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ORION ENERGY SYSTEMS, INC.

2210 Woodland Drive

Manitowoc, Wisconsin 54220

April 4, 2011

Via EDGAR System and Overnight Mail

Mr. Larry Spirgel

Assistant Director

U.S. Securities and Exchange Commission

Division of Corporation Finance

100 F Street, N.E.

Mail Stop 3561

Washington, D.C. 20549-3561

    Re:

    Orion Energy Systems, Inc.

Form 10-K for the fiscal year ended March 31, 2010

Filed June 14, 2010

Form 10-Q for the quarter ended December 31, 2010

File No. 001-33887

Dear Mr. Spirgel:

     Orion Energy Systems, Inc. (the “Company”), a Wisconsin corporation (File No. 001-33887), in
response to the comments of the Staff of the Securities and Exchange Commission (the “Staff”) set
forth in the Staff’s letter, dated March 23, 2011 (the “Comment Letter”), provides the following
responses with respect to the above-referenced filings (the “Filings”). The numbered items set
forth below repeat (in bold italics) the comments of the Staff reflected in the Comment Letter, and
following such comments are the Company’s responses (in regular type).

Form 10-K for the fiscal year ended March 31, 2010

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Critical Accounting Policies and Estimates, page 44

    1.

    Provide us with a detailed analysis of your Orion Virtual Power Plant Agreements (OVPP) and
Orion Throughput Agreements (OTA) financing programs. Tell us how you applied the guidance in
ASC 840 or other accounting guidance in determining the appropriate accounting treatment for
these transactions, including the sale of future cash flows and residual rights to equipment
to an unrelated third party. In your response, please describe the material terms of the
agreements, including the following:

    •

    your obligations under the agreements and how you evaluated the impact
of these obligations in recording the sale of future payment streams or
contract rights to third parties,

    •

    the term of the agreements, including renewal periods,

    •

    the details of the right of return, and

    •

    the details of the early buyout provisions.

Mr. Larry Spirgel

April 4, 2011

Page 2

     We respectfully advise the Staff that the Company sells products to our customers on a
cash basis, but also offers a financing program called Orion Throughput Agreements (OTAs) or
Orion Virtual Power Plant (OVPP) Agreements. We use the terms OTA and OVPP synonymously, and
the terms and conditions for each type of agreement are identical. Hereafter, in this
response, we will use the term OTA as a reference to both types of aforementioned
agreements.

     Our obligation under the OTA contract is to manufacture and install any combination of
high intensity fluorescent (HIF) lighting fixtures and energy management wireless controls
on behalf of our customers. The financing program in substance is a lease agreement which
covers an initial period of 12 months, during which time the customer makes fixed monthly
rental payments. At the end of the initial 12-month period, the customer may either return
the product or renew the OTA agreement for the next 12-month period. There are no return
provisions during the 12-month contract term. The full term of the agreement, which includes
four renewable 12-month terms, is typically five years, but may be less dependent upon a
customer’s facility lease terms or as a result of our credit underwriting decisions. At the
end of the final 12-month term, the rights of ownership of the lighting system automatically
transfer to the customer. The OTA agreement includes a predetermined early buyout schedule,
which is an estimate of the fair value of the equipment that allows the customer to purchase
the HIF system at any time during the contract term.

     For revenue recognition purposes, we treat OTA contracts as operating leases and
recognize revenue on a monthly basis over the 12-month term of the agreement. The renewal
terms are not considered part of the initial lease term as renewal is strictly within the
control of the customer and the Company cannot conclude whether such renewals are assured.
Contracts in the final renewal year are treated as capital leases as ownership of the HIF
lighting system transfers to the customer. Due to the timeframe in which we have used OTA
contracts, contracts in their final renewal year have not been significant.

     For all OTA contracts, we do not begin the revenue recognition process until the
customer has signed an OTA acceptance certificate providing their acknowledgement and
agreement that the system has been installed and is operating as designed. Our revenue from
OTA agreements is based upon a fixed monthly price and is not dependent upon the amount of
energy savings generated. Under Generally Accepted Accounting Principles (GAAP) and
Accounting Standards Codification (ASC) 840, the OTA agreement is treated as an operating
lease for revenue recognition purposes for the following reasons: during the 12-month
contractual term, no transfer of ownership occurs; no bargain purchase price exists; the
estimated economic life of an HIF system is substantially longer than the 12-month terms of
the OTA agreement; and the present value at the beginning of the lease term of the minimum
lease payments does not exceed 90% of the fair value of the leased HIF system. Additionally,
collectability of the monthly lease payments is reasonably predictable and, due to the fact
that the customer must agree in writing that the system has been installed and is operating
as designed, there are no important uncertainties related to unreimbursable costs yet to be
incurred by us under the lease.

