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Solar Shouldn’t Be Businesses’ First Priority

By Anuj Thakkar


As the price of solar photovoltaic (PV) installations has continued to fall over the past decade, the commercial sector has been rapidly installing solar on its facilities in order to lower energy bills, protect the environment, and increase energy independence from the grid. Solar-energy jobs are growing 12 times more quickly than the U.S. economy, and as of October 2016, the top 25 corporate solar customers had installed 1100MW of solar capacity.

In spite of the excitement and investment in solar, solar PV may not be the most cost-effective technology for achieving the cost-reduction and environmental-protection goals of U.S. businesses. In areas where solar power purchase agreements or funding support programs are not in place, the cost of installing a typical 60kW solar system on one facility could be upwards of $150,000 plus maintenance costs.* Instead of making solar PV installation a first priority, businesses should aim to better achieve the goals of lowering energy bills and reducing grid stress by focusing on replacing their fluorescent tube-lights with direct-install energy-efficient LED tubes.

According to the Department of Energy, “widespread use of LEDs could save about 348 TWh of electricity by 2027,” and LEDs are “one of today’s most energy-efficient and rapidly-developing lighting technologies.” More specifically, the replacement of fluorescent tubes with LED tubes could have a dramatic impact on the electricity usage in the U.S. commercial sector.

While tube-lights aren’t typically cited as heavy energy-consumers in the U.S., the U.S. Energy Information Administration has found that 17% of commercial electricity consumption comes from lighting, the biggest single drawer of electricity for commercial facilities. In addition, 92% of facilities have tube-lighting, with 78% of floorspace lit by tube-lights, signaling that tube-lights alone consume a significant portion of the nation’s commercial electricity.

Typically, the “levelized cost of electricity” (LCOE) is a metric used to determine the lifetime cost of producing power with a certain technology and isn’t applied to energy efficiency technologies like LEDs. However, because solar PV and LED tube-lighting are both designed to reduce the energy that facilities demand from non-renewable sources, they can both be treated as power sources (ex. a 15W LED replacing a 32W fluorescent would be a 17W power source).

With this treatment, LCOE can be used as a metric to determine the cost of reducing grid electricity demand by a set quantity, with higher LCOE values indicating the cost of reducing grid electricity demand to be higher. The LCOE for solar PV is $0.074 / kWh, whereas the LCOE for LED tube-lighting is only $0.017 / kWh (calculated using EIA data and $13/lamp cost). At these rates, LED tube lighting is 430% as effective as solar PV at achieving a set quantity of electricity reductions.

On a national scale, if businesses wanted to reduce their cumulative grid demand by 50% of annual lighting consumption (52.8 TWh annually and less than the estimated current consumption by commercial tube-lights), they could spend $45.1 billion on solar PV, or they could spend just $10.6 billion on LED replacement tubes. With $5.54 billion electricity cost savings annually, LED tubes redeem their investment four times as quickly, with a payback time of just under two years, compared to eight years for solar.** While an initiative of this scale is highly unlikely to happen soon, if businesses in the US did choose to cut 50% of their lighting electricity consumption, that could result in 37 million metric tons of CO2e reductions annually at a quarter of the cost of installing solar.

In terms of achieving lower energy bills and protecting the environment, LED tube-lighting is the clear winner over solar PV. However, arguments can be made that solar PV could be more effective at helping businesses become energy independent from the grid. They can be paired with smart meters and battery technologies to deliver power during peak consumption hours, reducing demand on the grid when necessary or allowing users to operate completely off-the-grid. Because LEDs are not power generators, they cannot allow users to operate completely off-the-grid. That being said, contrary to popular belief, energy-efficiency technologies like LED tubes can be paired with load-shifting batteries that are charged by the grid during low-demand hours, helping produce the same peak-shaving effect as solar PV.

Solar PV is certainly a reliable source of clean energy and is growing more appealing as prices fall, but given the current state of the technology, the costs of installation and maintenance are still too high to make solar the best option for businesses around the country. Instead of prematurely concentrating their efforts on this evolving technology, businesses should first focus on high-impact energy efficiency projects like installing LED replacement tubes, which translate to more cost savings and environmental benefits than solar. Making solar a secondary priority would not only ensure that high-impact measures are taken first, but would also allow time for solar technology to improve before implementation, allowing businesses to maximize their savings and reductions.

Schools and businesses around the country are beginning to see the value of LED tube-lighting technology, and as more entities recognize the benefits of low-cost, high-impact energy-efficiency initiatives like this one, the commercial sector could begin playing an even larger role in the reduction of national carbon emissions over the next few years.

*Solar financing programs like those offered by Tesla/SolarCity and other solar companies can significantly reduce the burden of solar on businesses, making it a much more feasible option. This discussion does not consider those financing options.

**Maintenance savings accrued from LED tubes are not considered, but would significantly increase savings and decrease payback time of LED tubes

***This article only discusses modifications to existing buildings, not new construction.