Rising energy costs and the continual strain on profit margins has businesses seeking ways to cut expenses. According to a recent analysis, electricity rates could rise sharply in 2023 and 2024. With businesses already facing inflationary pressures, identifying areas to reduce energy usage can lead to major savings.
One way for companies to substantially lower their energy bills is by upgrading from old fluorescent lighting to more efficient LED lighting. By converting to LEDs, businesses can realize immediate reductions in their electricity costs. Over time, the savings from LED lighting add up through lower energy usage and reduced maintenance expenses. This guide will explore the benefits of switching to LEDs and provide business owners a roadmap to convert their fluorescent lighting in a cost-effective manner.
Benefits of Switching to LED Lighting
Switching from fluorescent to LED lighting offers several benefits that can save businesses money over time. One of the biggest benefits is that LEDs are significantly more energy efficient than fluorescent lighting. According to Straits Lighting, LEDs use at least 75% less energy and electricity than fluorescent lighting. The energy savings from LEDs add up dramatically over time, reducing electricity costs.
LEDs also have a much longer lifespan than fluorescent lighting. Fluorescent tubes typically last 10,000-20,000 hours, while LEDs can last 50,000-100,000 hours with proper cooling and voltage. The longer lifespan results in lower maintenance and replacement costs over time. Businesses won’t have to frequently change out burnt-out fluorescent tubes.
In addition to energy and cost savings, LEDs provide better light quality than fluorescents. LEDs produce a sharper, clearer light with better color rendering. This leads to improved visibility and work conditions for employees). LEDs also run cooler than fluorescent lighting, reducing air conditioning costs in the summer.
Cost Comparison of LED vs Fluorescent
When comparing the costs of LED and fluorescent lighting, it’s important to consider both the upfront purchase price as well as the long-term operating and maintenance costs.
The purchase price of an LED fixture is typically 2-3 times higher than a comparable fluorescent fixture. However, LEDs last 3-4 times longer than fluorescents and use 60-80% less energy, resulting in significantly lower operating costs over the lifespan of the fixture (U-M study outlines cost, energy savings of switching from fluorescent lamps to LEDs, 2023).
For example, a 4-foot LED tube light costs around $10-15, while a comparable fluorescent tube costs $3-5. However, the LED tube will last 50,000 hours compared to just 15,000 hours for the fluorescent, resulting in lower replacement costs over time.
In addition, LEDs consume 40-60% less power than fluorescents. A standard 4-foot 32W fluorescent tube uses about 29W, while an equivalent LED tube uses only 15W. For a 10,000 sq ft facility running 40 fluorescent fixtures 10 hrs/day, switching to LEDs would save over $2,000 annually in electricity costs (Ledvance, 2022).
When factoring in both the initial investment and ongoing energy and maintenance savings, most businesses find that LED lighting delivers a return on investment in 2-3 years through lower operating expenses over the life of the fixtures.
Utility Company Rebates
Businesses can qualify for generous rebates on LED lighting upgrades through the local utility companies. Evergy offers both standard and custom rebates through their Business Lighting Program to help offset the upfront costs of an LED retrofit project. According to their website, standard rebates can be up to $0.12 per kWh saved by replacing existing fixtures with qualified energy efficient options. For LED tubes, rebates are $10 per lamp.
To qualify for Evergy rebates, businesses must get pre-approval and complete lighting upgrades within 120 days. Lighting projects must result in a minimum savings of 2,000 kWh. Customers should work with a lighting contractor to assess potential energy savings and submit required paperwork to get rebates pre-approved. Overall, Evergy offers commercial lighting rebates up to $250,000 per customer location. Taking advantage of these generous rebates can offset a significant portion of the upfront costs of an LED retrofit.
LED Retrofit Options
There are a few different options for converting existing fluorescent fixtures to energy efficient LED lighting:
LED Tube Replacement
The most straightforward retrofit option is to simply replace the existing fluorescent tubes with LED tubes. LED tubes are designed to directly replace T8 and T12 fluorescent tubes and provide a simple plug-and-play upgrade. LED tubes can be used with the existing fluorescent ballasts in place, or for maximum energy savings the ballast can be removed and the tubes direct wired to the power supply.
LED Retrofit Kits
For a more advanced retrofit, fluorescent light fixtures can be converted using LED retrofit kits. These kits allow you to remove the entire fluorescent ballast and rewire the fixture for LEDs. Retrofit kits include new LED drivers and wiring and allow for higher efficiency LED chips optimized for the existing fixture housing.
Complete LED Fixture Replacement
The most thorough retrofit option is to replace the entire fluorescent fixture with a new LED fixture designed for commercial and industrial use. This allows old fluorescent fixtures to be upgraded with modern, energy efficient LED fixtures with advanced thermal management, optics, and controls. The downside is this is the most labor intensive option involving removing old fixtures and installing completely new housings.