     As disclosed in our critical accounting policies for revenue recognition in our Annual
Report on Form 10-K, we have sold certain OTA contracts and the related future cash flows on
a non-recourse basis to an unrelated third party equipment finance company. Any risk of
non-renewal lies with the purchaser of the OTA contracts. The terms of the sales provide for
a discount to the gross value of the remaining OTA payments. Payments on the net price of
the sale to the third party finance company are typically received over a four-year period
and revenue is

Mr. Larry Spirgel

April 4, 2011

Page 3

recorded based upon the net present value of the future payments using the Company’s
weighted average cost of capital. Under the provisions of ASC 860 a transfer of financial
assets in which the transferor surrenders control over those financial assets shall be
accounted for as a sale to the extent that consideration other than beneficial interests in
the transferred assets is received in exchange. The transferor has surrendered control over
financial assets if the following conditions have been met: the transferred assets have
been isolated from the transferor beyond the reach of the transferor and its creditors, the
transferee has the right to pledge or exchange the assets it received and no condition both
constrains the transferee from taking advantage of its right to pledge or exchange and
provides more than trivial benefit to the transferor, the transferor does not maintain
effective control over the transferred assets through either (1) an agreement that both
entitles and obligates the transferor to repurchase or redeem them before their maturity or
(2) the ability to unilaterally cause the holder to return specific assets, other than
through a cleanup call. All of these criteria have been met and the only continuing
involvement relates to our fulfillment of warranty obligations to the system which are
covered by the original equipment manufacturers of the HIF bulbs and electronic ballasts.

    2.

    Describe in your response the selling and administrative costs and expenses you are deferring
under the OTA and OVPP agreements and your basis for deferral. In this regard we note that in
some instances you disclose that all costs are expensed up front and in other instances you
state that most are expensed up front. Also describe the costs of revenues that you are
deferring, your basis for the deferral, and your basis for the amortization period for the
related deferred costs.

     We respectfully advise the staff that all costs for OTA projects related to selling and
administrative are expensed as incurred. These costs include all compensation, travel and
related salesperson costs to present proposals to our customers along with all
administrative costs for compensation related to contract development, contract legal review
and credit underwriting. We capitalize our manufacturing product costs for HIF and energy
management controls, and the contracted costs of installation and the disposal of the old
lighting systems. The final capitalized cost of the HIF product is recorded within property
and equipment on our balance sheet. The OTA equipment is amortized over the expected full
term of the underlying OTA contract to match expense and revenue based upon our experience
that practically all customers exercise the renewal option after each 12-month term. We will
clarify in future filings which costs are expensed and which are capitalized.

Form 10-Q for the quarterly period ended December 31, 2010

Note B — Summary of Significant Accounting Policies

Revenue Recognition, page 9

    3.

    Please address comments one and two above, as applicable, in regards to your solar power
purchase (PPA) financing program.

     We respectfully advise the Staff that the Company provides a financing program, called
a Power Purchase Agreement (PPA), for electricity generated from solar photovoltaic panels
that convert sunlight into electricity. The Company acts as a distributor for solar panel
suppliers and does not manufacture any of the solar technologies. The terms of the PPAs are
either 10 or 15 years. The PPA agreements define a fixed rate per Kilowatt (KW) that the
customer will pay. The rate can be fixed for the duration of the contract or may include an
escalator clause for pricing that resets annually based upon the customer’s market retail
electric rate. At the end of the PPA contract term, the customer has (1) the option to
terminate the contract, at which time we would reclaim the solar system from the customer’s
site, (2) the option to continue the contract for an additional period of time to be
negotiated or (3) the option to purchase the system at fair market

Mr. Larry Spirgel

April 4, 2011

Page 4

value. The agreements meet the classification of operating leases under the provisions
of ASC 840 as the customer has the ability or right to control access to the solar panels
while obtaining more than a minor amount of the output. Accordingly, revenue is recognized
on a monthly basis based upon the KW electricity generated. There is no transfer of
ownership of the solar panels. We currently have two PPAs in place. We have not sold any of
our PPAs to third party finance companies.

     Costs related to materials, engineering and project management design to get the system
operational and installation expenses are capitalized and recorded as property and equipment
on the Company’s balance sheet. These costs are amortized over the term of the PPA contract
to match expenses with revenues. The terms of the contracts are less than 75% of the
estimated useful life. Expenses related to selling, including compensation and travel costs
for salespersons engaged in presenting customer proposals and administrative expenses
related to compensation costs for contract administration, legal review and accounting
support are expensed as incurred.

* * * * *

     Additionally, as requested, the Company hereby acknowledges that:

    1.

    The Company is responsible for the adequacy and accuracy of the
disclosure in the Filings;

    2.

    Staff comments or changes to disclosure in response to Staff comments
in the Filings do not foreclose the Securities and Exchange Commission from taking
any action with respect to the Filings; and

    3.

    The Company may not assert Staff comments as a defense in any
proceedings initiated by the Securities and Exchange Commission or any person under
the federal securities laws of the United States.

If the Staff has any questions with respect to the foregoing, please contact the undersigned at
(920) 892-5454.

    Very truly yours,

ORION ENERGY SYSTEMS, INC.

    By:
    /s/ Scott R. Jensen

    Scott R. Jensen

    Chief Financial Officer

    cc:

    Michael Henderson

Terry French

Securities and Exchange Commission