BACC Editor on Friday, 02 September 2011 22:53
LED Lighting Follows in the Footsteps of Solar with New Leasing Options
The popularity of solar leases has inspired the launch of financing innovation in another clean technology sector. Lunera, a Silicon Valley startup that provides next-generation LED lighting, is believed to be the first in the commercial lighting sector to announce a lease-to-purchase program. This program allows commercial building owners to upgrade their lighting systems with ultra energy efficient LED lighting for no money down.
The market for LED lighting is strong, especially along the East and West coasts where electricity rates are high. LEDs do not contain mercury, can be used with a dimmer, last much longer than standard bulbs, have potential for enhanced visibility and can secure attractive operating cost reductions for companies and municipalities. For example, streetlight fixtures upgraded with LED technology have a lifespan of over 15 years compared to the 7 years of standard high-pressure sodium lamps and have the potential to achieve 50% in energy savings. The initial costs of LED lighting systems, however, can be a deterrent. To address this barrier, Lunera has developed a five-year lease-to-purchase agreement with fixed monthly payments, which will “remove the first cost of investing in LED lighting, enabling facility owners and tenants to pursue their growth objective of upgrading to LED lighting and lowering operating expenses,” explains Karen Owyeung, CEO of Lunera Lighting.
Lunera’s announcement comes at a time when the popularity of solar leasing options has soared. The San Francisco Chronicle reports:
47 percent of residential solar installations in California are owned by a third party, not the homeowner, according to state data crunched by SunRun. The company arrived at that figure by examining the records of the California Solar Initiative, which provides rebates for solar installation.
Solar leasing was thrust further into the spotlight following recent announcements of major companies collaborating with solar vendors to make leasing options more accessible. In June, Google and SolarCity, a San Mateo-based solar power company, announced a $280 million investment deal that will allow the company to extend solar lease and power purchase agreement options. More recently, Citigroup and San Jose-based SunPower announced a new $105 million fund for residential solar leasing projects, which will permit SunPower to expand its 20-year lease program to several other states. Citigroup has also partnered with Sungevity, an Oakland-based startup, to create a tax-equity fund that will finance the leasing of $50 million worth of residential solar systems and advance Sungevity’s expansion to the East Coast.
“Leasing gets [people] over the hump [of upfront costs] and it's familiar: Anyone who has a monthly mortgage gets the idea that you are paying over time,” says Nancy Pfund, a managing partner at DBL Investors. “We need to fix the economics of renewable energy if we are going to grow the market. A lease like this is another tool in the tool kit.”
It remains to be seen whether Lunera’s announcement will drive a trend in LED lighting leases, but if the popularity of solar leases and the burgeoning market for LED lighting systems are any indication, Lunera might have turned on the switch for another successful clean technology sector.