require replacing it 50 times with a new bulb), typically use over 5,000kWhr of electricity. This costs a lot of money. A 100W incandescent light bulb actually costs around £320 to operate over 50,000 hours.

By contrast, a comparable typical modern 10W LED light costs a lot more to buy, but typically uses only 10.8W of electricity, representing a total of 540kWhr over 50,000 hours. This is nearly a factor of 10 cheaper to run.

Since incandescent lamps can no longer be used for general lighting in the UK (except for a very few special exceptions), this no longer matters, but it illustrates the point - that first costs should always be considered against lifetime energy costs, especially as Haitz's Law states that every decade, LED prices fall tenfold, while performance is improved twenty-fold. This has been the case over many years of development. While Haitz's Law will not keep for ever, the pace of LED lighting developments is such that both purchase costs and running costs are continuing to fall.

Therefore, on a TCOO basis, LEDs are already cost-effective in many applications, even though the first cost is several times more than conventional equivalents, lumen for lumen. This situation will continue to improve as development continues.

Other TCOO considerations:

But this is not all, as LED lamps last far longer even than long-lived fluorescent lamps and CFLs - longer also than other convention lamp types. LED lamps typically have lives ranging from 20,000 hours to 80,000 hours, depending upon colour, application, operating/ambient temperature and luminaire type. The LED chips will degrade to reduce the luminous flux over the life cycle, but over a very long period. Even then, good quality LED chips will rarely fail completely - at least not for many years; they will just become slowly dimmer and, apart from an occasional clean, need little or no maintenance.

CFL lifetimes, however, vary from 1200 hours to 20,000 hours - typically a much shorter life, so although CFLs are significantly cheaper to buy than the equivalent LED lamp, they will need replacing more often. In this respect, therefore, the use of LED lamps helps keep maintenance and replacement costs low - another essential consideration.

An important point to remember is that when using an energy efficient and optically superior luminaire, higher initial costs can be quickly offset by using fewer luminaires. A smaller number of luminaires results in energy consumption and maintenance savings over the life of the product.

Clearly, the major issues are the capital cost of investment against the benefits in time, particularly of maintenance and lamp replacement costs. Of course the older the technology proposed as an alternative (T8 for example), or to be replaced, the easier the arguments.

In terms of carbon:

However, the true TCOO of any energy-using product, such as lighting, goes far beyond purchase price and running costs. The real cost to society at large includes the cost and environmental damage caused by mining the raw materials to manufacture the lighting product, the cost of manufacture in terms of the plant's impact of the environment (energy used and emissions produced), the packaging of the product and the later recycling (if at all) of packaging waste, transport of the products to distributors and end-users, plus energy, carbon emission and other costs over the product's working life.

The social and economic costs of recycling the product at the end of its working life are also important and Recolight (www.recolight.co.uk) is probably the best source for an impartial resource to this.

In addition, there are other more subtle issues of resources management and responsible manufacturing with regard to rare earths and phosphors currently in short supply and increasing in cost, that can add an extra dimension to the product(s) concerned. Such issues also accentuate the fact that a new technology is not just end-user TCOO, but a TCOO for the Global Village.

All of these parameters measure the true TCOO of any product, though only purchase price and running costs will be of significant interest to end-users, while installation costs will catch installers' attention.

Energy saving lighting should nearly always be used as it saves money for the end-user (often lots of it) while also helping to reduce man-made climate change, which, despite denier's usually biased claims, is becoming rapidly worse and is probably the greatest threat that currently exists to mankind and the global ecological balance.

For this reason alone, use of energy saving lamps, such as LEDs, good modern fluorescents and CFLs, plus the latest HID lamps, should be mandatory in developed countries such as the UK and Australia, but electrical contractors and installers can help 'sell' the latest energy-saving lamp technologies and controlgear to customers by simply emphasising the total cost of ownership benefit. In short, end-users can save significant amounts of money over time compared with using cheap low-cost lamps.

Even so, there are other issues again on sustainability which do not merely have an affect on a social level, but rather on an economic level. For example, new technologies allow landlords to meet certain technology requirements for building efficiencies that are a requirement for them to continue to let their properties.

How to determine TCOO?

For larger and more complicated lighting installations, software is available from a number of lighting manufacturers that provides an analysis and comparison of TCOO for various different lighting systems. Typically, such software may evaluate the purchase, maintenance and operating costs of lighting systems. Comparisons can be based - for example - on any combination of installation, energy consumption and maintenance costs. This allows a comparison to be made for each lighting system's net current value and payback time.

In conclusion:

The LED lighting industry has long been driven by Haitz's Law, which states that each decade LED prices fall by a factor of 10, while performance improves by a factor of 20. The industry has followed this law quite closely for a decade or so, and is still doing so - though it won't last for ever. Costs, therefore, are coming down fast, while LED performance is improving all the time.

Therefore, there is no reason why electrical contractors and installers cannot benefit from the massive potential business opportunities presented. Most lighting engineers and designers have embraced LEDs for general lighting already, as have many architects, so why not you too? Most importantly, you can help sell the concept of using energy-saving lighting technologies, especially LED, based upon the concept of total cost of ownership, and gain extra business into the bargain.