What Is the Breakeven Time for LEDs?

Building owners investigating the cost-effectiveness of LEDs will often ask when they will “breakeven.”  In other words, when will their savings offset their investment.

We have worked on several projects recently and can confirm with confidence that breakeven times are approximately 2-3 years.  The precise answer depends on the type and price of LEDs employed, the cost of new fixtures, if any, the number of hours the fixture is used per month and per year, and labor costs (which are nominal but must be considered for a new installation).

Costs can be easily gathered to make this analysis.  But a quick rule of thumb should suffice to illustrate the economics:

 

  • LED bulbs now cost approximately 10 times conventional bulbs.  A 60 watt equivalent bulb costs approximately $10 while a 60 watt incandescent bulb costs less than $1.
  • LEDs consume approximately 1/9 of the electricity required to power a conventional incandescent (and perhaps 1/3 of that required for a CFL). A 60 watt equivalent bulb generally consumes about 7 watts per hour.
  • If a bulb is used on average 3 hours per day annual hours will approximate 1000.  Accordingly a 60 watt bulb would consume 60 kilowatts per year.  At $.11 per kW the bulb would cost $6.60 per year to operate.
  • An incandescent bulb generally needs to be replaced after 1500 hours.

Based on these factors,

  • Two incandescent bulbs burning for two years would cost $2 to install plus $13.20 to operate for a total of $15.20.
  • An LED bulb would cost $10 to install but only $1.54 to operate for two years for a total of $11.54.

The additional cost of the lightbulb would be recovered sometime in the second year of operation.