Understanding ROI for Energy Savings

October 31, 2016

To take control of your company’s facilities management outcomes and costs, it’s important to pin down areas where value leakage is occurring. Since a commercial building’s lighting system can account for up to 35 percent of a building’s total energy load, lighting is a key consideration in energy efficiency. Because LED lighting provides more (and better quality) light with less power, an LED upgrade represents a massive opportunity for large scale warehouses and manufacturing facilities.

A Lighting Retrofit Creates Energy Savings

According to Consumer Reports, LED light bulbs can last anywhere from 20,000 to 50,000 hours, or up to five times longer than any comparable bulb on the market. While the fixtures are initially more costly, a simple LED upgrade calculation can determine how quickly your savings will kick in when traditional bulbs are replaced with an LED upgrade. Keep in mind that maintenance and associated labor costs will go down and that local, state and federal rebates and incentives may further sweeten the deal.

To produce your own site specific ROI projections with LaaS (Lighting as a Service), request an audit from Go Beyond Lighting.

A Simple ROI Calculation for LED Savings

You can begin your own LED financing return on investment estimate by obtaining the following information about your potential warehouse LED retrofit and doing some simple calculations.

  • Hours per day lights are lit.
    Hours per day x days per week x 52.143 weeks = hours per year
  • Number of days per week they are lit.
    Number of lamps x wattage of lamps x ballast factor = fixture wattage
  • Number of existing fixtures or lamps.
    Existing fixture quantity x fixture wattage x hours per year = kWh 1000
  • Wattage of existing lamps.
    kWh x utility rate = yearly energy cost (in dollars)
  • Ballast factor of existing lamps.
  • Your current kWh rate.
  • Estimated cost of yearly maintenance and upkeep.
    Number of lamps x $6 (est. industry average) = yearly maintenance cost
  • Proposed new fixtures or lamp quantity (provided by Go Beyond Lighting)
  • Installation cost of new fixtures (provided by Go Beyond Lighting).
Tax Incentives Through 2016

Aimed at industrial and commercial buildings such as manufacturing facilities, warehouses, and distribution centers which meet the watts per square foot threshold requirements, a tax incentive is in place through Dec. 31, 2016.

We suggest clients act quickly to take advantage of a government-approved tax break known as IRS EPAct Section179d. Introduced in 2006 with validity through 2013, EPAct was re-introduced for 2016. For a large scale LED retrofit, the incentive accounts for approximately $0.60 per square foot as an immediate deduction to be taken in 2016.

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