Getting Started

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By joining GreenLight, you have chosen to adopt energy-efficient lighting solutions which improve or maintain lighting quality and which are highly profitable. To help you choose the most suitable options, you can follow the steps below:

  1. Survey the lighting characteristics in your existing spaces
  2. Choose energy-efficient alternatives
  3. Assess their profitability
  4. Verify the energy savings
  5. Communicate your success

The GreenLight Endorsers can help you in that task. Do not hesitate to contact them.

Survey your Lighting

  • Download the lighting survey form to survey your lighting installations (in PDF 115 KB). Please note that the use of this form is optional.

  • Visit the spaces where a lighting upgrade would be potentially profitable. Example of such spaces are those with: long operating hours, no control system, intermittent occupancy pattern (offer good pre-conditions for occupancy sensors), low-efficient lighting technologies which can be easily replaced by more efficient products, no maintenance plan, etc. 

  • Use the form to record on-site the characteristics of these spaces (Baseline Lighting fields).

  • Go to the next sections (Choose Options and Assess Profit) to compare your installations with best available technologies and practices and assess the cost-effectiveness of adopting these solutions. You can contact the GreenLight Endorsers to help you in that task.

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Choose Options

There is a large variety of lamps, each used for different applications. The most common families are described below in terms of performance, applications, power range, colour temperature, colour rendering index (CRI), luminous efficacy and lifetime. 
Energy-efficient alternatives are identified by 

 

List per Family

 

 

List per Application

Incandescent Lamps (definition)
    Tungsten Standard Lamps (definition)
      General Lighting Service
      Reflector
    Tungsten Halogen Lamps (definition)
      Line-Voltage
      Very-Low Voltage

 
 

- For direct substitution of an existing lamp (depends on lamp see below)

- For a new installation (depends on application)

Fluorescent Lamps (definition)
    Linear Fluorescent Lamps (definition)
      38mm-diameter (T12)
      26mm-diameter (T8)
      16mm-diameter (T5)
    Compact Fluorescent Lamps (definition)
      Integral (self-ballasted)
      Dedicated (pin-based)
    Induction Lamps (definition)
      Fitting-based
      Self-ballasted

 
 

For direct substitution of General lighting service incandescent lamp:

Other Discharge Lamps (definition)
   Metal Halide Lamps
    High Pressure Mercury Lamps (definition)
      Standard
            Blended lamp
    High Pressure Sodium Lamps (definition)
      Standard
      "White sodium”

   Low Pressure Sodium Lamps
  For direct substitution of reflector incandescent lamp:
  Other Lamps
   Light-Emitting Diodes
   Microwave Lamps
  For direct substitution of 38mm-diameter linear fluorescent lamp:
      For direct substitution of high pressure mercury lamps:
      For a NEW lighting installation where colour rendering is:

    Very important (CRI = 90-100, e.g. in art galleries)

    Important   (CRI = 80-89 e.g. in offices, schools)

    Secondary  (CRI = 60-79  e.g. in workshops)

    Not important  (CRI less than 60 e.g. road lighting)

 

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Assess Profit

The GreenLight Programme encourages its Partners to tap a large reservoir of profitable investments without the need for specific financial incentives from the Commission. The GreenLight investments use proven technology, products and services which can reduce lighting energy use 30% to 50%, earning rates of return between 20% and 50%.

 


How to calculate profitability ?
(with extracts from the EC Joule-Thermie Maxibrochures on energy-efficient lighting)

Improvements in energy efficiency generally have an initial cost which then leads to reduced future energy costs. An existing lighting installation may be providing suitable lighting early in the morning, but remain switched on when daylight provides adequat lighting in the space later in the day. The installation of an automatic control system to turn off the lighting will entail the expenditure of an initial sum of money, but future running costs will be reduced. Is this future saving sufficient to justify the initial expenditure? In order to decide this question, first of all the costs involved must be added together, and then the benefits, in the form of energy savings, evaluated. An assessment of the cost effectiveness of the proposed system can be made in a number of ways.

