LED Parking Garage Lighting Installations Accelerate With EPAct Tax Savings

The much anticipated introduction of energy efficient LED (light emitting diode) lighting into mainstream building categories is escalating with parking garages. LED lighting uses semiconductors called diodes to provide a lower energy consumption powerful light source. Informed commercial building owners and designers of government-owned garages are using the Energy Policy Act (EPAct IRC Section 179D) 60 cent per square foot EPAct lighting tax incentive to further accelerate this market change. Although it was predicted that LED's would eventually mainstream into core building lighting, the speed of introduction of LED's for parking garages has caught even leading lighting experts, including lighting designers, architects and engineers by surprise. The economic downturn has caused LED lighting manufacturers to accelerate product development cycles and bring LED parking garage lighting to markets much earlier than anticipated. Before these recent developments, many garages were converting from metal halide lighting to fluorescent lighting. The metal halide to fluorescent changeover is still a very good investment that typically has an economic payback of less than two years, and often less than one year.1 However, now some metal halide garages are leapfrogging directly to LEDs, and many fluorescent lit garages are upgrading to LEDs as well.

The Importance of Parking Garage Lighting Retrofits

Parking garages are one of the most important building categories for introducing new lighting products because lighting is the biggest energy user in parking garages and garage lighting is generally low ceiling height lighting that is clearly visible to the public. We sometimes forget the sheer number of parking garage applications. Major parking garage facilities include:

  1. City and town: government and private general parking garages
  2. Airports: government and private parking
  3. Universities: often large state universities
  4. Malls and shopping centers
  5. Office buildings: government and private
  6. Sports stadiums: government and private
  7. Hotels
  8. Convention Centers

The LED Product Solution

Parking garages present challenging lighting environments related to high energy costs, exhaust emissions, vehicle vibration, and high maintenance costs. This is an excellent opportunity for LEDs which provide tremendous energy cost savings, resistance to environmental impacts, and have very long product life.

Understanding LED Economic Payback Analysis

Like any new technology, LEDs are quite expensive as compared to current lighting technologies. However, it is crucial to evaluate and compare LED payback after considering energy cost savings, utility rebates and product life. One of the first LED parking garage projects took place in February 2007 for the convention center in Raleigh, North Carolina. Because of the prominence and local support for Cree Inc., the leading LED subcomponent supplier, Raleigh has been an earlier adopter of the LED City initiative. LED City, a combined government and industry organization, advocates energy efficiency, environmental awareness and lighting quality for safety by encouraging the accelerated adoption of LED lighting for cities and municipalities2. The actual LED lighting fixture manufacturer for the product used in the Raleigh convention center is the Wisconsin-based Beta LED. Beta LED has provided a detailed presentation of the economics of this project on its web site as follows:

Economic Analysis

To evaluate the economic impacts of the LED lighting alternative, the city constructed a 15-year life cycle analysis that contained the following elements for each alternative.

  • Capital costs
  • Energy costs
  • Maintenance costs
  • Replacement costs

We will examine each component as well as the overall analysis.

Capital Costs

As this was a new construction project, the LED lighting costs were compared to the costs of purchasing the 175 Watt metal halide fixtures. The LED light fixtures were more expensive than the traditional fixtures, and the additional first cost fo the 544 LED light fixtures was $262,000.

Energy Costs

The metal halide fixtures consumed significantly more energy than the LED fixtures. Each metal halide fixture consumes 218W - 175W for the lamp plus 43W for the ballast. The LED fixtures each consume 110W (74W for the LEDs and 36W for the power supply). This yields a savings of 108W per fixture. For the 544 fixtures, the total savings is 58,752W. Since the lighting operates 24 hours a day, seven days a week, the yearly savings are 514,668 kWh.

The City of Raleigh pays a blended rate of approximately $0.06/kWh for their electricity. Therefore, the yearly energy savings are $30,880. To account for the expected increases in energy costs, the analysis assumed a 3%/year increase in electricty costs. This assumption appears to be extremely conservative given the local utility has filed for a 16% increase already this year.

Using these factors, the 15-year energy savings total $574,335.

Maintenance Costs

The metal halide lamps in the traditional HID fixtures require replacement each 15 months due to the continuous use and the vibrations from the vehicular traffic in the parking deck. The lamps are typically replaced upon failure and the yearly replacement cost is estimated at $76 for each fixture including $60 for labor and equipment and $16 for the materials. The labor and equipment number is a fully-loaded cost including depreciation on equipment and tools, salary, benefits and vehicle fuel. For 544 fixtures, the yearly maintenance cost is therefore $33,075. As with the energy costs, the maintenance costs are assumed to increased an average 3% per year over the study period.

The 15-year maintenance cost for the metal halide fixtures is therefore $615,163. The LED fixtures are anticipated to require no regular maintenance over the study period.

Replacement Costs

The LED fixtures offer extremely long lamp life - 50,000 hours of use before considering replacement. A lifetime of 50,000 hours represents 5.7 years assuming continuous 24 hours a day operation. After 50,000 hours, the lights are not out. Instead, they simply have reduced light output - 70% of the original output. This is an important consideration for a public space, as the city will not have regular outages creating potential safety hazards.

After 50,000 hours, or 5.7 years, the LED modules in the fixtures can be replaced. Given the rapid increases in LED performance and the expected cost reductions of LED lighting solutions, the replacement costs in year 6 and year 12 are estimated at $162,200 and $131,750 respectively, including labor.

Total Life-Cycle Cost Assessment

Using the results outlined above, the total 15-year life cycle cost analysis shows:

Capital Cost Differential $(262,000)
Energy Savings $574,335
Maintenance Savings $615,163
Replacement Costs $(291,950)
Total Savings $635,548

The payback comes in just over 3 years.

It should be noted that LED building lighting is an emerging new technology and, as with any new technology introduction, there will be product issues that need to be resolved3.

The Tax Benefits

Both commercial owners of parking garages and designers may be eligible for substantial tax savings related to LED garage projects.

Commercial Owners

Commercial owners, particularly those replacing fluorescent lighting (or occasionally for a recent metal halide installation) in a garage previously subject to a cost segregation study will be potentially eligible for multiple tax benefits including EPAct, IRC Section 179D deductions. The cost segregation opportunity arises because the remaining basis of the lighting being replaced can also be written off for tax purposes.

Designers on Government Garages

Designers of government garage LED projects may be eligible for substantial tax benefits if they follow the EPAct tax requirements which generally require a parking garage project to meet ten EPAct procedural requirements.


Parking garage LED lighting is effectively a market changing disruptive technology. The quick widespread introduction of LEDs into this market will serve as precursor to other building categories, particularly as LED lighting price points begin to fall. EPAct tax savings will accelerate this market conversion, which is exactly what the EPAct tax law was intended to do.

1 - Goulding, Charles & Kelly, Peter & Goulding, Taylor. “EPAct Tax Deductions for Parking Garage Lighting Projects Gain Wider Use.” The Parking Professional. September 2008.

2 - “About the LED City Program.” LED City. <http://ledcity.org>

3 - Goulding, Charles & Goldman, Goulding & Goulding, Taylor. “The Economic, Business and Tax Aspects of Light Emitting Diode Interior Building Lighting.” Corporate Business Taxation Monthly. January 2009.

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