An energy efficient lighting upgrade provides the fastest return of any investment in energy efficiency. The widely available financial incentives provided by electric utilities and the Federal government make lighting upgrades even more attractive. You'll find the terms incentives, grants and rebates used interchangeably depending on the utility program sponsor. Federal incentives can be obtained in addition to local incentives so that the net cost of a project can be recovered from energy savings in less than a year.
Waypoint Lighting has extensive experience managing the complex application and inspection requirements these programs demand and will guarantee results. This experience has allowed Waypoint professionals to secure over $1.6 million from twenty different programs in ten states. On average these incentives have covered 30% of the project purchase price but often reach 50 - 75%.
Why do utility companies offer incentives?
Utility-based efficiency programs are structured to help electricity users reduce their electric demand (kW) during times of peak energy use. This allows electric utility companies to postpone or eliminate the need for additional generating capacity. When the electric generation and distribution system is used more efficiently the overall cost to all energy users is reduced.
For utilities located in the southern U.S. the peak system demand is during the hottest months of summer - typically 2:00 PM - 6:00 PM Monday through Friday. For northern utilities, the system peak may be during the winter heating months - typically 6:00 AM - 10:AM Monday through Friday. It is worth noting that these programs may offer additional incentives for reducing energy (kWh) use and even night-time demand, which can offset the cost for exterior lighting improvements.
How do I find out about programs available for my facilities?
To get the most current information on these programs just contact Waypoint Lighting. Not only can we take care of the legwork, we've been known to find information on unpublished programs as well. The most comprehensive directory of lighting incentive programs is maintained by the U.S. Department of Energy and the North Carolina Clean Energy Technology Center and can be searched here (dsireusa.org).
A note of caution: The Dsireusa.org site referenced should only be used for general guidance for available rebates. Not all Federal programs are included and it is common for the structure of incentive programs and the availability of funding to change without notice.
Even better: Deduct the cost of your lighting upgrade!
For projects completed before January 1, 2018, the 2005 EPAct Federal tax deduction program allows a percentage of lighting upgrade cost to be expensed in the current tax year under Section 179D tax guidelines. The normal recovery period is 39 years for building equipment.
As in years past, it is expected that the program will be reinstated for projects completed in 2018. The Bipartisan Budget Act of 2018 extended the deduction retroactively for projects completed in 2017. The new lighting system must meet specific energy savings targets and design parameters and must be certified by a qualified professional. Up to $0.60 per square foot may be expensed in the same year the project is completed if the program is reinstated. See example below.
For comprehensive energy efficiency upgrade projects that include improvements to the building envelope, HVAC (mechanical systems) and interior lighting, the project may qualify for up to a $1.80 per square foot tax deduction if designed, installed and certified properly. For "lighting only" projects bi-level dimming and auto-off lighting controls are required in all interior areas to meet the EPAct 2005 required design criteria.
The added complexity of the control system design, equipment, system integration and startup will increase the cost of the lighting project but will increase the long term energy, equipment and maintenance savings. To take advantage of the EPAct tax benefit owners must be willing to focus on life cycle cost and ROI, not the cheapest price.
To understand how the tax benefits will work if the program is renewed, let's review a past industrial lighting retrofit project that was qualified under the IRS's Interim Lighting Rule. Qualifying Area: 525,000 sq. ft. Project Cost: $450,000.00 Lighting Power Density (LPD): 0.61 watts / sq. ft. (lighting power density) At $0.60 / sq. ft. the maximum tax deduction allowable is $315,000 which falls below the $450,000 cost cap. The LPD is well below the required 2.2 watts / sq. ft. threshold. If one assumes a corporate tax rate of 35%, the company in this example can avoid paying $110,250 in taxes which significantly improves the project ROI.
Engineered Tax Services is a consulting firm that focuses on providing EPAct 2005 support services for a fee. They provide a very detailed overview of the program here. Note that Waypoint provides the EPAct 2005 certification as part of the overall lighting project cost and does not charge an additional fee.
The US Department of Energy provides additional information on 179D tax deductions including an estimator here.
One more reason to do a lighting upgrade: Bonus Depreciation
In March of 2011, the Internal Revenue Service (IRS) provided guidance concerning the first-year depreciation of certain new assets which includes exterior lighting for certain types of businesses. The ruling defined the process by which businesses may deduct as “bonus depreciation” a percentage of the cost of new lighting equipment. The current IRS bonus depreciation tax program which was signed into law on December 18, 2015 allows a 50% first year tax deduction of lighting project cost with the remaining cost being deducted over the normal 15 year period for pole mounted or freestanding outdoor lighting.