ROI Calculation

ROI Calculation

Information Required for ROI Calculations

Accurately estimating a return on investment for an LED lighting upgrade requires below key information :

  • The current number of lamps
  • The wattage of the current lamps
  • The ballast factor of current lamps
  • How many hours a day lamps will be on
  • How many days of the week lamps will be on
  • The current kilowatt hour rate
  • The yearly cost of maintaining the current lighting system

Next, gather information on the proposed new LED lighting options and get estimates on installation costs.

Calculate Your Current Costs

After you’ve gathered the information, you can use it to determine the current costs to your business. To calculate the existing energy use in kWh:

existing fixture quantity x fixture wattage x hours per year

To calculate the total yearly energy costs:

kWh x utility rate

To calculate the yearly maintenance costs:

total number of lamps x $6 (which is the estimated industry average)

Calculate the Proposed System’s Costs

To determine how much energy the proposed LED system will use in kWh:

proposed fixture quantity x LED fixture wattage  x hours per year

To find the total yearly energy cost for the proposed LED system:

kWh x utility rate

Next, it’s important to accurately establish the installation costs of the new system:

proposed fixture quantity x installation cost per fixture

To calculate the total fixture cost:

proposed fixture quantity x proposed fixture cost

And finally, the total cost for the proposed LED system is determined by:

total installation cost + total fixture cost

Calculation Formulas for New Systems

The formula you should use will depend on whether it’s an entirely new LED system or a retrofit.

For a new system, you should subtract the total cost of the existing system from the total cost of the proposed system. To establish the adjusted proposed system cost:

(proposed fixture cost + proposed installation cost) – (existing fixture cost + existing installation cost)

Or use the new build simple payback formula:

new build simple payback (in years)
annual savings (in INR)

Calculation Formulas for Retrofit Systems

To determine the simple payback in years for an LED retrofit system, first calculate the yearly energy savings:

(existing kWh – proposed kWh) x utility rate

To calculate the business’s yearly savings:

(proposed total energy cost + proposed total maintenance cost) – (existing total energy cost + existing total maintenance cost)

Finally, the simple payback formula in years is:

total cost of proposed system
annual savings (in INR)