Leased LEDs and Energy Service Contracts can Cut Electric Bills (Video)

I first heard of Consumer Energy Solutions from a non-profit's IT guy who was boasting about how he got them to lease him LED bulbs for their parking lot and the security lights at their equipment lot -- pretty much all their outdoor lighting -- for a lot less than their monthly savings on electricity from replacing most of their Halogen, fluorescent, and other less-efficient lights with LEDs. What made this a big deal to my friend was that no front money was required. It's one thing to tell a town council or non-profit board, "If we spend $180,000 on LEDs we'll save it all back in five years" (or whatever). It's another thing to say, "We can lease LEDs for all our outdoor lighting for $4,000 per month and save $8,000 on electricity right away." That gets officials to prick up their ears in a hurry.Then there are energy service contracts, essentially buying electricity one, two or three years in advance. This business got a bad name from Enron and their energy wholesaling business, but despite that single big blast of negative publicity, it grows a little each year. And the LED lease business? In many areas, governments and utility companies actually subsidize purchases of anything that cuts electricity use. Totally worth checking out.

But why, you might ask, is this on Slashdot? Because some of our readers own stacks of servers (or work for companies that own stacks of servers) and need to know they don't have to pay whatever their local electric utility demands, but can shop for better electricity prices in today's deregulated electricity market. And while this conversation was with one person in this business, we are not pushing his company. As interviewee Patrick Clouden says at the end of the interview, it's a competitive business. So if you want the best deal, you'd better shop around. One more thing: the deregulated utility market, with its multitude of suppliers, peak and off-peak pricing, and (often) minute-by-minute price changes, takes excellent software (possibly written by someone like you) to negotiate, so this business niche might be one an entrepreneurial software developer should explore.

Comments

So paying more in the long run is better?

[silas_moeckel]

Was this some sort of lease to own scheme? Municipalities tend to pay very little for cash less than a leasing company. Are we surrounded by idiots with no impulse control or long term thinking to think leasing is cheaper?

Re:So paying more in the long run is better?

[countach44]

I think the argument here is that it's cheaper than keeping the legacy power hungry stuff. Cheaper in the long run than owning the LEDs? Definitely not, because the lessor is making a profit somewhere.
If you don't have the capital to invest in purchasing your own stuff and switching over, however, it seems like this is a reasonable option.

Re:So paying more in the long run is better?

[Roblimo]

I believe Pat's company does lease to own deals. A lot of them do. That should be a big factor in selecting a vendor for that kind of lease program.

Re:So paying more in the long run is better?

[Mr D from 63]

Was this some sort of lease to own scheme? Municipalities tend to pay very little for cash less than a leasing company. Are we surrounded by idiots with no impulse control or long term thinking to think leasing is cheaper?

Without discussion of lease terms, length, and end of lease requirements, you really can't determine if there is anything to be saved. Also, installation costs might be a big factor purposely not discussed. It may be easy to lease the lights, but the costs of installation (and maybe even maintenance) drive the real cost up and potential benefit down.

Re:So paying more in the long run is better?

[Mike_EE_U_of_I]

Was this some sort of lease to own scheme?

It would be pretty stupid if it was not. About 20 years ago, most office buildings changed up the ballasts on their fluorescent lights from magnetic to active which gave huge electricity savings. It was pretty common to see deals like this back then. The company that I was consulting at did this. They had a company come in and replace the ballasts. The deal was ten years of half of the savings on the electricity and then the leasing company walked away. So from the POV of the customer, they had no up front cost, for 10 years the customer got half the electricity savings, and for the remainder of the life of the product the customer got 100% of the savings. If purchased outright, the ballasts would have paid for themselves in just a couple of years so it was a really sweet deal for the leasing company.

Re:So paying more in the long run is better?

[The Grim Reefer]

If you don't have the capital to invest in purchasing your own stuff and switching over, however, it seems like this is a reasonable option.

Depending on the size of the site, it should be possible to replace some portion of the lights at a time. You could even do the first round of replacements and then use the savings from the next (couple) of electric bills to replace the next round of lamps and continue to do so until all have been updated.

Of course in the real world the first round of lights would be replaced and the savings from that would go directly to the CEO's quarterly bonus I suppose.

Re:So paying more in the long run is better?

[Smallpond]

. If purchased outright, the ballasts would have paid for themselves in just a couple of years so it was a really sweet deal for the leasing company.

Unless the company goes out of business before the lease is up.

Re:So paying more in the long run is better?

[geoskd]

Are we surrounded by idiots with no impulse control or long term thinking to think leasing is cheaper? Yes.

