Guide
How to Figure LED Retrofit ROI
Return on investment for lighting is mostly arithmetic. If you know your watts, your hours, and your electric rate, you can estimate payback yourself.
The basic math
Yearly savings comes from the watts you remove and how long the lights run.
- Watts saved = (old watts − new watts) × number of fixtures.
- kWh saved per year = watts saved ÷ 1,000 × run hours per year.
- Dollar savings = kWh saved × your electric rate per kWh.
- Simple payback in years = net project cost ÷ yearly dollar savings.
Numbers people get wrong
Small input errors change payback a lot.
- Run hours: a 24/7 warehouse and a 50-hour office are not close.
- Electric rate: use your blended rate from a real bill, not a guess.
- Maintenance: fewer lamp changes is a real saving, especially at height.
- Demand charges and cooling savings can help, but keep them separate.
Where the rebate fits
A rebate lowers the net cost, so it shortens payback but does not change yearly savings. Run the math both ways, with and without a rebate, so the project stands on its own.
Try it with your numbers
Our free calculator does this math for you, including payback before and after a possible rebate.
Common questions
Questions people ask
What payback is considered good?
That is a business decision, not a rule. Many owners look for under three years on lighting, but longer paybacks can still make sense for lights that run all day.
Is simple payback the same as ROI?
No. Simple payback ignores the time value of money. It is a fast screen, and finance teams may also want IRR or net present value.
Are these estimates guaranteed?
No. Estimates depend on your inputs and on program rules that can change.
Next steps
Use the free tools
This guide is general information, not advice for one building. Confirm current rules with your utility.
Information last reviewed September 1, 2026.