What is lighting as a service (LaaS) and how does it work?
Posted by Scott Anderson on
If you've been wondering how your business can afford the initial investment in a LED lighting retrofit or how you can convince upper management that it's worth the money, lighting as a service may be an option worth considering.
The lighting industry has started moving in this direction as long-life LED products continue to get more efficient and it is getting harder and harder to compete for internal capital requests and building operations often lose out to more glamorous requests.
How lighting as a service works
Do you subscribe to services like Netflix, Dropbox, iCloud, Spotify, or Pandora monthly? They’re pretty convenient. They’re easy to get started with and easy to budget for. Sure, if you wanted to build your own version of one of these services and skip the monthly fee, you probably could. You could go out and buy a server, buy software, and pay someone to get your new system up and running. But in the end, why go through the up-front investment when you can subscribe to a monthly service that’s designed to get you what you need?
That’s the beauty of Netflix and so many other subscriptions services that are becoming more a part of modernity.
Lighting as a service is a similar idea. Instead of shelling out the capital investment for a lighting upgrade at the beginning of your project, your lighting service provider will come out and install and warranty your new long-life, high-efficiency lighting system on their dime. Then, with a portion of the money you save on reduced energy bills, you budget a monthly payment for your lighting. It’s effectively a way to get the advantage of the lighting upgrade you’ve been considering and making it cash-flow positive from day one.
Cue up the movies, Netflix.
Problems lighting as a service solves
As mentioned above, lighting as a service solves the problem of paying a large lump sum for a lighting retrofit. By using lighting as a service, you don't have to spend countless hours convincing management to up your budget so you can afford the retrofit upfront. Instead, you pay a monthly fee that’s less than the amount you’ll save to have all of your lighting updated and maintained for you.
With the rapid pace of technological improvement in LED lighting, people often feel stuck with yesterday's technology when new advancements hit the market. Lighting as a service also solves the problem of missing out on the latest improvements to LED. There are options (like iPhone upgrade programs) that include the price to upgrade to new technology in your monthly fee.
How does lighting as a service affect your role?
Pros and cons of lighting as a service
As with many project options, you want to choose an option that will work best for your application and company's financial situation. Here are some pros and cons of lighting as a service:
Lighting as a service pros
- No upfront investment
- Allows nominal upgrades to be completed within the existing operational expenditure of the contract
- Subscribers are immediately cash flow positive
- Constant energy savings
- Burn outs are not your responsibility
- Quality service providers make sure that upgrades comply with the latest local and federal requirements
Lighting as a service cons
- You’ll be held to the terms of the agreement for the duration of the contract
- Net monthly costs reduced, but not as much as if you make the up-front investment in the project since you’ll have to factor in the monthly lighting as a service payment
- Like any payment program (from leasing a car to a home mortgage), the interest and fees associated with breaking the total cost into monthly fees will result in an overall cost that is higher than the cost of paying everything up front
It's really no surprise to hear that lighting as a service is expected to grow at a rate of 46.3 percent over the course of the next five years. By solving many problems for today's businesses, it's a great opportunity for those looking for creative ways to retrofit their business without any sizable capital outlay. The opportunity to capture significant energy savings sooner is a huge benefit to businesses. With each day that passes without upgrading, money is left on the table.
To learn more if lighting as a service is a good fit for your business, contact us and we’ll have a lighting specialist reach out to you.