Many forward-thinking businesses upgraded their facilities to LED lighting 10+ years ago. In doing so, they will have saved a significant amount of energy. It also will have been an easy decision for any board of directors due to the rapid return on investment.
But what happens after you have already upgraded to LED and you need to upgrade again?
How do you know when you need to upgrade your LEDs?
In this post we’ll explain why upgrading your old LED lighting is important, how to know when it’s time to upgrade, and provide the 3 avenues you can take to make sure you have the most energy efficient lighting available.
Why do we need to upgrade again?
Although the lifespan of commercial LED lighting is far longer than the alternatives, it does eventually begin to degrade in its efficacy. In some instances, the LED driver will actually fail long before the LED lighting output begins to decline. As you know, there are lighting requirements for your facilities so you’ll need to make sure your lux levels are equal or higher than required.
By switching from an old LED lighting system to a newer LED lighting system your lighting will significantly improve.
How do I know when it’s time to upgrade again?
Usually, it will be quite evident when your LED lighting system needs to be upgraded.
The LED driver is typically the first thing to fail, which can result in flashing light fittings. The actual lighting output will also begin to slowly deteriorate.
Your eyes may become accustomed to the new lighting levels so you can roughly check lux levels using a handheld lux meter. This way you can measure what the lighting levels are without having to guess when it’s time to upgrade again.
You don’t want to have to check the lux levels everyday. So, here’s a quick rule-of-thumb guide on when you’ll need to upgrade based on your operational hours of use:
Typically, LED lights start deteriorating after 50,000 hours of operational use.
So what are the financial options when upgrading again?
Unfortunately, those huge savings that came with the first upgrade won’t happen again. At least not until a new technology comes along. That means that there will be either no return on investment or a very long payback period, potentially 10 years plus.
Therefore, the 3 options for upgrading in the first place are the same but with a slightly different picture:
You will need to spend a significant amount of your budget to upgrade all over again. Unfortunately, because of the energy efficiency of your old LED system, the payback period could be 10+ years in length, if existent.
Hopefully, most businesses seeking to deploy CapEx on this basis will have looked ahead and ring-fenced the savings from when they initially upgraded to LED lighting the first time around.
High-level CapEx with minimal return on investment will represent a heavy burden on infrastructure budgets.
You could borrow and spread the costs of the system over a number of years.
This will ease the large budget requirement. However, as of 2019 the IFRS upgraded the rulebook on how hire/credit and lease agreements should be accounted for. These types of instruments must now be presented as “on-balance sheet” transactions, just like capital purchases, meaning that they will ultimately affect your future cash flow and borrowing capacity.
Lighting as a Service (LaaS)
Just like the hire purchase options, LaaS will present an opportunity to spread the project costs across a period of time- typically 5 years. However, this option comes with significant extra advantages that the hire purchase/credit does not:
Off-Balance Sheet – service agreement does not impact financial covenants
Maintained – LaaS service provider is responsible for maintaining the system for the project’s duration
Smart Finance – Removes your need to invest your valuable CapEx into a depreciating asset
Unfortunately, technology deteriorates and that is no different to LED lighting. If you upgraded anywhere from 6 years ago, it could be time to upgrade to newer luminaires now depending on your operational hours of use. Check your lighting levels with a handheld lux meter to help make the decision on when it is time.
Your three options for upgrading from your old LED lighting to your new LED lighting are:
Hire Purchase/Credit, or
Lighting as a Service.
The right choice depends on your business.