Energy savings with LED in industry: a real calculation of ROI and payback time

The finance director of a components manufacturing company receives a proposal from the technical manager: the lighting on the factory floor needs renewing. Before taking it to the management committee, he needs figures, not promises. Energy savings with LED in industry can be calculated precisely, and this article gives him the formula, the worked example and the arguments to make the case for the investment. Here you will find the method for doing the industrial LED savings calculation with verifiable data and a savings table you can adapt to your own plant.

Why industrial lighting is one of the biggest energy costs

In a production unit, the lights are on for many hours. Long shifts, high ceilings and large floor areas call for a high installed power. That is why lighting typically accounts for between 15% and 40% of the electricity bill of an industrial installation, depending on the sector. Cutting that percentage has a direct effect on the bottom line.

The problem is not just the consumption. Older technologies lose luminous flux over time, fail frequently and require maintenance at height, with elevating platforms and line stoppages. The energy efficiency of an industrial unit depends as much on the watt consumed as on the reliability of the equipment.

How much a unit with metal halide lamps consumes

A 400 W metal halide high bay actually draws close to 450 W with the control gear included. In a unit with 80 of these fittings running 4,000 hours a year. The annual kWh consumption per luminaire is worked out as follows: 0.45 kW × 4,000 h = 1,800 kWh per luminaire per year. Multiplied by 80 units, that comes to 144,000 kWh a year on lighting alone.

To this is added an important detail: the metal halide lamp takes several minutes to strike. What is more, its performance drops over time. The luminaire energy label of this equipment shows a very low class compared with today's alternatives.

Consumption comparison: LED vs earlier technologies

The consumption of an industrial LED luminaire vs a conventional one shows a clear difference. A 150 W UFO LED high bay delivers the same level of lighting as the 400 W metal halide, with better flux distribution. The table sums up the contrast per luminaire and per year:

Replacing metal halides with LED for savings cuts the unit consumption by around 65%. The advantage of zero maintenance with LED vs metal halide shows from the very first year: no replacement of lamps or control gear.

How to calculate the savings when switching to industrial LED

To justify the investment you need a reliable figure. The method has three input data: old power, LED power and annual hours of use. With these you obtain the savings in kWh and, by applying the tariff, the savings in pounds.

Formula for calculating annual savings in kWh

The formula is straightforward:

Annual savings (kWh) = (Old power − LED power) × number of luminaires × hours of use per year ÷ 1,000

Once you have the savings in kWh, multiply it by the electricity tariff price per kWh for businesses that appears on your latest bill. That result is the annual financial saving. The prior calculation of industrial lighting power is best done with a lighting design project. As the lux calculation for an industrial surface determines how many luminaires you need to meet the standard for each work area.

Practical example: a 2,000 m² unit with 80 high bays

An illustrative example, with sample figures to explain the method:

The annual saving in the example is 96,000 kWh, that is, £17,280 a year. It is the basis of the practical case study of LED savings in a factory you will see further down. This is the figure that answers the question of how much you save by switching to LED in industry: around 65% of the lighting cost. The reduction in the electricity bill from industrial LED is immediate and sustained.

What ROI is and how it is calculated for lighting

ROI measures how long the investment takes to pay for itself with the savings it generates. For lighting, the calculation of the ROI of industrial LED lighting is simple: you divide the total investment by the annual saving. The result is the years of payback for a company's LED lighting.

Using the previous example: if renewing the 80 high bays costs £32,000, and the annual saving is £17,280, the payback is 1.85 years. From that point on, the return on the LED investment in an industrial unit is net saving. The amortisation of the lighting capex speeds up if the available grants are included, which we deal with later.

Payback time according to the type of luminaire

Not all luminaires pay back the same. The UFO LED high bay, thanks to its high luminous efficacy, usually offers the shortest payback in high-ceilinged units. The amortisation of UFO LED high bays usually runs between 1.5 and 2.5 years when use is intensive. Industrial floodlights for outdoor or loading areas have a somewhat longer return, but an equally favourable one.

