How to Calculate LED Retrofit ROI

Understanding LED Retrofit ROI

Calculating the return on investment for an LED retrofit is essential for getting project approval from building owners and facility managers. A solid ROI analysis includes energy savings, maintenance reduction, and available rebates.

The Basic Formula

Simple Payback Period = (Total Project Cost - Rebates) / Annual Energy Savings

Step 1: Calculate Current Energy Costs

Current Annual Cost = (Watts per fixture × Number of fixtures × Hours per year) / 1000 × $/kWh

Example: 100 fixtures × 400W × 4,380 hours/year = 175,200 kWh × $0.12/kWh = $21,024/year

Step 2: Calculate LED Energy Costs

LED Annual Cost = (LED Watts × Number of fixtures × Hours per year) / 1000 × $/kWh

Example: 100 fixtures × 150W × 4,380 hours/year = 65,700 kWh × $0.12/kWh = $7,884/year

Step 3: Annual Savings

Annual Savings = Current Cost - LED Cost + Maintenance Savings

Example: $21,024 - $7,884 + $3,000 = $16,140/year

Step 4: Factor in Rebates

Most utility companies offer $20-75 per fixture for DLC-listed LED upgrades.

Example: 100 fixtures × $50/fixture = $5,000 in rebates

Step 5: Calculate Payback

Total Project Cost: 100 fixtures × $250 = $25,000
After Rebates: $25,000 - $5,000 = $20,000
Payback Period: $20,000 / $16,140 = 1.24 years

Real-World ROI Factors