How do you calculate lighting retrofit payback?

Subtract ongoing support cost from gross annual savings to get net savings, then divide installed cost by that net. With 64,000 cost, 24,500 gross savings, and 1,200 support cost, net savings are 23,300 and payback is about 2.75 years.

What is a good payback period for an LED retrofit?

Many industrial lighting retrofits land between 1.5 and 4 years, and most facilities approve anything under 3. The default inputs here give roughly 2.75 years, which is solidly fundable.

Does this include utility rebates?

Not directly. Subtract any rebate from the installed cost first, then enter the net figure — rebates often cut payback by 20-40% and can move a marginal project under the approval line.

Why subtract a support or controls cost from savings?

Networked controls carry license, commissioning, or maintenance cost each year. Netting it out — 24,500 gross minus 1,200 here gives 23,300 — keeps the savings honest so payback is not overstated.

Simple payback vs ROI — what is the difference?

Simple payback tells you how fast you recover cost; ROI and NPV tell you the return over the asset's life with the time value of money. Payback is the quick screen; a five-year net value, 52,500 in this example, shows the gain after recovery.

How accurate is simple payback for a lighting project?

It is a good first-order screen but ignores rate escalation, LED output decline, and discounting. For a final capital decision, follow it with a lifecycle or NPV analysis.

Energy & Sustainability calculator

Lighting Retrofit Payback Calculator

Lighting retrofit payback is the number of years a facility takes to recover the installed cost of an LED or controls upgrade from the net energy and maintenance savings it generates. Energy managers, plant engineers, and sustainability leads use it as the first screen on any lighting capital request, because a fast simple payback is the easiest case to take to finance. It nets out ongoing controls or maintenance support cost so the savings figure is honest, then divides the project cost by what is actually left each year. For a typical industrial fixture-and-controls retrofit, this single number decides whether the project moves forward.

What this calculator does

Estimate simple payback for a lighting retrofit from project cost, annual electricity savings, and support cost.
a facilities manager needs to screen a lighting efficiency project
It computes simple payback in years by dividing installed retrofit cost by net annual savings (gross lighting savings minus ongoing support cost).

Formula used

Net annual lighting savings = annual lighting energy and maintenance savings - annual controls or maintenance support cost
Lighting retrofit payback = installed lighting retrofit cost ÷ net annual lighting savings

Inputs explained

Installed lighting retrofit cost: Include fixtures, controls, lift rental, labor, disposal, commissioning, and incentives if netted.
Annual lighting energy and maintenance savings: Use avoided kWh, demand, lamp replacement, and maintenance savings.
Annual controls or maintenance support cost: Include software, sensor maintenance, warranty, or periodic recommissioning cost.

How to use the result

Use it as the first screen on any LED or lighting controls upgrade, before committing engineering time to a detailed lifecycle analysis.
Simple payback ignores the time value of money, utility rate escalation, LED lumen depreciation, and any rebate, so it is a fast screen, not a full ROI or NPV.

Current U.S. benchmarks

Industrial electricity averages 8.66 cents per kWh across the U.S. (EIA, Apr 2026), up 5.5% from a year earlier. Energy-intensive steps carry this directly into unit cost.

Common questions

How do you calculate lighting retrofit payback? Subtract ongoing support cost from gross annual savings to get net savings, then divide installed cost by that net. With 64,000 cost, 24,500 gross savings, and 1,200 support cost, net savings are 23,300 and payback is about 2.75 years.
What is a good payback period for an LED retrofit? Many industrial lighting retrofits land between 1.5 and 4 years, and most facilities approve anything under 3. The default inputs here give roughly 2.75 years, which is solidly fundable.
Does this include utility rebates? Not directly. Subtract any rebate from the installed cost first, then enter the net figure — rebates often cut payback by 20-40% and can move a marginal project under the approval line.
Why subtract a support or controls cost from savings? Networked controls carry license, commissioning, or maintenance cost each year. Netting it out — 24,500 gross minus 1,200 here gives 23,300 — keeps the savings honest so payback is not overstated.
Simple payback vs ROI — what is the difference? Simple payback tells you how fast you recover cost; ROI and NPV tell you the return over the asset's life with the time value of money. Payback is the quick screen; a five-year net value, 52,500 in this example, shows the gain after recovery.

Last reviewed 2026-05-12.