And we keep electing them to run things. How stupid does that make us?

Re:So paying more in the long run is better?

[geoskd]

installation costs might be a big factor purposely not discussed. It may be easy to lease the lights, but the costs of installation (and maybe even maintenance) drive the real cost up and potential benefit down.

There are no additional installation costs. These LED lights are designed to be drop in replacements for the older halogen and sulfur types. These elected officials are just that stupid.

Re:So paying more in the long run is better?

[Roblimo]

Without discussion of lease terms, length, and end of lease requirements, you really can't determine if there is anything to be saved...

Yep. You'd better shop around.

Re:So paying more in the long run is better?

[oneiros27]

You're assuming that they're not effectively leasing in the first place.

My town is small enough (300 homes) that most of the lights are managed by the local power company (PEPCO). We pay them a fixed amount per month, plus the energy cost. When something goes wrong with one of the lights, we report it to them, and they fix it. (citizens can also report them, but it's a royal PITA, as you have to give them both the pole number (which means you have to get out of your car, and walk up to the pole, and try to read it in the dark), and the type of fixture (which of course, we're all experts on, and why the hell don't they have a database of what fixture is on what pole?))

Back when I was a town commissioner, we were trying to get the lights replaced w/ LEDs, but PEPCO insisted that they didn't have enough data to figure out what the replacement lifetime would be, and so they couldn't determine their cost and thus couldn't offer them to us.

So instead, we had to pay to get all of the lamps replaced with high-pressure sodium, when they stopped offering whatever the lights were that we used to have. (oh ... and did I mention that we also paid the up-front cost for the fixtures, along with a monthly maintenance fee, and the energy usage?).

Re:So paying more in the long run is better?

[Mr D from 63]

There are no additional installation costs. These LED lights are designed to be drop in replacements for the older halogen and sulfur types.

It still cost money to send guys out on bucket trucks to replace lights.

Re:So paying more in the long run is better?

[geoskd]

It still cost money to send guys out on bucket trucks to replace lights.

It was money you would have to spend on replacing them when they burn out anyways. When one burns out, you replace the two closest to it as well, that way you cut your replacement labor costs in roughly 1/3, and you don't have the huge up front expense of replacing them all at once. You just begin to reduce your monthly costs gradually. After a year or so, you're saving so much that the program pays for its own continuation. After 3 years you have a significant reduction in monthly maintenance costs as well as significant savings in energy costs...

Re:So paying more in the long run is better?

[geoskd]

Note that if they are five year bulbs, the initial install needs to be replaced now.

These bulbs last 25 years, not 5 years. Leasing is an idiotic option that only an American mind could think of as being a good deal. If there is a private company leasing you the equipment, it is *by definition* going to be cheaper for you to buy it yourself, especially if you can get financing for less than the private company can.

Re:So paying more in the long run is better?

[NostalgiaForInfinity]

Like all such arrangements, you're paying to transfer the risk. What's the risk? That the lights don't work as advertised and that a new, better technology is around five years from now.

I addition, the reason municipalities can get money so cheaply is because their interest rates don't reflect actual risk. Given that, their ability to take on debt should be (and has been) limited.

The prudent and right thing to do for government projects is to treat every project as if it borrowed money at commercial rates over its entire lifetime.

Re:So paying more in the long run is better?

[Dereck1701]

"but PEPCO insisted that they didn't have enough data"

This situation sounds like a serious conflict of interest where the utility has at the very least no incentive to work towards LED street lights and could very well actively attempt to prevent such a switchover. Street lights by their very nature operate at night, a time where the system load has for the most part has dropped below the utilities baseload capacity. In simplistic terms they are generating power that isn't being used, so they aren't being paid for it. There is a significant impetus for them to WANT "someone" to use power in the midnight to 6 AM period and they're probably hoping that municipalities with power hungry street lights and homeowners with "security" lights will take up at least part of the slack.

Re:So paying more in the long run is better?

[BitZtream]

Yes

Re:So paying more in the long run is better?

[manu0601]

Was this some sort of lease to own scheme? Municipalities tend to pay very little for cash less than a leasing company

EU, which is always ahead on the matter of economical stupidity, now even mandates member state to that a deficit under 0.5% of GDP, which means loaning to invest is forbidden. It seems considered better to spend money to lease instead of paying a debt.

Re: So paying more in the long run is better?

[thesupraman]

... And if you think the difference between lease and buy is exceeded by the difference between zero and 4 percent interest then you cannot do math.

The face is that leasing almost never makes financial success except in a short term use scenario. Lease companies generally make very good profits and there is a reason for that.