Retrofitting Process
There are a few main approaches for retrofitting fluorescent lighting to LED:
LED Tube Replacement
This is the simplest retrofit option. It involves directly replacing the existing fluorescent tubes with LED tubes designed to fit into the existing fixtures. The process typically involves:
- Removing the fluorescent tubes from the fixtures.
- Installing new LED tubes in place of the fluorescents.
- Replacing ballasts/tombs with LED-compatible drivers if needed.
LED tube replacement allows you to upgrade to LED lighting with minimal labor and disruption.
LED Retrofit Kits
Retrofit kits convert the existing fluorescent fixtures to LED by removing the ballasts and rewiring. Steps include:
- Disconnect and remove the fluorescent ballasts.
- Install LED light strips or panels into the fixture body.
- Rewire fixtures to supply AC power directly to the LEDs.
Kits provide more flexibility in LED setup but require disassembling fixtures.
New LED Fixtures
For a complete lighting overhaul, fluorescent fixtures can be replaced with new LED fixtures, involving:
- Removal and disposal of old fluorescent fixtures.
- Installation of new LED fixtures.
- Rewiring of electrical connections.
While more labor intensive, new LED fixtures provide optimal light quality and control.
Converting Fluorescent to LED: ROI Analysis
When investing in an LED lighting retrofit, it’s important to analyze the return on investment (ROI) and payback period to determine if the project makes financial sense. Here are some examples of ROI over different time periods:
The payback period refers to how long it takes to recoup the upfront costs of the LED upgrade through energy savings. Many businesses find their LED retrofit pays for itself in under 2 years.
The 1 year ROI can be 50% or more. For example, if the retrofit costs $10,000 and saves $5,000 in electricity costs in the first year, the 1 year ROI is 50% ($5,000/$10,000).
The 5 year ROI is commonly over 100%, meaning the project more than pays for itself. If the $10,000 retrofit saves $5,000 per year, the 5 year ROI is 150% ($25,000/$10,000).
The 10 year ROI is typically 200-300% since the LED lighting keeps saving year after year. For the example above, the 10 year ROI is 300% ($50,000/$10,000).
These ROIs demonstrate the significant long-term savings from upgrading to energy efficient LED lighting. Businesses should consider both the payback period and longer-term ROI when evaluating an LED retrofit project.
Case Studies
For an example of a successful LED retrofit by a local business, look to Harvesters, a nonprofit food bank and community kitchen. Harvesters converted their 100,000 square foot warehouse and distribution center from fluorescent to LED lighting. By installing new LED fixtures, they reduced energy consumption by 60% and lowered their annual lighting costs by over $30,000.
The project involved replacing 400 400W metal halide high bay fixtures with 240W LED high bay fixtures. Despite the significant upfront cost of $120,000, the project paid for itself in just over 3 years through energy savings. In addition to financial savings, Harvesters has benefited from improved light quality and lower maintenance requirements with the LED system. The 5-year warranty on the new LED fixtures also provides ongoing peace of mind.
According to Harvesters’ Director of Facilities, the change to LEDs was “one of the best financial decisions we’ve made.” Their experience shows that even non-profits and community organizations can benefit from the long-term savings of LED lighting. For businesses looking to follow in Harvesters’ footsteps, an LED upgrade can provide faster payback through immediate energy and maintenance savings.
Other Incentives
In addition to utility rebates, there are other financial incentives available that can help offset the upfront costs of switching to LED lighting:
Federal tax credits – Businesses may be eligible for federal tax credits when installing energy-efficient LED lighting. The credits allow you to deduct a percentage of the cost from your tax liability. LED lighting installed in nonresidential buildings may qualify for a full expensing tax deduction.
State tax credits – Some states offer tax credits to businesses that install energy-efficient lighting and equipment. The credits can vary but help accelerate depreciation and provide tax savings. For example, California offers tax deductions for installing LED lighting through its Research and Development Tax Credit program.
Grants – Government and utility grants are available to assist businesses with upgrading to more energy-efficient systems like LED lighting. These grants can cover 25% to 100% of equipment and installation costs. The US Department of Energy provides grant funding through its Small Business Administration program.
Transform Your Lighting for Bottom Line Savings
Let us help you realize the cost savings from an LED lighting retrofit for your business. We offer business owners like you a complimentary consultation to assess your current lighting and determine the potential return on investment from converting to efficient LED technology. Our lighting experts can calculate the exact energy, maintenance, and replacement savings you can expect while tailoring a conversion plan for your unique space and requirements.
As a full-service LED lighting provider, we handle the entire retrofit process–from procurement of high-quality commercial grade LED products to installation, disposal, and recycling. We seamlessly manage all aspects of the lighting upgrade so you can focus on running your business. Our experience with utility rebate programs ensures you maximize available incentives, while our maintenance staff are available 24/7 to service your new LED system.
Go from fluorescent fixtures draining your bottom line to an energy-efficient LED lighting solution that pays for itself. Contact us today to schedule your free lighting assessment and financial savings analysis.