Costs: They fall into two categories: initial costs and running costs. Initial costs are those incurred in getting the scheme installed and running. They include equipment costs: lamps and luminaires, controls and cables; installation costs: wiring and builders’ work; and commissioning: checking and adjusting controls, testing circuits and measuring illuminances. Running costs often exceed the initial purchase cost of the installation within a short time. They include the energy costs, cleaning, replacement of lamps at the end of their economic life and replacement of any other failed components, e.g. ballasts, prismatic panels, etc.

Benefits: These are usually in the form of reductions in energy costs and in some cases reductions in maintenance and lamp replacement costs. Reduction in the energy used for lighting, and hence heat released into the room, can also reduce the air conditioning load, producing savings in the energy used for air-conditioning and leading to smaller plant requirements. Improvements in lighting can also yield other benefits, such as improved productivity, but these are more difficult to quantify.

Simple payback

This is the simplest method of appraisal. It is usually used where a new proposal is being compared with an existing scheme. If the initial expenditure for the new scheme is x and the annual cost saving is y, then the payback period is x/y years.
 

Example: consider the replacement of a 60 watt tungsten lamp with an 11 watt compact fluorescent lamp in a room used for 2000 hours per year. The cost of a tungsten lamp is 0.7 Euro, the cost of a compact fluorescent lamp is 19 Euro, electricity costs 0.08 Euro per KWh. The life of a tungsten lamp is 1000 hours, the life of a compact fluorescent lamp is 8000 hours. The tungsten lamp uses 120 kWh per year at an annual cost of 9.6 Euro, the compact fluorescent lamp uses 22 kWh per year at an annual cost of 1.8 Euro. The fluorescent lamp has an initial capital cost 19 Euro, but there are no further capital costs for this system. Two tungsten lamps are required each year at a capital cost of 1.4 Euro. Energy costs per year are 9.6 Euro for the tungsten lamp and 1.8 Euro for the fluorescent lamp. The cost savings using fluorescent lamp are 7.8 Euro for energy and 1.4 Euro for filament lamps that otherwise would have to be bought, a total of 9.2 Euro per year. The simple paybck time of the investment (19/9.2) is therefore just over two years.

However, simple payback is not a good indicator of profitability because it does not consider returns beyond the payback period and ignores the time value of money. Therefore, the GreenLight Partners are advised to choose between two other more powerful indicators: the Net Present Value and the Internal Rate of Return.

    Net Present Value

An improvement to the simple payback assessment is to consider the discounted value of the annual savings. Money today is worth more than the same amount of money in the future because it can be invested today to earn interest and produce a greater sum in the future. For example 100 Euro invested today at a real rate of return of 10% per annum will be worth 110 Euro in a year’s time; alternatively 110 Euro in a year’s time is worth 100 Euro today if discounted at 10%. It is possible to calculate what future savings are worth today by discounting them by the rate of return anticipated on an investment. This is a common financial appraisal technique. The discount factor for a single year is calculated from:

Where  f  = discount factor
           R = discount rate (<1)
           m = year considered

For example the factor for the third year at a rate of 10% would be:

The cumulative discount factor (c) over n years is given by:

The present value (PV) of annual savings is given by:

PV = annual savings x c

For example a saving of 50 Euro per year for 10 years discounted at 5% is worth today:

Euro

The net present value (NPV) of an investment is the present value of the income or savings less the initial cost of the investment (calculated over its lifetime, i.e. 15 years in GreenLight). A cost effective investment is one where the NPV is positive, ie the savings are worth more than the initial investment.

    Internal Rate of Return

The Internal Rate of Return (IRR) is the interest rate that equates the present value of expected future cash flows to the initial cost of the project. Expressed as a percentage, IRR can be easily compared with loan rates to determine an investment’s profitability. The higher the IRR, the more cost-effective the investment.

The GreenLight commitment defines a profitable investment as one that provides an annualised IRR equivalent of at least 20% over a 15-year period.

