Below is my contribution to the May issue of tED Magazine, the official publication of the NAED. Reprinted with permission.
Offered by many utilities and energy efficiency organizations, commercial lighting rebates are a longstanding driver in demand for energy-efficient lighting and controls in existing buildings. The rebate outlook for 2021 looks very positive for distributors who rely on them to sweeten upgrade proposals.
In review, many utilities offer rebates as an incentive to consume less energy, which helps them avoid the higher cost of building new power plants. While custom rebates are available, the majority are prescriptive, with a cash amount awarded per installed qualifying product and with the rebate capped at a maximum percentage of its cost.
According to BriteSwitch, a rebate fulfillment firm that analyzes rebate trends, rebates vary in impact by typically covering anywhere from 10 to 70 percent of the product cost, with an average 20 to 25 percent payback improvement. Increasingly, rebate programs have structured away from offering “free rides” to ensure the owner shoulders part of the cost. With weak demand in 2020 due to the COVID pandemic, however, a significant number of utilities offered temporary bonus rebates to boost participation.
In 2021, three-fourths of the United States remains covered by a lighting rebate program, fairly consistent from 2020 with a notable exception: Ohio. With the passage of the state’s controversial Bill 6 in late 2019, Ohio’s major investor-owned utilities discontinued their energy efficiency programs at the end of 2020.
LED products
In LED lighting, the most popular rebates continue to target LED replacement lamps, downlights, high-bays, parking garage luminaires, troffers/linear panels, and outdoor, as shown in Table 1. In short, a wide variety of lamp and luminaires covering a majority of applications.
“In 2021, the rebate amounts for LEDs are relatively flat from 2020,” said Leendert Jan Enthoven, President, BriteSwitch (www.BriteSwitch.com). “This in itself is quite remarkable because for the past 10 years, they have dropped 10 to 20 percent each year. Usually, the decrease we’d see was to match the dropping prices of LED, but a weak market and leveling out of prices meant they didn’t have to adjust much for 2021.”
A majority of rebate programs qualify products by requiring listing on the DesignLights Consortium’s (DLC) Qualified Products List. In 2020, Version 5.0 of the DLC technical requirements was to take effect, which DLC pushed to February 2021 due to the pandemic. Version 5.0 raised the minimum required efficacy for LED products while requiring reporting of dimming capability; DLC Premium products generally must be dimmable.
On December 31, 2021, Version 5.1 listing becomes required to qualify for rebates. Version 5.1 expands reporting of various lighting quality attributes while requiring dimming for a broad range of products, with continuous dimming required for most indoor luminaires and retrofit kits.
“With Version 5.0, solutions installed in the marketplace now are more efficient than they were before,” said Enthoven. “It presents some complexity for distributors as their older products in stock may no longer qualify for rebates once delisted from the current DLC list.”
Version 5.0 may also be impacting the availability of rebate programs promoting DLC Premium products. Some programs rebated only these higher-efficacy products or incentivized it with a bonus rebate. Enthoven said the number of these rebates dropped in 2021, possibly due to the higher efficacy required for standard listed products.
Lighting controls
The 2021 rebate picture for lighting controls looks much the same as it did in 2020, with fairly consistent, substantial rebates available for remote-mounted, wallbox, and luminaire-mounted occupancy sensors; photocells; and daylight dimming systems, as shown in Table 2.
“Lighting control rebates have historically been very stable, changing little over the past 12 years,” Enthoven said. “In 2021, control rebates are similar to previous years. For standalone sensors, the rebates are still relatively high compared to the cost, making it an easy add-on for most projects. With DLC Version 5.1 making dimmability more important in many categories at the end of the year, it will be interesting to see how rebate programs adapt in 2022.”
What’s new in lighting control rebates is the recent entry of networked lighting controls into the rebate market. In 2020, the number of programs increased 15 percent to 95; in 2021, however, only three new programs were added, suggesting utilities are still wrestling with how to incentivize the category.
Enthoven said the majority of these rebates offer a per-fixture adder for connecting to a networked lighting control system and require the system be qualified under the DLC’s Qualified Products List for Networked Lighting Controls. The most common luminaire types with additional networked control rebates are troffers, high-bays, and low-bays. Outside of these programs, networked controls may be eligible for rebate under custom programs.
Getting the rebate
Including rebates in project quotes can help obtain customer approval by improving return on investment. Securing rebates, however, requires administration. The rebate must be identified and understood, paperwork must be submitted, and pre-approval must be gained. Enthoven said the rebate process takes an average 12 steps over five months to complete, requiring either in-house resources or outsourcing to a firm like BriteSwitch.
Below are some tips on managing the rebate process:
- In typical prescriptive product rebate programs, the rebate is paid directly to the customer, though some “midstream” or “instant” lighting rebate programs, typically geared around lamps told for retrofits, involve the distributor providing the rebate at the point of sale. Get to know the program so you understand its requirements, and then follow the program to keep abreast of changes and funding level.
- Taking the rebate amount off the invoice can be risky, as rebates are not guaranteed or may pay out a lower-than-expected amount. Available funds may tap out during the year. And note that a majority of rebate programs cap the rebate at a percentage of the material or project cost—meaning if a customer is paying $150 for an LED high bay and the rebate is $150 capped at 50 percent of the material cost, the resulting rebate would be $75.
- Pre-approval is required in a majority of programs before installation, so build that time into the project if needed.
- The time for rebate pre-approval and final checks to be issued increased considerably in 2020 due to the COVID pandemic; file for pre-approval as soon as possible and ensure the customer understands payment may take time.
- A majority of programs require the product be listed with ENERGY STAR (lamps) or DLC (lamps and luminaires). Make sure the exact model for a selected product is listed.
- Some programs require inspection to verify installation. In the COVID era, this may be done remotely using a camera rather than onsite.
Rebate estimates should be included on every quote that you send out to a customer,” said Enthoven. “There is no easier way to take the pressure off of your margin than to show the ‘discount’ from the rebate program. Even if you’re not filing the rebates on the customer’s behalf, your knowledge and expertise on the subject is invaluable to them and make you stand apart from the competition.”
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