[4.5 Minute Read]
Determining your Return on Investment for LED lighting starts with a simple question.
How many people does it take to change a lightbulb?
Think about it.
Someone has to buy it. Someone has to deliver it to the building. Someone has to get it from the storage closet. Someone has to get a ladder or lift. Someone has to take the time to climb up, and change it, and put everything away, and properly dispose of it, and… You get the picture.
So perhaps the question isn't how many people will it take, but how long will it take and at what cost?
In addition to the bulb's price, the more often you have to change it, the more expensive it becomes.
According to Green America, the average LED bulb lasts 30 times longer than incandescents and 3 times longer than CFLs. Not only do they last longer, but LED bulbs can also:
- Reduce light consumption by up to 90%
- Improve your employees' productivity
- Decrease your employees' stress and headaches
- Increasing building safety and security
- Reduce energy expenses
We'll be honest.
Upfront, LEDs are more expensive.
They're an investment. Long-term, they have the potential to save you money. A lot of money!
As with all investments, the big question is: how long will it take for you to break even or see a return?
There are other variables that can impact the exact return, but calculating the LEDs' ROI is relatively easy to estimate. You need a few numbers to get started:
- Hours per day your lights are on
- Days per week you run your lights
- Number of existing light fixtures
- Type of existing light fixtures
I can bore you with math equations to do by hand, or you can head on over to our LED ROI Calculator and plug-in those numbers.
Then one of our LED experts will send over your estimated annual savings and Return on Investment.
These estimates should be eye-opening.
You should see that while the upfront cost is steeper, long-term, it makes the most sense. This doesn't even include the positive environmental benefits of switching to LED lighting.
Factors that Influence ROI on LEDs
Remember those variables I mentioned earlier? They can change your results pretty drastically.
They're a bit harder to calculate and require a conversation around your current situation, location, uses, and needs. But being aware of these variables can help you better understand what your real savings will be. Keep reading so you can determine how accurate your projections are, and make sure you adjust accordingly.
Current Bulb Costs
Incandescent bulbs have an average lifespan of 1,000 hours. If you run your lights for 12 hours a day, you'll need to change them every two and a half months. This means every couple of weeks you must answer the question: how many people does it take to change a lightbulb… and at what cost?
You need to factor in the bulbs' price, maintenance costs, and electricity used to power the lights. All of these factors will give you an accurate assessment of how much you're really spending on the "cheaper" bulbs.
Geographic Electricity Costs
Electricity prices vary depending on your circumstances. Geographic location is the largest determinant. Additional factors like what time you use it, what month you're in, and your provider can also impact pricing.
Fluctuating electricity costs can influence your annual savings, payback period, and ROI. Imagine how much each project could vary when we consider the following data provided by the U.S. Chamber of Commerce's Global Energy Institute.
The national average in the United States is 10.6¢ /kWh.
The lowest rate is in Louisiana at 7.65¢ /kWh.
The highest rate is in Hawaii at 28.83¢ /kWh.
Your projections will look very different if you're in Hawaii!
Initial Investment Factors
LED bulbs aren't always a 1-for-1 swap with older bulbs. They often require additional upgrades to get them up and running. If you're remodeling existing lighting, you may need a switching device or surge protector. If you're developing a new space, you need to factor in the labor required to implement everything.
You may qualify for rebates when you switch to LED lights, which will reduce your initial investment. Again, requirements vary from state to state, and some are more cumbersome to get. Check out this map by Dsire USA to find policies and incentives available in your state, or have one of our reps do it for you.
A lot that plays into determining your ROI on LEDs. A quick calculation gives a nice estimate but fails to factor in impactful variables. If you're interested in discussing specifics for your project and getting a more accurate ROI projection, please fill out our Contact Us form to set up a meeting.
Editor's Note: This post was originally published in April, 2018 and has been updated for freshness, accuracy, and comprehensiveness.