 


Financing options you can choose from
(with extracts from the EC Guide to Energy Efficiency Bankable Proposals)

The basic financing methods for the energy-efficiency lighting upgrades fall into three categories:

  • Self-financing
  • Debt-financing
  • Third party-financing by Energy Service Companies (ESCOs)

    Self-financing

The simplest and most important source of finance is shareholders’ equity, raised either by stock issues or retained earnings. Advantages: all cost savings realised from the upgrade are immediately available and the equipment depreciation becomes a tax deduction.

    Debt-financing

The next most important source of finance is debt. Debtholders are entitled a fixed regular payment of interest and the final repayment of the principal. It is important to note that tax authorities treat interest payments as a cost. This means the company can deduct interest when calculating its taxable income. Interest is paid from pretax income. Dividends and retained earnings come from after-tax income.

    Third party-financing by Energy Service Companies

The basic role of the Energy Service Company (ESCO)  is to provide comprehensive energy efficiency services to consumers including project finance, engineering, project management, equipment maintenance monitoring and evaluation, usually through Energy Performance Contracts (EPC). ESCOs can package their services using a variety of finance schemes whereby they finance up-front capital improvements in the client's premises in exchange for a portion (or the total, depending on the EPC) of the savings generated.

The ESCOs are in effect able to turn the cost savings from efficiency measures into a revenue stream which can be used to repay debt and provide a profit. That's why performance contracts are sometimes referred as "paid from savings" contracts.

They may constitute the preferred financing option if your organisation wants to keep the upgrade project off its balance sheet. This type of contracting can be complex, but it is emerging in Europe.

See list of European Energy Service Companies (ESCO)

 

 


Additional references

ADEME: "Financer des travaux d'economie d'energie en hotellerie restauration", ed.: ADEME, France, Contract Thermie B SME-0635-95-DE, 1997

Building Research Establishment: "Financial aspects of energy management in buildings - Good practice guide 165", 1995
Shows those responsible for managing energy how to identify the most promising projects, how to locate investment funds and develop a sound financial case effectively with decision takers and finance specialists

European Commission Directorate General for Energy & Transport : “Guide to Energy Efficiency Bankable Proposals”. Jointly prepared by The European Commission THERMIE and SYNERGY Programmes and The European Bank for Reconstruction and Development.
To understand how to write a business plan with a focus on energy efficiency projects

European Commission Directorate General for Energy & Transport: "Shared energy saving and supply agreement for UK buildings", Luxembourg: Office for Official Publications of the European Communities, ISBN 92-827-5874-5, 25 pp. 1996
Template for contract with Energy Service Companies (made for UK buildings but can serve as example in other countries)

International Council for Local Environmental Initiatives: "Profitting from energy efficiency! A financing handbook for municipalities", ed.: Dan J. Goldberger and Philip Jessup, Sept. 1993
Describes a number of approaches to financing energy efficiency, with an emphasis on municipal building retrofit programmes

International Council for Local Environmental Initiatives: "Energy Smart Cities, Energy Efficiency Financing Directory", Nov. 1995

Regione Piemonte: "Gestione del servizio di illuminazione pubblica e realizzazione di interventi di efficienza energetica e di adeguamento normativo sugli impianti comunali, con l'opzione del finanziamento tramite terzi - Capitolato tipo d'appalto per le amministrazioni comunali", 2001, download Word document (262 KB, in Italian)
Template for Third Party Financed public outdoor energy-efficient lighting upgrade projects

World Energy Efficiency Association: "Manual on financing energy efficiency projects", ed.: James B. Sullivan and Rolf R. Anderson, 1997
Deals almost exclusively with capital intensive energy efficiency investments

IDAE, Inst. para la Diversificación y Ahorro de la Energía: Propuesta de Modelo de Ordenanza Municipal de Alumbrado Exterior
Esta propuesta sirve como modelo a los ayuntamientos que quieren regular sus instalaciones de alumbrado exterior, tanto público como privado, para reducir el impacto medioambiental en cuanto a consumo de energía y resplandor luminoso nocturno. Puede descargar el documento completo en formato PDF (2,5 Mb) o en formato Word. Copyright 2001 IDAE.

