Why most LED retrofit ROI numbers are wrong
A retrofit proposal that promises "60% energy savings" is easy to believe and hard to check. The savings are real, but the payback number depends on inputs the seller controls: assumed operating hours, the electricity rate, the existing fixture wattage, and whether maintenance savings and rebates are counted — or quietly left out.
This guide breaks the calculation into parts you can verify, so the payback period you present to a building owner or a client stands up when someone asks how you got it.
The core formula: energy savings first
The foundation of any retrofit case is the energy you stop using.
Step 1: Energy savings
Start with the wattage you remove minus the wattage you install.
- Old system: number of fixtures × watts per fixture
- New system: number of fixtures × watts per fixture
- The difference × operating hours per year = kilowatt-hours (kWh) saved per year
A worked example makes it concrete. Replacing 200 fixtures of 250 W each (50,000 W total) with 200 fixtures of 100 W (20,000 W total) removes 30,000 W. At 4,000 operating hours per year, that is 120,000 kWh saved. At an electricity rate of $0.14 per kWh, the energy saving is $16,800 per year.
Line item | Old system | New system |
Fixtures | 200 × 250 W | 200 × 100 W |
Connected load | 50,000 W | 20,000 W |
Annual energy (4,000 h) | 200,000 kWh | 80,000 kWh |
Annual cost at $0.14/kWh | $28,000 | $11,200 |
The figures above are examples — substitute your own fixture count, wattage, operating hours and rate. The formula is what matters.
Step 2: Maintenance savings
LED fixtures fail far less often than the fluorescent or HID lamps they replace, and they last longer. Two costs drop: the labour and lift cost of re-lamping and changing ballasts, and the downtime in a working space.
Maintenance saving is the re-lamping cost you no longer pay. If a facility currently re-lamps every two years at $40 per fixture in labour and material, 200 fixtures mean $4,000 per year in avoided maintenance. Add this to energy savings — leaving it out understates the case.
The variables that change your payback
Electricity rate and operating hours
Two numbers dominate the result and are worth verifying rather than assuming. Operating hours vary by space: a 24/7 warehouse runs 8,760 hours a year, while a 9-to-5 office runs closer to 2,500. Electricity rates vary by utility and region. Get both from the actual facility, not from a generic estimate — a wrong operating-hours assumption is the single most common error in retrofit proposals.
Utility rebates and DLC
Many commercial projects can claim a per-fixture rebate if the product is listed on the DLC Qualified Products List. A rebate of 30–50 per fixture directly reduces upfront cost and shortens payback. Confirm the product's DLC tier and the utility program before you finalise the budget — this is money left on the table if skipped.
Installation and disposal
Count the full installed cost, not just the fixture price: wiring changes, controls, lift access, and disposal of old lamps and ballasts, which may contain mercury and require certified handling.
Simple payback vs. lifetime cost
Simple payback = total installed cost ÷ annual savings. If a retrofit costs $60,000 installed and saves $20,000 a year, payback is three years.
For a sharper picture, look at life-cycle cost over the fixture's rated life: energy over 10+ years, avoided re-lamping, and the replacement cost at end of life. Two products with the same wattage can differ sharply here if one degrades faster or fails earlier — which is why the next section matters.
Conclusion
A defensible retrofit ROI is built from verified inputs, not from a supplier's headline. Confirm operating hours and electricity rate from the actual facility, count maintenance and rebates, and check life-cycle cost — not just the first-year saving.
Solarix Lighting manufactures commercial, rail-transit, tunnel and panel lighting, with more than 20 metro projects, airport and municipal installations behind it. We provide the LM-80/TM-21 data, verified wattage and certification documents you need to build a retrofit case that holds up. Tell us your fixture count, operating hours and electricity rate, and we will help you work out the numbers.