If you own a business or manage a facility, you’ve probably heard about the benefits of switching to LED lighting. Not only are LEDs longer lasting, energy efficient, durable, weather-resistant, and better for the environment, they offer design flexibility that other types of lighting can’t match. Plus, LED lighting improves employees’ comfort and safety—and the savings from the resulting lower energy costs add a nice touch to your bottom line.
However, in one of those Catch-22s the universe loves to throw out, it costs money to upgrade a lighting system so you can enjoy extra savings. And that’s money you may not have when cash flow is top of mind. So how can you justify the cost of retrofitting your lighting system when there are so many other things competing for your business budget?
The good news is that in many cases, the conversion to LED can actually pay for itself. Let’s take a look at all the ways LED lighting can pick up the tab for your retrofit.
A Spectrum of Light Savings
The table below, from the U.S. Department of Energy’s Energy.gov site, compares a 60-watt traditional incandescent with energy efficient bulbs that provide similar light levels.
|Comparisons between Traditional Incandescents, Halogen Incandescents, CFLs, and LEDs*
|60W Traditional Incandescent
|Energy $ Saved (%)
|Annual Energy Cost*
|1000 to 3000 hours
*Based on 2 hours/day of usage, an electricity rate of 11 cents per kilowatt hour, shown in U.S. dollars.As you can see, LEDs provide not only the longest life and energy savings but the greatest cost savings.
The FYI on ROI
Saving money and energy is a great goal, but how does that work into your Return on Investment (ROI)? Lightsearch.com, an online directory of architectural lighting manufacturers, has created a detailed example of the ROI you can realize from a lighting retrofit. (For this article we’ve just summarized the highlights; you can find the full example here.)
Their ROI calculations are based on a proposed retrofit of 100 fixtures, which include energy-efficient LEDs and drivers or lamps and ballasts. Total energy savings per year is estimated to be $2,250.Next, an economic analysis determines simple payback and ROI. A five-year cash flow was used based on lamp life expectations, with calculation based on the following formulas:
Using an estimated initial cost for the system—including components, labor and waste disposal—of about $70.00/fixture or $7,000 total, here’s the resulting payback and ROI:
Of course, your own results will depend on your business situation, but it always helps to get a look at the possibilities.
Tax Savings and Rebates: The Gift That Gives Back
Another way a lighting retrofit can help pay for itself is through the tax saving and rebates available for upgrading to more energy-efficient lighting.
On the U.S. Department of Energy’s website, Energy.gov, you can search for available tax credits, rebates and savings (you’ll find the link in the list of sources at the end of this article). A quick search on the keyword “LED” finds more than 400 results, although the results that apply to you will depend on your location and other factors unique to your business.
In addition, many utilities offer rebates and incentives for lighting efficiency projects, since these initiatives benefit both utilities and the consumers. For more information on some of these initiatives, check out our blog article, Looking for Big Savings? Let Us Light the Way.
Even after the retrofit is complete, you’ll continue to find savings. For instance, less maintenance and fewer light replacements due to the LED’s longer life mean reduced downtime, which leads to greater productivity. And the improved safety and working conditions lead to fewer workplace injuries and more engaged staff—which again, lead to more productivity.
In this article, we’ve only scratched the surface of what makes the switch to LEDs a possibility for any size business. Rather than asking yourself if you can afford to make the change, maybe a better question might be, “Can you afford not to?”
Not sure where to start? For a turnkey LED solution—from consult and design, to financing and installation—rely on Woodward Energy Solutions. We can streamline the process of retrofitting your facilities with LEDs, saving you both time and money. Call us today at (866) 967-4533 for a free audit. We think you’ll be pleasantly surprised by the results! To learn more and view some of our projects, visit www.woodwardenergy.com.