Selection & ROI Analysis

Payback Period Analysis for a Commercial Lighting Retrofit

This wiki will describe a step-by-step procedure that can be carried out by any company planning to upgrade the lighting technology of a commercial building. As an example, we will analyze an upgrade from fluorescent T8 lighting to LED lighting. LED CENTRAL will provide this service for free.

If you would like to schedule a no expense audit for your property, please call 866-606-7040 or email [email protected]

STEP 01

Determine the type, number and operation schedule of the lamps currently installed

This will require a building inspection, in order to determine the characteristics of the current installation. For this example, assume the following results are obtained:

Lamp Type – 4×32 Watt, T8 Fluorescent, 2’x4′

Power per lamp = 4x32W = 128W
Number of lamps = 800
Operation schedule = 240 hours / month

Lamp Type – 4×17 Watt, T8 Fluorescent, 2’x2′

Power per lamp = 68W
Number of lamps = 400
Operation schedule = 200 hours / month

STEP 02

Estimate demand in kW, and energy consumption in kWh

The demand and consumption can be calculated by:

Demand (kW) = Number of lamps x Power per lamp (W) / 1000
Energy (kWh) = Demand (kW) x Operation hours (h/month)

In this example, the corresponding demand (kW) and consumption (kWh) would be:

4x32W T8 Lamps

Demand (kW) = (800 lamps x 128 W/lamp) / 1000 = 102.4 kW

Energy (kWh/mo) = 102.4 kW x 240 h/mo = 24,576 kWh/mo

4x17W T8 Lamps

Demand (kW) = (400 lamps x 68 W/lamp) / 1000 = 27.2 kW

Energy (kWh/mo) =27.2 kW x 200 h/mo = 5,440 kWh/mo

TOTALS

Total Demand (kW) = 102.4 kW + 27.2 kW = 129.6 kW

Total Energy (kWh/mo) = 24,586 kWh/mo + 5,440 kWh/mo = 30,016 kWh/mo

STEP 03

Estimate demand and consumption with an energy efficient alternative, and compare

Consider a LED alternative is available, which replaces the current lamps:

4x32W T8 is replaced by 3x18W LED
4x17W T8 is replaced by 3x10W LED

The procedure for step 2 must be repeated for the proposed energy efficient lamps. Number of lamps and operation schedule remain the same, since this lamp retrofit is on a one-on-one basis.

3x18W LED Lamps

Demand (kW) = (800 lamps x 54 W/lamp) / 1000 = 43.2 kW

Energy (kWh/mo) = 43.2 kW x 240 h/mo = 10,368 kWh/mo

3x10W LED Lamps

Demand (kW) = (400 lamps x 30 W/lamp) / 1000 = 12 kW

Energy (kWh/mo) =12 kW x 200 h/mo = 2,400 kWh/mo

TOTALS

Total Demand (kW) = 43.2 kW + 12 kW = 55.2 kW

Total Energy (kWh/mo) = 10,368 kWh/mo + 2,400 kWh/mo = 12,768 kWh/mo

COMPARISON

Demand reduction = 129.6 kW – 55.2 kW = 74.4 kW

Consumption reduction = 30,016 kWh/mo – 12,768 kWh/mo = 17,248 kWh/mo

In this scenario, energy needs of the lighting system are reduced by 57.4%. However, this only considers direct energy savings from the lighting upgrade. Given than this is a commercial facility, there are also air conditioning savings thanks to the reduction of the heat released by the lighting system.

To get an exact savings value for air conditioning, it would be necessary to carry out energy modeling for the facility before and after the upgrade. However, a quick and reasonable estimate can be calculated from the lighting load reduction and the average efficiency of the air conditioning system.

Assuming the A/C system operates with a COP of 3 the total savings achieved per month would be:

AC kWh Savings = (17,248 kWh/mo) / 3 = 5,749 kWh/mo

This brings total energy savings to:

Total kWh Savings = 17,248 kWh/mo + 5,749 kWh/mo = 22,997 kWh/mo

Since air conditioning devices cycle their compressors on and off, there are no demand savings – there will always be moments when the A/C system operates at full capacity.

Now that technical analysis has been completed, the next step is financial analysis.

STEP 04

Calculate the savings in Dollars

For this step, the following information is needed:

Power rate, in $/kW-month
Energy rate, in $/kWh

Assume the electric rates at the location of this example are $15/kW-month and $0.05/kWh. Therefore, the savings would be:

MONTHLY SAVINGS ($ / month) = (74.4 kW x $15 / kW-month) + (22,997 kWh/month x $0.05/kWh) = $2,265.85/month
YEARLY SAVINGS ($ / year) = $2,265.85/month x 12 mo/yr= $27,190.20/yr

NOTE: If the air conditioning is not used all year long, multiply it separately by the number of months it is used, and then add it to lighting savings.

STEP 05

Calculate the Cost of the Upgrade to LED

This step requires obtaining vendor prices for the lamps, as well as the cost of installation charged by a contractor. Suppose the installed prices of each type of lamp are: