Is Upgrading to LED Lighting Worth It?
February 9, 2021

Upgrading to LED lighting is one of the quickest and easiest ways to boost sustainability and energy-efficiency, but many facility managers and decision-makers balk at the upfront cost of investment. Because LED upgrades may be considered a luxury at this time and not a necessity, the key to justifying that cost is figuring out the return on that investment over the course of the lighting’s lifetime. 

While there are formulas to easily calculate the quantifiable ROI of LED upgrades, it’s not always easy to determine whether that number is good — or good enough — to justify the upgrade. Don’t overlook some important factors when figuring out when it’s time to switch to LED lighting.

Incentives, Rebates, and Tax Deductions

Utility companies across the country offer rebates for projects that improve the efficiency of commercial buildings; Ameren, Missouri will offer cash rebates in exchange for proof that facility managers have purchased products or equipment that meet energy ratings. The maximum rebate Ameren offers is $500,000 per project, which can make a big dent when investing in LED lighting upgrades, but you only get the rebate once. 

The federal government also offers a tax deduction for energy projects in commercial buildings. The 179D deduction is specific to lighting upgrades and can reduce taxable income and tax debt obligation. There are also several other national and state incentives that a qualified, experienced lighting distributor would be able to help organizations leverage.

Energy Usage

One of the most obvious benefits of LED lighting upgrades is the reduction of energy consumption. When traditional lighting is replaced with LED lighting at the same brightness, facilities can see savings that would pay for the LED investment over the course of two or three years.

There are calculators available online to figure out the exact energy savings from an LED lighting upgrade, but the savings will be significant over the lifetime of the lighting (which is around 10 years for most LED bulbs and fixtures). Factor in these annual savings when determining ROI.

Maintenance

When lighting and fixtures last longer, they ultimately require less maintenance over time; this is one of the strongest selling points for LED upgrades. Traditional lighting requires more frequent replacement, and in some commercial buildings that takes special equipment manned by skilled professionals — an additional cost to include in maintenance calculations. Maintenance can also disrupt business operations. Don’t overlook the cost of downtime in your facility as complicated maintenance processes are performed to keep lighting working as it should.

Doing The Math

After knowing how all of these affect upgrading to LED Lighting, it’s time to boil ROI down to some important numbers. Before figuring the formulas, here are the specs you need to collect to do the math.

  • Hours per day lights are on
  • Number of days per week that the lights are lit 
  • Number of fixtures or lamps
  • Wattage of lamps
  • Ballast factor of lamps
  • Your current kWh rate
  • Estimated cost of yearly maintenance
  • Proposed new fixtures or lamp quantity
  • Installation cost of new fixtures

These numbers are then plugged into several equations.

Finding fixture hours per year:

Hours per day x days per week x 52 weeks = hours per year

Estimating total fixture wattage:

Number of lamps x wattage of lamps x ballast factor = fixture wattage

Calculate existing energy use (kWh):

Existing fixture quantity x fixture wattage x hours per year = kWh 1000

Calculate existing total energy cost per year:

kWh x utility rate = yearly energy cost (in dollars)

Calculate proposed energy use (kWh):

Proposed fixture quantity x LED fixture wattage (no ballast factor) x hours per year = kWh 1000

Calculate proposed total energy cost per year:

kWh x utility rate = yearly energy cost (in dollars)

Establish installation cost:

Proposed fixture quantity x installation cost per fixture = total installation cost

Calculate yearly energy savings:

(Existing kWh – Proposed kWh) x utility rate = yearly energy savings (in dollars)

Calculate yearly savings:

(Proposed total energy cost + proposed total maintenance cost) – (Existing total energy cost + existing total maintenance cost) = annual savings (in dollars)

The question of upgrading to LED lighting shouldn’t be if, it should be when, and the best way to get true ROI is by working closely with a distributor with experience. Our team is proud to work with you to find the best industrial lighting solutions for your needs. We help you save money, get rebates, use less energy, find the perfect industrial lighting solutions. Let’s talk more about your LED lighting upgrade. 

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