Just as Microsoft did with the servitisation of computer software and Netflix did with entertainment, Lighting as a Service (LaaS) is redefining the delivery of energy efficiency projects through monthly subscription fees. In other words, businesses with large facilities can now pay-as-they-save whilst reducing their carbon footprint.
In this post, we’ll define Lighting as a Service, show how it works, and help you understand if this model could benefit your business.
What is Lighting as a Service (LaaS)?
Lighting as a Service allows you to upgrade and maintain your business premises to LED lighting for zero capital expenditure. You pay a monthly subscription fee based on a fraction of the savings and generate an increase in net cash flow from day one.
How Does LaaS Work?
The model is essentially 3 stages- assess, upgrade, save. For an overview, you can watch the video below. Or, read on to learn more about the process.
1) Assess
A lighting engineer conducts an on-site survey of your pre-existing lighting infrastructure to calculate your energy consumption and potential savings.
There are four variables considered:
i) the wattage of your current light fittings vs the LEDs
ii) the operational hours of use
iii) the unit rate of electricity
iv) reduction in maintenance costs
Then, taking this data into account, a proposal is drafted. From this, you will see your reduced energy costs, monthly/annual savings, the fixed monthly subscription fee plus the environmental benefits.
2) Upgrade
The new LED lighting system is installed resulting immediately in a safer, brighter and more energy efficient building.
Your old lighting system is removed and recycled. At Lumenstream, we work with Recolight to ensure your business remains in line with WEEE (Waste Electrical and Electronic Equipment) regulations.
3) Save
Following the successful installation, you pay a fixed monthly subscription fee, based on a fraction of the savings created, and generate an immediate increase in net cash flow from day one.
Why Choose LaaS? Who is it For?
There are three routes in upgrading your lighting system in your business.
- The old way: buying from wholesalers
- The newer way: leasing them/ Hire Purchase Agreement
- The newest way: Lighting as a Service
For further information on these options, we give an in-depth review in our article The Ultimate Guide to LED Lighting Upgrades. Which route you go for depends very much on your business.
Typically for Lighting as a Service to be most beneficial to you, your company should have:
- high operational hours of use ie lights are on at least 12 hours per day
- large premises such as warehouses or factories
- lights that are old fluorescents, halogens, or first generation LED lighting.
LaaS should not be confused with a lease or form of finance/credit. It is a Service Agreement that has been specifically designed to be an off-balance sheet transaction. Subsequently, it will have no negative impact on your future cash flow or borrowing capacity.
Even cash-rich businesses should consider LaaS because it removes their need to invest CapEx into depreciating assets and unrecoverable labour costs. This provides them with the opportunity to invest their budgets into what really matters- their core business.
Also, any maintenance is only one phone call away and completely taken care of.
What are the Drawbacks to Lighting as a Service?
As already stated, Lighting as a Service is extremely beneficial if your business fits in the category of having a large premises with high operational hours of use for the lighting. Unfortunately, where it falls down is if your business is outside of these criteria.
For example, if you have a big warehouse but the lights are already on sensors and are only on 8 hours a day Monday to Friday then the savings may not be big enough. In this case, you may want to look at buying the LED lighting outright.
What Happens at the End of the Service Agreement?
At Lumenstream, our Service Agreements are 5 years. At the end of this period there are a number of options for your business.
- Allow the contract to expire. You keep the lights. You keep 100% of the savings.
- You opt for an ongoing Maintenance Agreement.
- You enter into a new LaaS contract and we upgrade your business to the most efficient and advanced lighting system available.
To sum up, Lighting as a Service is the best option for your business if you have long operational hours of use, old inefficient lights and large premises in need of an upgrade.
As we say here at Lumenstream- Invest your money into your core business. Leave your lighting to us.
To find out what other companies, like CIMC, had to say about Lighting as a Service with Lumenstream visit our Client Journeys page.