How to Reduce Office Energy Costs

Electricity is one of the largest cost items on the bills of data centers and other offices. Electricity is used to power air conditioners, computers and communication equipment, mobile and laptop chargers and for lighting. An office manager who would like to reduce electricity consumption in his office would have to address each usage. The electricity consumption in a typical office is equally split three ways – Lighting, air-conditioning and for office equipment. It is not that these are unrelated. If an office has an energy inefficient appliance the heat produced by it will increase the air conditioning load and consequently the electricity costs.

Lighting Electricity consumption in a typical office

A typical office has a lighting electricity consumption of 3 watts per square foot or more. For a 200 square foot office it works out to 600 watts. If the office is open for 8 hours 4.8 kWh will be billed every day. Lighting costs for a 200 square foot office are as follows.

Electricity Usage for Lighting Per square foot Per day Per week (5 days) Per annum (52 weeks)
Watts/ Kilo watt hours (kWh) 3 watts 4.8 kWh 24 kWh 1248 kWh
Cost in dollars (@ 0.10 USD per kWh)   $0.48 $2.40 $124.80
Table 1: Annual cost of lighting in a typical office

$124.80 is the direct cost of lighting the office every year. LED based devices can do the same job for 1/7th of the cost of incandescent lights. The cost of lighting with these energy efficient lights would go down to just $17 - a saving of $107.

Other Sources of Savings

Reduced air conditioning needs, reduced maintenance, reduced replacement costs are the other savings that accrue to businesses. If the proprietor believes in offsetting the carbon foot print of the office energy use, using energy efficient lights helps save money on that front as well. It is also possible for businesses to get advantage of the government’s tax credit policy for energy efficiency.

Heat production by inefficient luminaries and potential savings

Heat production and dissipation is very important in lighting design. Office managers must remember that every watt of electricity not used productively will produce close to 3.41 BTU as heat. This heat must be eliminated by the air-conditioning system.  Assuming 10 luminaries in a typical 200 square foot office and an air conditioner SEER rating of 10, it is clear that using energy efficient LED products can help reduce air conditioning costs by $73 per annum.

Energy savings in reduced cooling costs can thus amount to as much as a third of the direct energy savings in lighting expenditures. The total energy savings now amount to $180 USD per annum.

Electricity Usage for Lighting Incandescent bulb CFL LED
Watts/ luminary 65 Watts 18 Watts 9 Watts
Electricity wasted as heat (%) 95% 75% 35%
Electricity wasted as heat / hour> 62 13.5 3
Waste heat produced (BTU/ hour) 210 46 10
Heat (BTU/ hour) by 10 light fixtures 2105 460 100
Air conditioning costs to remove heat produced by 10 light fixtures $77.00 $17.00 $4.00
Table 2- Impact of lighting on air conditioning bills

Reduced air-conditioning bills are an added advantage when an office shifts to energy efficient equipment and lighting devices. 

Reduced Replacement Cost

Incandescent Bulb CFL LED
Life in Hours 2000 6000 50000
Frequency of Replacement Once every year Once every 3 years Once every 10 years
Table 3 – Replacement frequencies of different bulbs in a typical office

The cost of replacing incandescent lamps would add another $5 to the savings calculator for each light fixture. For a 200 square foot office that would amount to $50 per annum in savings on replacement.

Reduced Maintenance Costs

It takes almost 45 minutes to replace a burnt out bulb. The breakup is given in our article ‘Energy Efficient lights for Warehouse Application’. The cost of maintenance works out to $120 for the 200 square foot office ($12 labor charges @ $16 per hour for replacement of one bulb X 10 bulbs per office). While small offices can save on this cost by replacing the bulbs themselves the opportunity cost would be no less.

Smaller Carbon Foot Print

With the reduced electricity consumption in lighting applications the carbon footprint would fall by almost 1.7 tons. An additional 0.51 tons would be added through savings in air conditioning electricity consumption. The total reduction in the carbon footprint would be 2.21 tons. At $10 per ton the value of the carbon credits would be equal to $22 per annum.

Total Savings

The total savings generated by energy efficient LED systems and tubes for a 200 square foot office amount to $107 (direct energy savings from lighting application) + $73 (reduced air conditioning) + $50 (lower replacement costs) + $120 (maintenance costs) = $350 per annum.

On a per square foot basis the energy savings work out to $1.75 per square foot. If you have a larger or smaller office you can estimate the potential savings by simply multiplying the square foot office space with the factor 1.75. Thus the savings from energy efficient lighting would be

Office Size in Square Feet
Annuals Savings in Energy Costs
300 $525.00 USD
500 $875.00 USD
1000 $1750.00 USD
2000 $3500.00 USD

Tax Shelter

Office owners can take advantage of the provisions of the Energy policy Act of 2005 that allowed a Commercial Building Tax Deduction (CBTD) for expenses incurred on energy efficient building expenditures. The tax deduction is capped at $1.8 per square foot and limited to buildings ASHRAE standard 90.1-2001. The deduction is available for improvements in three areas – lighting, air conditioning or hot water systems and building envelope. The cap for each one of these is $0.60 per square foot. The energy independence act 2007 has extended the date for claiming to CBTD January 1, 2014. For indoor lighting improvement projects a minimum of $0.30 per square foot can be claimed for a 25% reduction in energy bills. If the reduction in energy bills for indoor lighting is 40% or more the full deduction of $0.60 per square foot is available. For warehouses the upper limit is a 50% saving in lighting energy consumption. Below is he table showing available tax deductions per square foot corresponding to different levels of energy savings in terms of % reduction in lighting power density/ square foot (LPD/ sq foot).

% of LPD reduction beyond ASHRAE Standard 90.1-2001


  26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 and above
Amount of Tax Deduction ($ / sq.ft) 0.3 0.32 0.34 0.36 0.38 0.4 0.42 0.44 0.46 0.48 0.5 0.52 0.54 0.56 0.58 0.6
Table 4 – Tax deduction ($ / Square foot) at different levels of reductions in lighting power density (LPD)

The credit is available to both owners and tenants who invest in upgrading the lighting systems of the building. Given that LED lighting technology allows you to reduce lighting power consumption by as much as 80% it is easy to attain the targeted savings of 40 % and obtain a tax deduction of $0.60 / square foot.

Office Size in Square Feet Amount of Tax Deduction for Lighting (@ $.60/sq. ft.)
300 $180.00 USD
500 $300 USD
1000 $600 USD
2000 $1200 USD
Table 5 – Tax deduction ($ / Square foot) at different levels of reductions in lighting power density (LPD)

The credit is available to both owners and tenants who invest in upgrading the lighting systems of the building. Given that LED lighting technology allows you to reduce lighting power consumption by as much as 80% it is easy to attain the targeted savings of 40% and obtain a tax deduction of $0.60 / square foot.


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