What is lighting-as-a-service, and why does it matter?
Thursday, June 21, 2018
Lighting-as-a-service (LaaS) is a service delivery model that allows lighting services to be charged on a subscription basis rather than via a one-time payment or the traditional manner of a facility or organization manually keeping up with equipment and paying the monthly bill.
The business model has become more common in commercial installations of LED lights, with the primary aim of reducing installation costs.
In lighting, because of the movement to long-life LED products, which are much longer lasting than incandescent bulbs, no longer do you have to put up with lights that last only a few months then need replacing.
Modern LED lighting instruments are able to last for years, and if they fail or need maintenance, experts with the LaaS vendor take care of the work in short order without the need for you to climb a ladder.
How lighting as a service works
As teased above, lighting-as-a-service operates in much the same manner as services like Netflix, Dropbox, iCloud, Pandora and mail order meal services like Blue Apron. A user needs something when they want it and they assess it as they need.
Thus, they only use the services that they want or need. So, in the case of Netflix, users stream a show or movie when they want rather than submitting to the whims of the cable company that offers random programming according to a previously set schedule.
Lighting can work the same way. You use a light when you want it. That may be similar to how things work now, but for organizations there’s a big plus. They are able to turn the entire process over to the lighting vendors, which can save them a tremendous amount of time and effort.
Instead of making the capital investment for a lighting upgrade or an initial investment in lighting at the beginning of your project, the lighting service provider installs the new long-life, high-efficiency lighting system according to your agreement.
Lighting is only used in areas of the building that require it. For example, a room is lit only when there is a meeting within it. Alternatively, if the room is well lit by natural light, no electric lighting is employed.
LaaS works in real-time and responds automatically to the needs of the employees and users within an organization.
One of the best examples of LaaS in practice are the lights in some of the freezer units of America’s better-equipped grocery stores.
When there are no customers in a specific aisle the freezer lights turn off. When motion is detected, the lights turn on so the shopper can see the products within the freezer. Once a certain time of inactivity is reached, the freezer lights turn off until motion re-activates them.
The industry is quickly growing, too. According to previous reporting here, a recent report published by Navigant Research, global LaaS revenue is expected to grow from an estimated $662.6 million market in 2017 to $2.6 billion by 2026, experiencing a compound annual growth rate of 16.6 percent.
"We are seeing a shift in the LaaS market from a traditional financing model to an increased number of turnkey services, which provide the customer with a full-scale offering from audit and design to installation to management and maintenance of the system," Krystal Maxwell, research analyst at Navigant Research, said in a statement.
Problems lighting-as-a-service solves
Lighting-as-a-service solves the problem of paying a large lump sum for a lighting retrofit, Regency Lighting says.
"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," the company said via its blog.
"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 that include the price to upgrade to new technology in your monthly fee."
Pros and cons
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:
- No upfront investment
- Allows nominal upgrades to be completed within the existing operational expenditure of the contract
- Constant energy savings
- Burnouts 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 upfront 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 upfront
The opportunity to capture significant energy savings sooner is a huge benefit to businesses with LaaS. With each day that passes without upgrading, money is left on the table.
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