Lighting as a Service (LaaS)

July 27, 2015

The LED (light-emitting diode) market is expected to grow from $2 billion in 2014 to $25 billion in 2023. To take advantage of the tremendous cost and energy savings garnered from using LED lights, government organizations, restaurants and hospitals are retrofitting buildings and switching from traditional lighting to LEDs. To cater to the growing market for LED lights and to ease the installation and conversion costs, manufacturers and software companies have introduced the lighting as a service (LaaS) model as a new approach to install and control LED lights.

Lighting is powered, connected and controlled digitally through LaaS.  The digital innovation stemming from this initiative encompasses short- and long-term gains such as reduced energy costs, increased energy efficiency and control, and the ability to harness and examine a vast array of digital analytics.

The LaaS approach could amount to major cost savings for facilities such as restaurants and hospitals. Lighting encompasses a significant portion of energy consumption in hospitals—more than 10 percent of total energy usage according to the U.S. Department of Energy. On top of this, every watt of electricity used for lighting generates heat, which requires hospitals to invest more energy on cooling, which amounts to greater cost.

Tremendous costs savings can be harnessed by retrofitting traditional hospital lighting systems with LED lights and utilizing an LaaS system.  LED lights have about a 6-10 year lifespan when operated continuously, whereas florescent lights need to be changed every year—which adds up in maintenance fees. Facility administrators can incorporate daylighting controls in patient rooms or public spaces with large window areas, saving on energy consumption and costs.  Controlling the lighting system to utilize more natural light during the day in large window spaces has non-energy benefits as well.  According to the U.S. Department of Energy, exposure to natural lighting can lead to a 12% increase in patient recovery time, 2.5% lower staff absenteeism, increased productivity and job satisfaction, and heightened psychological well-being. Spaces that are frequently unoccupied such as restrooms, service areas, stairwells and mechanical rooms can be controlled and dimmed through a LaaS system as well to reduce energy consumption and costs.

In addition to the cost savings, the way a company can pay for lighting as a service can also benefit their cash flow.  Some companies that sell and support LaaS bundle everything together into a managed service offering. The user pays month by month with no upfront capital expenses, giving the customer an immediate return on investment. Instead, the cost of the project is paid through the energy and maintenance savings the project yields per year, for a set number of years. Typically, the service provider also monitors and maintains the system during the life of the contract and recycles or reclaims any parts of the system that must be replaced. As long as the service provider is able to charge less than the annual savings, the customer comes out ahead without exposure to high capital expenditure risks.

When one studies the growing movement to convert to LED fixtures, it is clear that embracing LED lights and smart technology encompass the future of lighting.  Cutting down on energy costs and increasing control over lighting systems and energy consumption is a priority for many facility managers, and switching to LED lighting while conserving cash flow with the LaaS model can deliver both objectives.  The LaaS model is predicted to revolutionize the LED market and the lighting market overall given these tremendous opportunities.

For information on how Igor provides lighting as a service, contact Igor today.