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Publication Number:  FHWA-HRT-14-050    Date:  June 2014
Publication Number: FHWA-HRT-14-050
Date: June 2014

 

Guidelines for The Implementation of Reduced Lighting on Roadways

Chapter 4. Cost Benefit Analyses of Adaptive Lighting

To determine the financial benefits to be expected from an adaptive lighting system, a lifecycle cost (LCC) analysis should be considered. A simple payback method of analysis could be used, but this method ignores operating and maintenance expenses, which are key components in evaluating lighting control systems and their expected benefits.

LCC is a simple calculation relating to the energy savings and the equipment required for the implementation of adaptive lighting. It does not consider the cost of a crash or a vehicle –caused fatality, and it assumes that the safety level of the roadway is not affected by the changes to the lighting level.

First Step: Quantify Costs

The first step in preparing an LCC is to quantify all of the costs associated with the lighting system. These costs include the following:

Second Step: Tabulate The Costs

After the initial costs have been collected, assemble a simple tabulation of costs over a period of time, without inflation or time –value of money elements. A fixed period of time (e.g., 20 years) can be used, and system replacement costs can be added to the costs depending on expected component life. Another option is to use the expected life of the system and equipment being evaluated as the period of time.

For example, assume that an adaptive control system is being added to a light –emitting diode street lighting system already equipped with dimming drivers and an acceptable photocell receptacle with sufficient pins for control and power connections. The assumed equipment life is 15 years, and the simple LCC analysis is set to that time frame. An example is shown in table 18 and figure 8.

Table 18. Example cost information for an adaptive lighting system.

Type of Cost Existing System Without Adaptive Control Adaptive Control System Costs
Installed Cost $0 $600,000
Annual Energy Cost $841,000 $589,000
Annual Maintenance Cost $100,000 $90,000
15-year Total Cost $14,115,000 $10,785,000

Figure 8. Graph. Example system costs by year for standard and adaptive lighting systems. Figure 8 is a line graph with cumulative costs on the y-axis, ranging from $0 to $14 million, and years on the x-axis, ranging from 1 to 15. There are two traces, one for a street lighting system without adaptive controls, and one for a street lighting system with adaptive controls. Both have positive slope, where the cumulative cost of the lighting systems increases as years increase. The trace for the street lighting system without adaptive controls has a steeper slope. From years 1 to 3, the street lighting system with adaptive controls is more expensive, starting at year 1 costing about $0.5 million, while the lighting system without adaptive controls would cost $0. At year 3, both systems cost about $2 million. By year 15, the street lighting system with adaptive controls costs about $10 million, while the one without adaptive controls costs about $13 million.

w/o = without

Figure 8. Graph. Example system costs by year for standard and adaptive lighting systems.

Third Step: Convert Costs To Present Value

To obtain a better picture of the actual costs, the cost of capital and future costs should be brought into the present day by converting them to the present value based on the assumed discount rate. Figure 9 presents the formula for this conversion:

Figure 9. Equation. Present value. This equation describes the process for calculating the presentvalue of lighting system. The present value is calculated as the future cost multiplied by one over the sum of one and the discount rate to the nth power.

Figure 9. Equation. Present value.

For the example above, a cash flow analysis is shown in table 19 using a 5-percent interest rate.

Table 19. Cash flow comparison for an adaptive lighting system.

Term Street-Lighting System Without Adaptive
Controls		 Street-Lighting System With Adaptive
Controls
Years Cash Flow Total Expense Present Value Cash Flow Total Expense Present Value
0 $0 $0 $0 $600,000 $600,000 $600,000
1 $941,000 $941,000 $896,190 $679,000 $1,279,000 $1,218,095
2 $941,000 $1,882,000 $1,707,029 $679,000 $1,958,000 $1,775,964
3 $941,000 $2,823,000 $2,438,614 $679,000 $2,637,000 $2,277,940
4 $941,000 $3,764,000 $3,096,652 $679,000 $3,316,000 $2,728,081
5 $941,000 $4,705,000 $3,686,491 $679,000 $3,995,000 $3,130,187
6 $941,000 $5,646,000 $4,213,132 $679,000 $4,674,000 $3,487,811
7 $941,000 $6,587,000 $4,681,258 $679,000 $5,353,000 $3,804,277
8 $941,000 $7,528,000 $5,095,247 $679,000 $6,032,000 $4,082,695
9 $941,000 $8,469,000 $5,459,193 $679,000 $6,711,000 $4,325,970
10 $941,000 $9,410,000 $5,776,924 $679,000 $7,390,000 $4,536,819
11 $941,000 $10,351,000 $6,052,015 $679,000 $8,069,000 $4,717,777
12 $941,000 $11,292,000 $6,287,808 $679,000 $8,748,000 $4,871,214
13 $941,000 $12,233,000 $6,487,421 $679,000 $9,427,000 $4,999,339
14 $941,000 $13,174,000 $6,653,765 $679,000 $10,106,000 $5,104,217
15 $941,000 $14,115,000 $6,789,556 $679,000 $10,785,000 $5,187,769

The net present value (NPV) is shown in figure 10. The results show that the return on investment for this example is less than 3 years.

Figure 10. Graph. Example NPV for standard and adaptive lighting systems. Figure 10 is a line graph with net present value (NPV) on the y-axis, ranging from $0 to $8 million, and years on the x-axis, ranging from 0 to 16 years. There are two traces, one for NPV without adaptive controls, and one for NPV with adaptive controls. Both traces show increasing NPVs for increasing years, and they both have steeper slopes at earlier years than at later years. At year 0, the NPV without adaptive controls is $0, and the NPV with adaptive controls is about $0.5 million. At about year 2, both NPVs are about $2 million. By year 15, the NPV without adaptive controls is about $7 million, and the NPV with adaptive controls is about $5 million.

Figure 10. Graph. Example NPV for standard and adaptive lighting systems.

 

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