Financial Strategies to Fund the Implementation of the Lighting Initiative

The first financial strategy for the sustainability initiative will be reduced energy usage and tax credits. Therefore, there is a need to acquire funding from other activities within the local hospital, which will be returned in the long run through cost savings. The energy consumption levels within the facility will be reduced at the expense of improved patient and worker experience. Further, there will be a reduction in costs associated with maintaining the lighting system. According to the U.S. Energy Information Administration, over 70% of the electricity used in healthcare facilities goes toward cooling, lighting, and ventilation (Zielinska-Dabkowska & Bobkowska, 2022). Of that entire 70%, lighting alone uses more than 40%. Switching to LED lights or fixtures provides superior, almost maintenance-free illumination that is great for aged eyes. Notably, this solution offers attainable payback periods and long-term financial advantages when used with lighting controls, which may decrease energy consumption by up to 70% over fluorescent lighting.

Instead of stretching the deductions over several years, we can take a one-time deduction for the entire amount of this investment. The only drawback is that bonus depreciation will gradually be eliminated starting in 2023, which will impact the current maximum deductions. The following shows the tax credits/deductions that will apply to the project in the first four years.

The advantage of this technique is that ongoing financial benefits over a four-year period will be acquired as opposed to a big one-time discount. In the same way, that is also a drawback because money had to be taken from capital forecasts or other plant operating budgets to finish the project. Notably, this also poses a risk because those funds may be used earlier than expected or unavailable if unforeseen repairs or replacements are required. However, this strategy will save money that would otherwise be spent on resident expenses and, over time, provide the community with capital alternatives through our energy gains and tax credits.

The second financial strategy that the hospital will need to consider is energy efficiency rebates and grants. Grants for energy efficiency are available to businesses, helping to defray the expense of switching to LED lighting. Grants are non-repayable funds or merchandise if a company satisfies the criteria. We should think little when evaluating this, unlike the tax credit. Federal energy grants are frequently more competitive than state grant programs. Notably, these state-funded renewable energy grants may be simple to apply for, but their total value might also be less. Depending on the capital amount, some grants may additionally call for a firm match equivalent to the donor’s contribution, which could be both a strength and a disadvantage.

PECO is one instance of a state supplier that offers refunds. The refund, which depends on how efficient the fixtures are, can be up to $150 per fixture. Iron Stone Real Estate is one business that profited from this. Instead of the outdated 150W High-Pressure Sodium (HPS) fixtures, they chose to install 90W LED canopy lights. They reduced their energy consumption from 64.5 kW to 38.7 kW, saving significant energy. Notably, this transition to LEDs saves Iron Stone about 40% in monthly overhead. The project’s overall cost was $430, with a rebate for the improvement of $64,500 due to obtaining the maximum rebate (Paris et al., 2022). Iron Stone quickly recouped their first investment because the LED upgrade only cost $430 in total. After two months, they were thought to have saved more than $1,000 only via energy savings.

The benefit of this financial strategy is that there may be little to no cost for the project, and there are no repayment obligations, unlike when using a loan. Essentially, this enables a quicker and larger return on investment with practically immediate capital savings. The grant’s shortcoming is that there is no certainty that we will be accepted, and there is still a chance that we may have to pay out of pocket. The facility will have to spend the capital upfront for the refunds, and we will then get our money back in one to three months. Along with those advantages and disadvantages, there is also the possibility of not being eligible for grants or rebates, or as