Factors that speed up the return: hours of use and tariff

The more hours a year the installation runs, the faster it pays for itself.

A three-shift unit recovers the investment in half the time of a single-shift one. The second variable is the tariff: the higher the price of the kWh, the greater the absolute saving. A 50,000 h service life for industrial LED guarantees that the luminaire will keep working for many years after it has paid for itself.

Additional savings with dimming and control systems

Switching to LED is the first step. Intelligent control adds extra savings without touching the luminaire.

Presence sensors in transit areas

Corridors, warehouses and loading bays do not need constant light. A presence sensor switches off or dims the lighting when there is nobody around. In areas of occasional traffic, this measure cuts the consumption of those zones by between 30% and 60%.

1-10V dimming according to daylight

In units with skylights or large windows, 1-10V dimming adjusts the flux of the luminaires to the contribution of daylight. The system keeps the lux level constant and reduces power when light comes in from outside. It is a saving that adds to that of the LED technology itself.

Grants and aid for renewing industrial lighting

The investment can be reduced with public aid. There is the PERTE grant for energy efficiency, within the funds aimed at industrial decarbonisation, which co-finances equipment renewal projects. The conditions and deadlines change with each call for applications, so it is worth checking the current one before drawing up a budget.

To the direct aid is added the tax deduction for energy efficiency: certain investments in efficiency allow a deduction on corporation tax. The grants for LED lighting for businesses and these deductions, combined, can significantly cut the initial capex and shorten the payback even further. The manufacturer's LED energy efficiency certificate is usually a requirement for accessing this aid, so it is worth asking for it from the outset.

A real case: a factory before and after the switch to LED

A components factory with a 2,000 m² unit was operating with 80 metal halide high bays. Its lighting consumption was around 144,000 kWh a year. After replacing them with 150 W UFO LED high bays, consumption dropped to some 48,000 kWh a year.

The result: a lighting bill 65% lower. There will be no need to change lamps for years. And there will be a visible improvement in the level of light at the workstations.

The CO2 savings from LED lighting in industry went hand in hand with the financial saving, since every kWh avoided reduces the carbon footprint of lighting associated with the plant. The committee approved the project in two weeks with these figures on the table.

Conclusion: when the time to act is

The moment is when the installation is still running on old technology and is used for many hours. Every year that passes with metal halides or fluorescent lighting is money going out through the meter. With a usual payback of less than two years, a long service life and grants that reduce the outlay, the decision justifies itself.

The first step is a calculation with the real data of your plant: current powers, hours of use and tariff.

Work out your savings: request a lighting design study tailored to your unit and receive the ROI calculation with the real data of your installation. Get in touch with us for a bespoke project.

Review the applicable solutions in the catalogue. The UFO LED industrial high bays for high-ceilinged units and the range of industrial LED lighting for the rest of the areas.

Frequently asked questions

How much is saved on average when switching to LED in an industrial unit?

The reduction in lighting consumption usually lies between 50% and 70%. In the example of a unit with 80 high bays, the saving comes to around 65% of the lighting cost.

How long does it take to pay back the investment in industrial LED?

The usual figure is a payback of between 1.5 and 3 years. The more hours of use and the higher the electricity tariff, the shorter the return.

Are there grants for changing a company's lighting to LED?

Yes. There is aid such as the PERTE for energy efficiency and tax deductions for investment in efficiency. The conditions vary according to the call for applications in force.

Which luminaires give the most savings in a high-ceilinged unit?

UFO LED high bays are the option with the best performance for high ceilings, thanks to their luminous efficacy and their flux distribution.

How does light dimming affect energy savings?

Presence sensors and 1-10V dimming reduce consumption in transit areas or in areas with daylight. This achieves an extra saving, on top of the saving from the LED technology.

Does the switch to LED also reduce my company's CO2?

Yes. Every kWh that is no longer consumed reduces the emissions associated with the electricity, which lowers the carbon footprint of the plant.

Can I finance the renewal of industrial lighting?

Yes. There are financing and lighting-leasing arrangements, in addition to public aid, that make it possible to tackle the renewal without a large initial outlay.