LEDs have been around for decades. We’ve all seen the colored indicator lights on our electronic gadgets and even in traffic signals. But in the last few years, white LEDs have appeared on the market and have improved dramatically with astounding breakthroughs in efficiency, life and durability. LEDs now outperform practically all conventional lighting technologies in every respect.
The most efficient indoor LED fixtures on the market today have an efficacy of approximately 72 lumens per watt. This compares to a typical efficiency of 40-50 lumens per watt for most fluorescent fixtures used in commercial buildings and 30-40 lumens per watt for metal halide fixtures, and 10 lumens per watt for incandescent lighting fixtures. So LED lighting can reduce energy consumption by 40% compared to fluorescent, 50% compared to metal halide, and 85% relative to the humble incandescent fixture.
LEDs also provide significant savings in maintenance costs. They have a typical lifetime of 50,000 hours, which translates to almost six years in 24/7 operation, or approximately 20 years when used during normal office hours. Furthermore, unlike metal halide and fluorescent lamps, LEDs contain no mercury or other hazardous substances, so used LEDs do not require any special handling, and they eliminate the risk of exposing to maintenance personnel and building occupants to hazardous materials in the event of bulb breakage.
So while LEDs now outperform conventional lighting technologies in every respect, there is still a cost premium to be overcome, and many building owners are crunching numbers to see if an LED retrofit makes good financial sense. High-performance LED can cost approximately 10 times as much as commodity-grade fluorescent lighting on an initial dollars-per-lumen basis, so lighting specifiers are naturally concerned about justifying the additional cost.
For a lighting designer or building owner looking for applications where LED lighting can show the quickest payback, the low hanging fruit for LED lighting can usually be found in four areas.
Firstly, areas with high electricity costs are obvious targets. While the U.S. average is approximately 10 cents per kWh, there are wide regional variations. In many major metropolitan areas, the energy costs can be significantly higher than the average. Also, electricity costs more than 13 cents per kWh in most Northeast states, and as much as 22 cents in Hawaii. Caribbean islands can also have very high electricity costs. Furthermore, in some cities, landlords resell electricity to their tenants at higher prices than the utility charges, so those tenants have an additional incentive to go green.
Secondly, LEDs make sense in applications where the cost per lumen is relatively high for traditional lighting fixtures, which tend to be found in lower lumen packages such as compact fluorescent downlights. The cost of conventional fixtures is generally driven by the cost of mechanical parts and electronics, and does not increase significantly with wattage and light output. In high-performance LED fixtures on the other hand, the lumen output is directly proportional to the number of LEDs, and in a LED fixture delivering more than about 1,000 lumens, the LEDs account for most of the total manufacturing cost.
Thirdly, LED lighting can show an attractive payback in applications where maintenance costs are high, such as with union labor or in high places where expensive equipment needs to be rented to service the lighting fixtures. LED fixtures can sometimes pay for themselves with the first avoided relamping, even without counting the energy saving benefits.
Finally, the payback is always more attractive in new construction and remodel situations, as opposed to retrofit projects, since the incremental installation cost is zero and only the incremental upgrade cost of the LED lighting needs to be justified. Having said that, a LED retrofit can still be financially attractive in installations with incandescent lighting. In these cases, the cost can generally be recouped in less than five years based on the energy savings alone.
One of the best LED payback opportunities can be found in new construction spaces where compact fluorescent downlights would otherwise be used. A high-performance LED downlight can deliver around 1400 lumens for less than 20W, which is the same lumen package as a 32W compact fluorescent downlight, which would draw approximately 35W net of ballast losses. So the LED downlight saves 131 kWh per year in 24/7 operation, which is $16 per year at an electricity cost of 12 cents per kWh. This would be a 5 to 10 year payback even before considering maintenance cost savings.
Keep in mind that a 10 year payback is equivalent to a 10% return on investment, with upside if electricity prices increase (and we all know they probably will). In today’s low interest rate environment, there aren’t many banks offering that kind of APR. The going rate for savings accounts is currently a paltry 1.5%, so by that yardstick, even an energy saving retrofit project with a 65 year payback is a more attractive investment.
The good news is that LED costs are declining almost as quickly as their efficacy is increasing, which means that the financial attractiveness of LED lighting can be expected to improve from respectable to compelling within a year or so, with payback periods measured in months, not years. Then we will be asking ourselves if there is still a place for fluorescent and metal halide in the lighting designer’s toolkit. It seems likely that they will be relegated to niche applications such as tanning beds and greenhouses.
It will be interesting to see just how rapidly the LED lighting revolution sweeps the industry. With environmentalists and bean counters equally excited, we could all be pleasantly surprised.
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