LUXe Affordable LED solutions for Independent Schools

The installation of LEDs in Independent Schools will undoubtedly reduce energy consumption and carbon emissions, so there is no real argument about the long-term necessity for change. There are compelling reasons to adopt LEDs by default.

Nevertheless, the financial benefits can be far less obvious to assess. To this end Powerful Allies was recently asked to undertake detailed cost/benefit analyses of so-called “Fully funded” LED proposals for several leading Independent Schools. The findings were alarming, but from this review emerged a solution which was both effective and financially viable from the outset; we call this LUXe, more later.

Comparative LED Proposal Findings

The reviews compared LED supply, installation and funding proposals from several providers and considered both the technical solutions proposed and the financial implications of the agreements.

In all cases we identified significant technical deficiencies and clear evidence of exaggerated financial claims, to the extent that for many schools there would be no actual saving in costs for the entire effective lifetime of the installation.

Conclusions

• Most proposals did not include a separately identifiable supply and installation cost, with this cost “bundled” into the monthly repayment. Consequently, it was impossible to assess Best Value for the installation itself or to undertake direct competitive tender for the supply and installation.
• The omission of a project cost also makes the APR for funding options more difficult to assess, which is particularly relevant to the payback period and the decision to seek external funding or not.
• For longer term funding, for example with 7-year payback, the APR rises significantly to an estimated 14% for this longer period.
• When VAT is correctly included in the calculation, the schemes failed to show any worthwhile savings at all for their entire funding period. Theoretical savings only emerge when the funding period is complete, but by then the LEDs are past their 5 year warranty period and will be subject to replacement
• All proposals significantly overestimated the % of current energy spend attributed to lighting, exaggerated the “burn-hours” and the reduction in that spend as a result of LED installation.
• Furthermore, all proposals assumed there is no degradation of performance by LEDs over their effective lifetime, which is incorrect. For the most part, leading suppliers warrant their products for 5 years, and performance beyond that period is unpredictable.
• With regards to design, most proposals simply replaced like-for-like, so if the lighting levels were incorrect in the first instance, they may still be incorrect. This is particularly true of Sports facilities, where the installer should always provide a design based on the level and type of sport use for the building.

The LUXe solution

Without doubt, LED installations are capable of being financially viable in a relatively short period, say 3-5 years, subject to a competitive supply and installation cost and subject to affordable funding where necessary. The energy cost savings are worthwhile, and are more than adequate to enable “self-funded” schemes.

In order to ensure viability for Independent Schools, Powerful Allies has applied our transparent, low margin, common sense 100% Renewable Energy procurement ethos to the delivery of no-nonsense LED installations. We call this LUXe

LUXe; Affordable LED solutions

Design, specification and installation.

• Powerful Allies will oversee the design and specification of all installations, and secure fully competitive tender prices for the project.
• All installers are mandated to provide on-site support throughout the lifetime of the lighting system, which is generally warranted for 5 years.
• For this role, Powerful Allies charges a simple 7% project design and management fee which will be included in the project cost.
• This approach ensures Best Value for schools, confident of the quality control and transparency offered by Powerful Allies to all Independent School clients.

Funding

• Unlike typical “Fully funded” schemes, LUXe is not geared to profit from finance.
• For those schools which have sufficient funds to finance an installation, our role remains one of design, specification and installation management.
• For those schools which prefer to fund the installation using accessible business finance, Powerful Allies has identified a panel of Ethical lenders which will fund 100% of the project cost, including VAT, on normal commercial terms.
• Typically, such funds are offered for periods from 3 to 5 years, and at an APR of circa 8%; the usual mechanism allows for repayment without significant penalty at any time.
• In our experience, lenders are eager to fund LED installations because they can see the environmental benefit and the ability for schools to repay debt from predictable energy cost savings.
• Finance is generally secured against the LED project itself, which is deemed to be a fixed asset. For the most part, no added security is required.
• There is big jump in APR between a 5- and 7- year Finance packages, and in our view the optimum period for finance is no more than 5 years, ideally 3 years. This ensures energy savings will pass to the school relatively quickly and those savings are aligned with the lifetime and performance of the underlying asset.