They also make a lot of money of people and companies who think they only need something for a short time but end up keeping it for a long time.. Very very common.

The only way this story makes sense is..

A. Slashdot is now it's own shill.
B. People who live on credit (and lease deals are almost always used as a form of credit) will go a long way to convince themselves it makes sense.

There are of course some situations where it does make sense.. But never because it is cheaper over a long time period.

Re:So paying more in the long run is better?

[Aaden42]

You can pretty much assume that should that happen, the revenue stream from any outstanding leases would be part of the company's assets sold off in the bankruptcy.

You'll continue to pay *someone* your leasing fees for the entire term of the original contract. Might not be the same company you started with, but someone will buy the contract out for pennies on the dollar and keep on invoicing you for the dollars.

If its seems too good.....

[Mr D from 63]

We can lease LEDs for all our outdoor lighting for $4,000 per month and save $8,000 on electricity right away

You can't save $8000t "right away". That's just bullshit.

What they are doing is depending heavily on tax subsidy/credits... not actual cost. Then twisting the numbers.

I'm confused...

[SeaFox]

Is this a legitimate article, or are we taking Slashvertisements to a new level?

Re:I'm confused...

[Roblimo]

"Slashvertisement - a fiction spawned in the brains of basement-dwellers who think that anyone who says anything nice about anything or anyone is getting paid to be positive."

Nope. All ads or "sponsored content" pieces on Slashdot are clearly identified. This piece is legit, and I clearly stated that this is just one of many companies in the energy-saving businesses. Clouden's company is close to me and I first heard about it from a satisfied customer, but at no point did I (or he) say his company was better than others in the same business. In fact, let me repeat: If you're going to buy any kind of energy-saving services, you'd better shop around -- just like Smokey Robinson's momma told him: https://www.youtube.com/watch?...
 

Another script-laden web site

[satch89450]

I use NoScript in Firefox. It would appear most of the site is navigated using scripts. No thank you.

I have wondered about doing 'leasing' for ....

[WindBourne]

residential HVAC. Basically:
1) insulate a home;
2) put in new windows, doors;
3) put in LED bulbs;
4) put in geo-thermal HVAC;

Then for the next 10-15 years, collect the difference on the utility bill. After that, the changes belong to the home.
It seems like this might be a win-win type operation.

Re:I have wondered about doing 'leasing' for ....

[swb]

HVAC is too mechanical and homeowners are too persnickety. You'd get killed on break fix and maintenance overhead and labor. If you tried not to, your service would suck and people would quit paying the leases or deduct out of pocket repair costs from lease payments.

Plus, what happens when you want to move? "Oh there's this weird lease on the HVAC..." could make it harder to sell.

Re:I have wondered about doing 'leasing' for ....

[WindBourne]

which is why I would think of only doing this with geo-thermal and electric. Gas has far too many issues.

Huh?

[argStyopa]

Isn't the point of a lease market that there's residual value after the primary use? Basically that (for the actual owner) then:

(lease payments) + (resale value at the end) > purchase price

Who buys used LEDs?

Re:Huh?

[Khyber]

LEDs now days are so good that after they hit their typical 70% of brand-new output they're still pushing more light per watt than brand-new HID bulbs.

So who buys used LEDs? Smart people.

Better methodology?

[Dereck1701]

A better methodology might be to simply stop buying standard bulbs and start buying LEDs. As standard bulbs go out swap them out. Sure you won't see the savings immediately but you also won't throw away a boatload of perfectly good bulbs and you won't have quite such a sticker shock. I can definitely see the use of this leasing service, but only in cases with especially pigheaded bureaucrats, kind of like those ones who claim the world is 7,000 years old or those who think we can convert 100% to renewable electricity and organic food and not have rolling blackouts and half the population starving to death.

Re:Better methodology?

[Dereck1701]

As a thought experiment perhaps, but when factoring in real world requirements such as disposal, transportation, labor & logistics you're hard pressed to justify a major effort to replace bulbs wholesale.

Re:As the LED expert on Slashdot.

[RobHostetter]

They usually even include fake printed UL labels to boot! Of course they don't have the testing that makes UL valuable.

Re:What did Enron prove?

[ChrisMaple]

Re: Price increases. You've never heard of long-term contracts?
Enron failed because it thought that its expertise in power pricing was valid in other fields. It was wrong.
Utilities are regulated for 2 reasons: 1. The sort of people who complain about everything in life are goaded by monthly bills into complaining to the government. 2. Being uniquely capital intensive and inherently unable to move, utilities are prime targets for government bullying