How to Know For Sure If LED is a Smart Investment – Simple LED ROI Calculation
This article may seem like a bit of a repeat of sorts as this is a drum we need to keep beating because not everyone is hearing it yet.
I do quite a little bit of reading about the LED Lighting industry, trying to keep up with the trends, outlooks, research and such. I cannot tell you how many times I read and hear things like this:
“LED light manufacturers are expected to face major challenges such as high initial investment…“1
This from an article entitled “Global LED Lighting Market Poised to Surge from USD 20.0 Billion in 2014 to USD 42.5 Billion by 2020.” Really? How can this be? If the market is “surging” how can this be such a “major challenge?”
The truth, and we have been saying this for over a year and a half, is that the initial cost is substantial but the savings to be had are tremendous and when you combine that with certain financing, subsidies, incentives that are easily available, you could very probably retrofit your business facility with LED lighting and experience POSITIVE CASH FLOW FROM MONTH ONE!
The market is surging because LED makes sense to your business in every way, especially financial.
That being said, what is the ROI going to be specific to your company? Let me show you.
INFORMATION YOU WILL NEED TO CALCULATE YOUR ROI
In order to accurately estimate a return on investment for an LED lighting upgrade requires gathering key information.
Start with gathering data on the existing lighting system and lamps, including:
- The current number of lamps
- The wattage of the current lamps
- The ballast factor of current lamps
- How many hours a day lamps will be on
- How many days of the week lamps will be on
- The current kilowatt hour rate
- The yearly cost of maintaining the current lighting system
Next, gather information on the proposed new LED lighting options and get estimates on installation costs. If you need help with this, contact me.
CALCULATE YOUR CURRENT COSTS
After you’ve gathered the above information, you can use it to determine the current costs to your business.
1.Calculate your Existing Energy Use in kWh (kilowatt hours):
existing fixture quantity X fixture wattage X hours per year
Note: You may also be able to get this figure directly from your utility bill without having to calculate it.
2. Calculate your Total Yearly Energy Costs:
energy usage in kWh (from above) X utility rate (you can find this on your utility bill)
3. Calculate the Yearly Maintenance Costs:
total number of lamps X $6 (which is the estimated industry average)
CALCULATE THE PROPOSED SYSTEM’S COSTS
1.Calculate how much Energy the Proposed LED System Will Use in kWh:
proposed fixture quantity X LED fixture wattage X hours per year
2. Calculate the Total Yearly Energy Cost for the Proposed LED System:
proposed LED usage from above in kWh X utility rate
3. Calculate the Installation Costs of the New System:
proposed fixture quantity X installation cost per fixture
Note: You could also simply get a quote for this.
4. Calculate the Total Fixture Cost:
proposed fixture quantity X proposed fixture cost
5. Total Cost for the Proposed LED System is:
total installation cost + total fixture cost
CALCULATE YOUR PAYBACK IN YEARS FOR RETROFITTING
1.Calculate the Annual Energy Savings:
(existing kWh – proposed kWh) X utility rate
2. Calculate your Business’s Annual Total Savings:
(proposed total energy cost + proposed total maintenance cost) – (existing total energy cost + existing total maintenance cost)
3. Finally, the simple Payback in Years is:
total cost of proposed system
annual savings (in dollars)
If you would like help with any of this and in finding out exactly how much you could save, call me!
1Article: Global LED Lighting Market Poised to Surge from USD 20.0 Billion in 2014 to USD 42.5 Billion by 2020 – MarketResearchStore.Com