Financial analysis for a LED lighting upgrade

October 21, 2019 //By Julien Happich
LED lighting
When a building receives a professional energy audit, upgrading to LED lighting is among the most common recommendations. LED products use between 30% and 90% less electricity than older lamp types, and their long service life saves many lamp replacement over time.

LED lamps and fixtures may seem expensive if you only consider their upfront cost. However, when energy consumption and lamp replacements are factored in, LED lighting has a lower ownership cost than other types of lighting. This article will describe how to estimate the annual savings and payback period of an LED upgrade.


Step 1: Inspecting the current lighting system

Before estimating the potential savings of an LED upgrade, you must know your current lighting costs. The first step is collecting the following information:

  • Types of lamps and lighting fixtures currently used, and their individual wattage.

  • Operating schedule of the current lighting system.

  • The cost of electricity.

The electricity price can be easily obtained from the latest power bill. Information about the lamp types and their operating schedules can be collected with a site inspection. For simplicity, this example considers two types of lighting fixtures with different operating schedules, and an electricity price of 16 cents per kilowatt-hour ($0.16 / kWh) is assumed:

This lighting installation uses both fluorescent and HID lighting, and its estimated operating cost is $9,392.64 per year. The next step is finding a suitable LED upgrade for each of the lamps and fixtures identified.

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