Installing LEDs gives warehouses cheaper, cleaner lighting, experts say – FreightWaves

August 10, 2022 by No Comments

Many people have switched to LED lights in their homes because they know how much money and energy it saves. So why haven’t companies with huge warehouses around the world done the same?

It’s not as simple as it may seem. “An LED retrofit is a disruptive retrofit,” Sam Stockdale, senior vice president and head of sustainability at last-mile logistics real estate company Link Logistics, told FreightWaves.

It often requires coordination between tenants and landlords, changes to leases or contracts, and optimal timing to reduce disruptions to warehouse operations.

But the environmental benefits of LED lighting are substantial, and in many instances, the economic benefits make it financially well worth the investment. 

Cost, energy, emissions savings of LED lighting

Lighting is “one of the largest electrical loads in warehouses and distribution centers,” Rafat Shehadeh, global head of essentials and procurement at supply chain real estate company Prologis, told FreightWaves. So improving energy efficiency can have a big impact on electricity costs.

According to the Department of Energy, LEDs use 75% less energy than incandescent bulbs. The main reason for the energy savings is that incandescent bulbs release 90% of the energy generated through heat, not light, the DOE said. CFLs, another type of bulb, lose about 80% of energy as heat.

LED lighting minimizes maintenance needs, reduces lamp and ballast replacement frequency, and can save up to 83% on energy when accompanied by wireless networked controls or occupancy sensors, according to Inbound Logistics.

LEDs last up to 25 times longer than other types of bulbs, according to the DOE. “That means your employee is on a ladder replacing that bulb 25 times less often. That’s extra time that can be put toward higher-value work,” Saleh Elhattab, founder and CEO of emissions tracking software provider Gravity Climate, told FreightWaves.

“Given the energy, labor and cost benefits, switching to LEDs is a smart move for any supply chain company,” Elhattab said. But some leaders don’t realize the benefits until they find out they can save $10,000, $20,000 or even $100,000 by switching to LED lighting, he added.

Shehadeh said Prologis customers with LED retrofits “benefit from keeping all the energy savings, operating more sustainably and having their team enjoy a brighter workspace.”

There is also the potential for job creation from switching over. For every million dollars in investments and spending in efficient new buildings and in making efficiency retrofits in existing buildings, 14 to 15 jobs are created, according to a 2020 Global Alliance for Buildings and Construction report.

The split incentive barrier

Many warehouses operate within the triple net leasing model, Stockdale said. That means the landlord gets a base rate for rent, and logistics companies that rent are responsible for paying for their own utilities, among other costs.

If landlords paid for LED retrofits, they would not benefit financially from the energy savings since their tenants pay for electricity. In this case, landlords have little incentive to make the investment.

One solution to this so-called split incentive barrier is performance contracting. Landlords can partner with energy service companies, which pay for the upfront cost of the LED installation. Energy service companies foot the bill with the expectation that it will be paid off using the saved money from more efficient lighting.

Another solution is to use green leasing to make addenda to leases. If a landlord pays for an LED retrofit, a change in the lease can make …….



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