## 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__

1000

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__

1000

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)