Payback Analysis

Typical pay-back analysis, using standard assumptions
Payback = (cost - rebate) / savings per year

Typical paybacks from lighting retrofits are generally within a 2-3 year payback.

Energy savings of 30% to 70% are available with new lighting technologies with typical project paybacks in the 2-4 year range. Better lighting and a positive project cash flow all add up to cash on the bottom line.

The good return on investment for modern high-efficiency light fittings arises from several of the components. Ballasts are a good example. About 98% of the lifetime service cost of ballasts is energy. As a result, an AGO study found the Net Present Value (at 10% discount rate over 10 years) of savings from using electronic ballasts is about 400% greater than for conventional units and 100% higher than for Full Low Loss ballasts in typical office applications. Any investment decision regarding luminaires and/or their components should be based on a whole of life cost analysis not just first costs.

The payback period of a total new fitting or any individually upgraded components in existing fittings of course depends on the initial cost and the hours of operation per year. However, experience shows that most lighting paybacks fall in the range 2-4 years. However, paybacks of less than 2 years and an Internal Rate of Return (IRR) of 20% or more are not uncommon. Any feasibility study should take into account the increasing market dominance of T5 lamps and their falling prices as well as the prospect of energy prices growing in real terms.

Visit this online payback calculation example.