A how-to guide to calculating the savings from an LED lighting retrofit project
Your business is interested in finding ways to save money throughout your company. You’ve worked on process improvement and other cost cutting initiatives and you’ve managed to find significant savings that went straight to the bottom line. You recently heard about the potential savings you can get from an LED lighting retrofit project and you have a question – “how do I calculate the savings from an LED lighting retrofit project?” This article will provide you with a high level overview to calculating the savings your company will realize from such a project, and future articles will provide more detailed information to computing the actual savings.
Step 1 – Identify the different sources of savings. With any LED retrofit project, the savings will come from several sources and you’ll need to compute the savings from each in order to determine the savings from the entire project. Here are the different sources:
- Labor Savings: older lighting products, like incandescent, halogen, or CFL bulbs have a lifespan of 1,500 to 15,000 hours. Depending on your business, these bulbs could be operating 365 days a year and an average of 12 or more hours per day. If your business is using the 1,500 hour bulbs, that means that you’re replacing each bulb 3 or more times per year. If you were to switch to LED lighting, with a rated life of 35,000 to 100,000 hours, your business would realize significant savings just in the amount of maintenance you’d save by not having to replace the bulbs so often. In a future article we will cover the detailed steps to compute these labor savings.
- Material Savings: due to their longer life, the LED lights will not need to be replaced as often. While LED lights cost more than their older counterparts, the trade-off will more than pay for itself each and every year. Again, you’ll be surprised at the annual cost of keeping your older lighting system around on a per bulb basis. We’ll go through a detailed example in a future article.
- Energy Savings: LED lights use considerably less energy (less wattage) than the inefficient bulbs they replaced during the retrofit project. Computing the different wattage of each bulb, the number of bulbs in operation, the number of operational hours during the year, and the cost of electricity per kilowatt hour, and you’ll come up with the amount of savings per bulb per year. You’ll be surprised at the result and wonder why you didn’t start your retrofit project years ago. In a future article we will cover the detailed steps to compute these energy savings.
- HVAC Savings: note that these potential savings only apply to retrofit projects that are done in a building that uses air conditioning. Older lighting products generate a LOT of heat and that extra heat spreads throughout the space, increasing the temperature of the room. In a space that is air conditioned, that means that extra energy will be needed to cool the space down. ASHRAE (American Society of Heating, Refrigeration, and Air Conditioning Engineers) has provided a rule of thumb for computing the extra cooling required to offset the heat generated for every 100 watts used to light a room. In a future article we’ll go through a detailed computation of the savings on a per bulb basis.
Step 2 – Determine the Total Cost of your LED lighting retrofit project. Be sure to include ALL costs, including materials, labor to install new lighting and dispose of old lights, any disposal fees, etc.
Step 3 – Compute the Overall Return on Investment (ROI) from the project. Once you have all of your savings above and the cost of the project, you’re ready to compute the ROI of the project. You might be surprised to find that the ROI is fairly significant and that the payback period is much shorter than you think. We will provide an actual example of the savings from a project in future article.
PKK Lighting will be happy to help you determine the ROI and payback period for your LED lighting retrofit project in Wisconsin. Contact us at 608-836-7821 for an initial consultation.