Plan B comes after Plan A. But before going any further, let’s step back and provide some context, so it will all make some sense.
Local Law 88/134 compliance requires that all buildings in New York City, larger than 25,000 s/f, to upgrade their lighting to LED. In the case of commercial buildings, the requirement calls for 100% of the interior to be upgraded, but with multifamily the requirement is limited to just the common areas – not the apartments. The Local Law 88/134 compliance deadline is 2024. With few exceptions, most buildings have yet to comply. The 2024 deadline may seem over the horizon, but when you start counting backwards, it tells a different story. Inevitably, there will be buildings looking to comply “just in time” to meet the deadline. So forget 2023 and 2024. For those buildings looking to proceed in a measured way, the realistic deadline is 2021 or 2022. As an aside, the retrofit process takes longer than you might think. Allow six months to a year to be on the safe side.
So back to Plan A. The first step is a lighting assessment, which includes an inventory of existing lighting along with the hours of operation. Based on the utility rate for the facility, an annual operating expense for existing lighting type is developed for each area in the building. Next step - LED lighting products are identified to replace the existing lighting, along with their respective kWh and annual cost of operation. With this information, a lighting model is developed, which provides the before/after operating cost calculations, as well as, the return on investment – ROI – for the project. In most instances, expect a two year payback, based on the accumulated savings of the before/after utility costs.
Following completion of the modeling, next is the installation of samples of the LED lighting products included in the model. It is not unusual for change-outs of samples until the desired results are achieved. Then on to the final step – the installation. In some cases, new fixtures are installed to achieve an upgraded look (lobbies, hallways, etc.) In other cases, existing lighting is re-lamped or retrofitted with LED modules to retain the existing look and feel of the facility. LED products come with warranties ranging from 5 to 10 years. No lamp changes during these long warranty periods is a major advantage for any facility.
Not covered, at least so far, is the funding availability of the LED upgrade. While LED installation will always pay for themselves, literally without fail, that does not equate to the availability of upfront funds to pay for the project. Lack of funding can definitely stop any upgrade in its tracks. But there are alternatives, and that is where Plan B comes into play – to move the project along without delay.
As covered above, every LED retrofit will result in lower monthly electric bills. Plan B is based on utilizing the monthly utility bill savings to fund your LED retrofit project. Plan B is based on utilizing the monthly savings differential to cover the monthly debt service payments for the up-front funding. This funding will cover the full cost of any retrofit, with no added costs to the building. Here is how it works:
Our retrofit, for this example, has total up-front costs of $55,840. The monthly projected utility bill savings are $2,737.08. The project lease financing provides an upfront payment of $55,840. The building selects their monthly payment schedule. Options range from a five-year schedule of $1,183.81 payments per month on up to a fast 2 year schedule of $2,574.22 payments per month. Note the monthly payments are always less than the monthly savings. At conclusion of the monthly lease payments, the building then pays $1 to purchase the lighting covered under their leasing plan.
Such a leasing plan, is very simple and straight forward. There are a number of providers, such as M-Core Credit, which offer energy savings related financing. To get started with your own lease financing, send Michael Weisberg an email (Michael@m-corecredit.com) with your questions. The application process usually involves a one page application with two years of financial statements. Lease financing offers an excellent no hassle opportunity to get your project up and running without delay. Think Plan B and get your Local Law 88/134 compliance behind you.
George Crawford is the principal of Green Partners, New York, N.Y.