What is Total Cost of Ownership?
To install a lamp, we need to purchase the lamp at $x cost. We pay the utility company $y cost to operate the lamp. If the lamp can last for z years, the total cost of owning and operating the lamp is:
Total Cost = Initial Cost of Lamp + Life of Lamp * Cost of energy to operate the lamp
or Total Cost of ownership (TCO) = x+z*y + maintenance/replacement labor cost
Why is Total Cost of Ownership Important?
There are a few cost components to the TCO formula; thus, it is important to understand the relationship when making the decision to purchase a lamp.
Lamp Life (z): A typical fluorescent tube has a life of 8000 to 20,000 hours. The LED replacement has a life of at least 35,000 hours. To replace, you need to purchase and pay labor to maintain or replace. In the fluorescent tube system, one has to worry about the ballast as well. LED has a longer life; therefore, less expenses. In some countries, one has to pay disposal fee to dispose the fluorescent tube due to the Mercury content inside.
Efficiency: Every electrical device requires energy to operate. For the same equivalent brightness, assuming 2000 lumen, a fluorescent tube with ballast requires about 40W. If the LED tube has 100 lm/W, the LED tube power is 20W. If the LED tube has 190 lm/W, the power is only 10.5W. Therefore, the higher the efficiency, the lower the power; thus, the lower the Electricity Bill to operate the lamp. y = (Power * total hours)/1000 * $/kWh.
Table 1 shows the potential energy savings comparing a 40W fluorescent and an equivalent 10.5W T8 LED tube outputting the same brightness.
From the context of TCO, a 35,000 hours LED lamp can last about 4 years (35,000/24 * 365). In the case of Germany, the total operating saving is $77.04*4 = $307.80 per tube.
From the payback perspective, the annual savings to replace is $77.04. If the tube is $25, the payback is only 4 months. This also means the cost of waiting is $77.04 per tube per year.
The replacement challenge
The higher the efficiency, the more the savings. Fig. 1 and Fig.2 depict how the savings could pay for the initial cost of the LED lamp. Even if the LED lamp were 10 times more expensive as compared to the traditional fluorescent tube, LED lamp still win from the total cost of ownership’s perspective.
From energy savings’ perspective, the use case is very compelling and brings many benefits to building owners, operators and yet the Fluorescent Tube to LED Tube replacement seems to be very slow. WHY?
- Is it because of the cost of the lamp?
- Is it because of the poor quality of the lamp?
- Is it because of awareness?
I sincerely would like to listen to your opinion.