Assessing the Financial Impact of Energy Efficient Public Lighting Jeff Hughes, Director Jen Weiss, Senior Finance Analyst efc.sog.unc.edu
Environmental Finance Center Using Finance to Make an Environmental Impact • Government entities Partnership • Colleges and universities Building • Non-profit organizations • Customer usage studies Applied • Pricing and data analytics Research • Financial modeling • Technical assistance Education • Program design • Training and webinars efc.sog.unc.edu
Local Government Expenditure Factors ($$ that will appear in a capital or operating budget) • Up-front cost of fixtures • Debt service (if financed) • Installation costs • Operation and maintenance costs • Electricity costs – Fees and charges depend on rate schedule • Non-monetary costs – Environmental – Social
Cost Impacts depend on Ownership Model • Utility (Company) owned – all inclusive • City (Customer) owned – e.g. Asheville • Utility owned with some attributes billed or treated separately – Metered electricity – Maintenance charges • Accelerated Installation (City participates in capital cost to accelerate implementation)
Capital Financing Options • General Obligation Bonds (General tax backed loan) – Low interest rates, longer terms – Significant cost of issuance • Installment Purchase (Asset backed loan) – Shorter terms – Smaller sized projects • General local government reserves • Specially designated reserves or fund – Can be incorporated into internal revolving loan fund to mimic a performance contract • Performance Contracts – Technically less of a financing option than a financing “approach” Still need to choose source of capital, but can allow for alternative bidding processes, and linking savings to project cost • Embedded in Utility Rates – Capital costs pooled over large geographic area – Includes rate of return – Includes depreciation
Financial Analysis Considerations • What are you comparing? – Level of service may be different for different options • Present Value – Requires discounting future expenditures and revenues. – Challenge of choosing a discount rate. High discount rates diminish importance of future savings. • Cash Flow Analysis – Requires estimating future energy costs – Maintenance costs – Replacement costs
A Closer Look … Duke Energy Progress (North Carolina) Street Lighting Service, SLS-26 As of December 1, 2013 Basic Rate (Non-LED Lighting) Basic Rate (LED Lighting) Company Owned - Standard Option Customer Owned Option Monthly Monthly Monthly Per Fixture Monthly Monthly Monthly Facility Fixture Type: Cost/Fixture kWh/Fixture Fixture Type: Basic Rate Charge TOTAL kWh/Fixture Cost/Fixture kWh/Fixture Sodium Vapor 5,800 lumen $7.21 29 LED 75 $6.42 $1.92 $8.34 25 $5.59 25 Sodium Vapor 9,500 lumen $9.91 46 LED 105 $9.20 $1.13 $10.33 35 $6.07 35 Sodium Vapor 16,000 lumen $13.23 59 LED 215 $13.54 $2.90 $16.44 73 $7.72 73 Sodium Vapor 28,500 lumen $17.20 109 LED 205 Site Lighter $13.59 $8.59 $22.18 69 $7.55 69 Sodium Vapor 50,000 lumen $20.55 152 Metal Halide 9,000 lumen $12.77 41 Special Street Lighting Poles and Posts Metal Halide 20,000 lumen $19.02 94 Monthly Charge Metal Halide 33,000 lumen $24.81 133 Type Per Pole/Post Metal Halide 110,000 lumen $51.02 370 Wood $1.60 7,000 lumen semi-enclosed (mercury vapor) $9.71 69 Metal, Fiberglass, or Post $2.80 7,000 lumen (mercury vapor) $10.44 69 12-Foot Smooth Concrete Post $9.81 12,000 lumen (Retrofit Sodium Vapor) $11.50 59 Decorative Square Metal $11.62 21,000 lumen (mercury vapor) $16.61 149 16-Foot Smooth Concrete Post $10.79 22,000 lumen (Sodium Vapor) $14.41 86 13-Foot Fluted Concrete Post $14.72 38,000 lumen (Retrofit Sodium Vapor) $17.68 135 Decorative Aluminum 12-Foot Post $17.66 40,000 lumen (metal halide) $26.32 160 Decorative 35- or 39-Foot Tapered Metal Pole $28.04 60,000 lumen (mercury vapor) $34.88 382 System Metal $0.96
LED Street Lighting Comparison Last Updated 12.20.13 PLEASE INPUT DATA IN THE BLUE HIGHLIGHTED CELLS City Name Anywhere, NC Average Capital Cost of LED Fixture Utility Duke Energy Progress Cost of Fixture Installation Cost Total Cost Discount Rate (Cost of Capital) 5.00% LED 75 $239 $50 $289 Cost Contingency 10.00% LED 105 $289 $50 $339 Annual Administrative & Marketing Costs $ - LED 215 $492 $50 $542 Electricity Rate Escalation 3.00% LED 205 Site Lighter $550 $50 $600 LED Basic Rate Escalation (Years 1 - 5) -2.00% CURRENT LIGHTING LED REPLACEMENT LIGHTING Scenario 1 Scenario 2 Standard LED Pricing Customer Owned # of lights Purchase Total Monthly Total Monthly Total # of Lights being under 20 years Monthly Cost Total Monthly Cost per Purchase Cost per Monthly Cost per Monthly Fixture Type replaced old per Fixture Cost Fixture Type Quantity Fixture Cost Fixture Cost Fixture Cost Sodium Vapor 9,500 lumen 500 150 $9.91 $4,955 LED 75 500 $289 $144,500 $8.34 $4,170.00 $5.59 $2,795.00 22,000 lumen (Sodium Vapor) 200 10 $14.41 $2,882 LED 105 200 $339 $67,800 $10.33 $2,066.00 $6.07 $1,214.00 Sodium Vapor 28,500 lumen 100 0 $17.20 $1,720 LED 105 100 $339 $33,900 $10.33 $1,033.00 $6.07 $607.00 800 160 Monthly $9,557 800 Monthly $7,269 Monthly $4,616 Annual $114,684 0 TOTAL: $246,200 Annual $87,228 Annual $55,392
A Comparison LED Comparison Analysis Summary Table City Name Anywhere, NC Utility Duke Energy Progress Number of Lights 800 Current Annual Cost $ 114,684 NPV is based on costs for the city, therefore a lower NPV is better. Cummulative LED 15 year NPV Estimated Annual LED Upgrade Upgrade Savings (based on a city's Scenario Type of Rate Structure Utility Cost for City (Year 1) Annual Savings (15 years) Payback (Years) overall costs) Current Pricing Utility-Owned (Standard) Rate Structure Progress $114,684 $0 $0 N/A $1,436,939 Scenario 1 Utility-Owned (Standard) LED Rate Structure Progress $87,228 $27,456 $763,946 0 $939,167 Scenario 2 Customer-Owned LED Rate Structure Progress $55,392 $59,292 $1,102,767 4.70 $959,580
For more information Jen Weiss jweiss@sog.unc.edu (504) 606-8148 Jeff Hughes jhughes@sog.unc.edu (919) 843-4956
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