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Verify Savings

Overview of Measurement & Verification Options

When firms invest in energy efficiency, their executives naturally want to know how much they have saved and how long their savings will last.  The determination of energy savings is a challenge, and requires both accurate measurement and repeatable methodology, known as a measurement and verification protocol.

The Protocol describes here is called the “International Performance Measurement and Verification Protocol” (IPMVP). The IPMVP is a document which discusses procedures that, when implemented, allow building owners, energy service companies (ESCOs), and financiers of buildings energy efficiency projects to quantify energy conservation measure (ECM) performance and energy savings. The IPMVP provides an overview of current best practice techniques available for verifying savings from both traditionally- and third-party-financed projects. It has been developped by a worlwide network of corresponding members to incorporate international expertise and to develop consensus among professionals from around the world.

Energy savings are determined by comparing energy use associated with a facility, or certain systems within a facility, before and after the Energy Conservation Measure (ECM).  The “before” case is called the baseline model.  The “after” case is called the post-installation model.  Baseline and post-installation models can be constructed using the methods associated with M&V options A, B, C and D described hereafter.
 


M&V Option

 How Savings Are Calculated

 Cost
Option A:  Focuses on physical assessment of equipment changes to ensure the installation is to specification.  Key performance factors (e.g., lighting wattage) are determined with spot or short-term measurements and operational factors (e.g., lighting operating hours) are stipulated based on analysis of historical data or spot/short-term measurements.  Performance factors and proper operation are measured or checked annually.  Engineering calculations using spot or short-term measurements, computer simulations, and/or historical data.  Dependent on no. of measurement points.  Approx. 1-5% of project construction cost.
 Option B:  Savings are determined after project completion by short-term or continuous measurements taken throughout the term of the contract at the device or system level.  Both performance and operations factors are monitored.  Engineering calculations using metered data.  Dependent on no. and type of systems measured and the term of analysis/metering.   Typically 3-10% of project construction cost.
 Option C:  After project completion, savings are determined at the “whole-building” or facility level using current year and historical utility meter or sub-meter data.  Analysis of utility meter (or sub-meter) data using techniques from simple comparison to multivariate (hourly or monthly) regression analysis.  Dependent on no. and complexity of parameters in analysis.  Typically 1-10% of project construction cost.
 Option D:  Savings are determined through simulation of facility components and/or the whole facility.  Calibrated energy simulation/modeling; calibrated with hourly or monthly utility billing data and/or end-use metering.  Dependent on no. and complexity of systems evaluated.  Typically 3-10% of project construction cost.

Only section of the protocol relevant to lighting are reproduced here. For more information, the entire protocol can be downloaded at http://www.ipmvp.org/

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Communicate

Download fill-and-print GreenLight reporting form (PDF 173 KB)

The GreenLight reporting form is made of one page per facility. Make copies if you need to report more than one facility. It shall be filled at the beginning of each year to report the facilities that were upgraded (or newly built) according to the GreenLight Guidelines during the year before (Yearly Progress). The GreenLight Partner shall also use the same form to report the facilities which upgrade is foreseen in the coming year (Yearly Mission).

This form is in an interactive fill-and-print PDF format. It includes automatic calculations and pull-down menus for easy selection of answers. It must be filled in on-screen and printed out for submission via fax or hard copy. You need Acrobat Reader 5.0 to fill the form. Acrobat Reader can be downloaded free of charge at www.adobe.com. Should you prefer to fill the form by hand, download, print, fill and send the non-interactive PDF version of the form (13 KB).

 

The GreenLight reporting form shall be posted, faxed or e-mailed by the GreenLight Corporate Manager to :

Paolo Bertoldi
GreenLight Programme Manager
European Commission – Joint Research Centre
T.P.450
21020 Ispra – Italy
Tel.: +39 0332 78 9299
Fax: +39 0332 78 9992
E-mail: paolo.bertoldi@ec.europa.eu