Andrew Patterson meets a virtual company who have developed a leading-edge LED product which can save at least 50% off business lighting costs

By Andrew Patterson

The former Labour government didn’t exactly endear itself to the country when it threatened to make energy saving light bulbs compulsory.

However, at a time when businesses are constantly seeking ways to reduce their operating costs, lighting is sometimes overlooked as an expense where sizeable savings can often be made.

Recent technology advances in lighting, particularly the development of commercial LED lighting, have the potential to significantly cut energy bills, in some cases by up to 25% - particularly if the business or organisation has a high demand for lighting and operates 24/7 such as hospitals, freight warehouses, carparks and even supermarkets.

Unlike traditional fluorescent tubes, the technology uses light-emitting diodes (LEDs) as the source of light.

The lamps, or more commonly tubes, which are used for commercial lighting installations, offer a longer service life and higher energy efficiency, though initial installation costs are more expensive than those of fluorescent and incandescent lamps which can often be off putting for some business owners

Improvements in LED devices have seen some chips able to emit more than 100 lumens per watt resulting in significant reductions in energy consumption.

However, issues with variability in the quality and consistency of the lighting in the past have made some architects and commercial fit out specialists reluctant to recommend the technology.

Energy savings

Business Lighting Solutions founder Paul Stoddard, who gravitated to lighting after a career in the telco sector, says he started the business because he could see energy savings were set to become the next big cost containment issue for companies.

“What has become really apparent to me is that energy efficient appliances in the future are going to be increasingly sought after as businesses look for ways to cut their costs and ultimately their carbon footprint.”

But the idea of simply sourcing the light technology off shore and importing it directly to NZ quickly proved to be flawed.

“When we first decided to investigate this opportunity further, we thought it would be a case of simply licensing some lights from Europe or China and importing them to New Zealand. But what quickly became apparent was that the LED products on offer either weren’t compliant with New Zealand and Australian electrical and safety standards or the quality and quantity of light was poor in terms of colour and output."

“So we embarked on a two-year R&D program to develop our own product Ecofluro® T8 LED.  A lighting solution specifically designed for Australia and NZ that addressed the safety issues, quality of light issues, and the amount of light that was being produced.”

So how much energy is it possible to save by switching to an LED installation?

“The rule of thumb is that businesses can often reduce their energy consumption by between 50% and 60%. So what we’re saying is that LED will give out the same amount of light and the same quality of light, but use significantly less power. So the economic argument is compelling, particularly when you take into account maintenance.

“However, we do have some customers who don’t bulk relamp. They do so on an as-required basis which means you have a call out fee for an electrician that could be up to $60 to change a single tube. So when you look at an LED solution that lasts three to four times the length of a fluorescent tube, you’re not only saving on energy bills, but you’re eliminating a significant maintenance overhead at the same time.”

Virtual business model

What makes Business Lighting Solutions somewhat unusual is that it operates on a virtual model, without a physical office. Every aspect of its operation is contracted out.

“What we’ve been able to do is adopt a business model that enables us to position our Ecofluro® LED’s at a price point that makes good economic sense. But the only way we achieve that was to drive fixed cost out of our business.

“So we’ve established virtual teams for every aspect of our business. We have a virtual marketing and communications team and we have another virtual team based in China who oversees the manufacture, production and quality control of the LED’s. This strategy has enabled us to be very competitive in terms of our pricing.”

“We do also undertake some of our manufacturing process here in New Zealand as well.”

Resistance to change

Not everyone has been convinced of the benefits of the technology with some businesses reluctant to make the switch due to the high initial capital cost involved while others have been put off by the variability in the quality of the light emitted.

Paul Stoddard says he’s had to work hard to educate sceptical business owners of the benefits of an LED lighting fit out.

“Obviously there is competition in the market and pretty much anyone can bring in an LED tube or an LED product into the country. What we’ve endeavoured to do is set the bar very high. So we proactively educate both prospective and existing customers as to what constitutes a good reliable product and some of our competitors don’t actually measure up in that regard.”

“With any new product people are always going to be a bit circumspect. So we’ve had to counter that with a lot of pilot studies, post pilot interviews and case studies written up on what we’ve done for different clients. Of course, that really does slow the sales cycle down. But now with 60 or 70 reference sites we have around the country and a range of comprehensive case studies, people are much more willing to embrace the technology."

“Having said that, some of the professional service firms are still a little cautious. They’d rather stay with the tried and true technology, which is always frustrating. But increasingly, there are progressive organizations that are recognising the merits of LED lighting from an economic perspective, but also from a sustainability point of view."

“Carbon credits are of some interest in New Zealand. But in Australia, it’s a hot topic and reducing a business’s carbon footprint is seen as a key economic driver. Over time, we believe that the same will apply in New Zealand.”

Achieving credibility

Starting a business and establishing credibility in the market, particularly when it involves a new technology, can have its challenges. Paul Stoddard believes in sticking to the basics.

“I’ve found there’s no secret formula to business. You need to develop a great product, you must have great customer service and you need to retain the best people. We’ve worked very hard on each of those fronts and as a result we’ve really started to make inroads into the NZ market and acquired a blue chip pedigree of corporate customers including Air New Zealand, Genesis Energy, Transpower, Turners & Growers and, most recently, our biggest installation so far was for F&P Healthcare."

“There’s a high capital hurdle involved to adopt LED technology. So you need businesses that have a robust cash flow and are able to be objective at what the return on investment (ROI) will be for the money that they’re investing in a new fit out."

“For some customers, such as a District Health Board (DHB) for instance, with their lights burning 24/7 that can approach 100%. But for the average business running their lights say 14 hours a day that ROI is approaching 40 to 45%."

“We believe that if all large businesses in NZ were to adopt LED lighting it would result in collective savings of around $300 million a year in energy consumption.”

Maintaining quality standards out of China remain an on-going challenge for the business.

“It can be a real trap if you’re not very, very careful. Right from the outset we sought to have end to end control over our supply chain. So we select every component that goes into our products. We have our own engineers in the factory overseeing assembly and verifying all the components involved in the manufacturing process. We even undertake random inspections of the product to an ISO standard. That’s absolutely necessary for product integrity.”

With an annual growth rate in recent years in excess of 400% the business is confident it can continue to maintain its expansion in the future.

“The future is looking very bright for us [no pun intended!]. We are able to help businesses drive down their energy costs and boost their bottom line results.”

Perhaps a good reason for more businesses to, maybe, see the light in the future.

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