This post was written by Keith Dawson for UBM Tech’s community Web site All LED Lighting, sponsored by Philips Lumileds. It is archived here because the All LED Lighting site has gone dark. This material is Copyright 2013-2015 by UBM Americas.


Calculating ROI on a Residential LED Retrofit

Here's a data point: an Ohio resident replaced all his incandescent bulbs with LEDs, carefully measured energy use and costs, and expects to see ROI after 33 months.

It's easy enough to get an idea how long a commercial LED retrofit will take to pay back. Any number of lighting companies and even financial institutions will be happy to help you work up the numbers considering local energy rates and labor costs, available rebates, etc.

But if you want to know the economics of replacing incandescents (and even compact fluorescents) at home with LEDs, you're pretty much on your own. Even the rare lighting company that makes house calls to help consumers select and install the right lighting won't necessarily help you to calculate ROI.

A data point
A retired utility worker in Ohio has worked systematically to understand the financials of a complete home LED retrofit project, and his experience provides a solid data point in answering questions like, "How long will it take to pay back an investment in LEDs via energy savings?"

Dave Lippert bought his LED wares in the summer of 2012, after considering the project and researching on and off for a couple of years. The write-up on claims that "big box stores didn't sell LED bulbs that met all his needs" at that time. He chose Viribright as the supplier, having found them on the Internet. This company, now a brand of Hong Kong-based Matrix Lighting, makes a variety of LED products based around modules from Epistar and Chimei.

The profile in does not say how many bulbs and fixtures Lippert replaced, only that the total cost for LED lamps was $975. At this point an Energy Star-certified Viribright 800-lumen lamp (dimmable, 80 CRI, 2800K CCT, 25,000 hour life, 5-year warranty) can be had for under $20 from Amazon. My guess is that a year and a half ago, the company didn't offer anything with Energy Star certification and prices would have been 50% to 100% higher.

Meticulous tracking
Lippert has been keeping records of energy use for decades. He wanted to amass solid data on cost savings in order to convince family and friends of the benefits of moving to energy-saving lighting. To this end, after completing the retrofit Lippert made sure not to add or remove any energy-using loads in his house for a full year, so that any differences could confidently be attributed to the change in lighting.

Here's the upshot: replacing 3,656 W worth of incandescents with 638 W of LED bulbs resulted in a 19% savings of energy in the first year, and 25% lower cost (because Lippert locked in a lower electric rate in that year). Lippert figures he saved $408 on energy in the first year, and that by April 2015, 33 months after the project began, total savings will offset the LEDs' cost. With an average of 3.2 hours per day of usage, the 25,000-hour LEDs should last 20 years and pay back $8,186 over that time.

With the retail cost having declined over the last 18 months, I imagine that a similar project begun now would reach ROI in well under two years.

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