The ROI of LEDs: saving money with energy efficient sources, programs and initiatives

LEDs have aroused the interest of designers and installers with promises of a longer lifespan, higher brightness, and a reduction in heat emissions and harmful lighting effects. Awareness has spread, but those making the purchasing decisions are still shying away from the higher cost of these new bulbs as compared with traditional lights. Why buy a $25 LED when you can buy a 90-cent bulb?

However, the most overlooked feature of LEDs is the life, cost and energy savings involved. Many have not fully explored the costs associated with LEDs and the return on making the initial investment, whether it's through a drastically reduced electrical bill, service frequency, or bulb replacement costs.

Looking even further, the advent of the LED has helped raise an even bigger issue surrounding integration - that there are a large number of incentives and rebates available to companies that use efficient energy sources. Upon closer examination of these programs and initiatives, it is evident that the initial investment made towards LEDs and other energy-saving tools is quickly returned.

Case studies

To begin to illustrate the value of energy re-evaluation, a few examples are necessary. In 2001, the City of Portland replaced 6,900 red and 6,400 green incandescent traffic lights with LEDs. The project resulted in annual energy and maintenance savings of $400,000, as well as 1,400 hours of maintenance staff time, and a net payback in less than three years. Since the city entered into a leasing arrangement for the project, they also qualified for Oregon's Business Energy Tax Credit, through which the leasing company receives a 35 percent tax credit over time, reducing the cost of the city's lease by about 22 percent and saving the city nearly $500,000.

In September 2004, Marriott International, with 2,600 owned or franchised lodging properties in nearly 70 countries, entered into a 15-property deal to participate in the Building Tune-Up (BTU) Program from Quantum Consulting. The latter company's engineers identified more than $1.7 million in energy savings across multiple Marriott properties. Quantum's BTU Program was estimated to result in $200,000 to $500,000 in annual savings for some of the 15 individual Marriott properties.

Commercial energy end-use breakdown

Business costs of heating, cooling, lighting and other energy usage can reach unnecessary levels. While these factors contribute to overhead, all companies can work to reduce these expenditures. Incorporating energy efficiency into a business plan or model gives an advantage in lowering utility bills and ensuring a dependable energy supply.

Energy usage
The chart represents the energy costs involved in running a business, lighting being the largest expenditure at 37 percent of the total. Therefore, replacing traditional lights with LEDs will have the largest energy saving opportunity since lighting uses the majority of electricity in most commercial buildings.

One example of cutting costs with LEDs is exit signs. A typical exit sign with two 20-watt incandescent bulbs can cost $20 a year more to operate than the electricity required for an LED. Incandescent bulbs have to be replaced about three times a year, which results in a cost of approximately $50 per year, including labor. The number of incandescent exit signs multiplied by $70 ($20 plus $50) will equal the estimated cost savings of using LEDs.

Rebates and tax exemptions

There are several rebates and tax exemptions available to companies that incorporate energy-saving programs, equipment and products into their environments. California's Solar or Wind Energy System Credit provides personal and corporate income tax credits for the purchase and installation of photovoltaic or wind driven systems with a peak generating capacity of up to 200 kilowatts. The tax credit is equal to 7.5 percent of the net installed system cost after deducting the value of any municipal, state, or federal sponsored financial incentives, or $4.50 per watt of rated peak generating capacity, whichever is less.

Since solar and wind systems generate fairly low wattage, LEDs are an ideal light source to be paired with these energy sources to obtain the best systems value. Essentially, conventional lighting negates the green value of alternative energy sources, while LEDs compliment and enable the use of lower-wattage power-generating systems.

Also, many utility companies have allotted rebates to energy-conscious businesses. For example, Florida Power & Light's discounts include $75 per kilowatt for permanent high-efficiency fixture replacements and $100 per kilowatt for permanent high-efficiency fixture replacements that use low-mercury fluorescent lamps.

The Database of State Incentives for Renewable Energy (DSIRE) is a comprehensive source of information on state, local, utility, and selected federal incentives that promote renewable energy.

As industry players are still learning about LED technology, it is useful to view these devices as one of a number of lighting and electrical technologies available to help companies cut energy expenditures. Longer lifespan and reduced energy consumption and maintenance costs allow LEDs to provide an excellent return on investment. Paired with energy rebates, tax exemptions and energy re-evaluation, these options are worth exploring when attempting to reduce business costs.

Looking ahead, the market will aim to examine what can be done in the way of general illumination. Manufacturers are working diligently to create products for a wider array of mainstream applications, leading to cost and energy savings across the board.

Useful links

Database of State Incentives for Renewable Energy (DSIRE)
Flex Your Power is California's statewide energy efficiency marketing and outreach campaign.
Quantum Consulting is nationally recognized as the industry leader in energy efficiency consulting and market research.
Focus on Energy is a public-private partnership offering energy information and services to energy utility customers throughout Wisconsin.
Energy Rebate Central is designed to help identify, apply for, and implement energy rebate programs.
The City of Portland's Office of Sustainable Development
Florida Power and Light Company


Zierick Manufacturing Corp

Offers innovative solutions for interconnect applications. Specializes in wire-to-board and board-to-board applications. Provides surface mount and thru-hole products while further reduci...

Cree Inc

Leads the LED industry in performance, brightness and reliability with its XLamp LED family, enabling the lighting industry with efficient, environmentally-friendly LEDs that produce beau...

InnoLight sp zoo

EU located lighting manufacturer for LED GU10 5W 600lm CRI>80 reflector, great performance, and LED E27 5W 380lm classic traditional appearance.

CSA Group

A global solutions provider of product testing and certification services for electrical, mechanical, plumbing, gas, medical and a variety of other products.

Energy Efficient Lighting

Energy Efficient Lighting offers total solutions to both conventional and more advanced LED lighting fixtures and LED retrofit kits for commercial and industrial applications.


48 companies worldwide, passionate about light and innovation, experts in developing LED lighting solutions for safe and comfortable environments with significant energy and cost savings,...

Guardian Industries

Guardian Industries Corp. is a leader in float glass, fabricated glass and high performance coated glass products. Guardian lighting solutions deliver optimal performance, flexibility and...

ELMA Electronic Inc

Provides standard and customized LED solutions. Elma's LED family offers consistent, reliable, and durable illuminating and indicating solutions.

LEDSAmerica Inc

LedsAmerica is a full line LED line company and has manufacturing in Iowa where T8 LED-O tubes and street lights are made together with PL, PARs, High Bay lights. MAx

Lumentra Inc

Provides NVLAP accredited optical (photometry, colorimetry, Lumen maintenance), thermal (mapping and transient analysis), electrical characterization services, product development, supply...


The LED, DC-DC and AC-DC power supplies from 1W - 1600W. Cincon’s lighting controllers, interfaces and devices incorporating DALI protocol. LED drivers from 25W - 150W with international ...


LTF, LLC is a U.S based solid-state lighting product development and manufacturing company with facilities located in both USA and China.

Marian Inc

Marian is a global company who supplies die cut and converted parts to the LED market. Materials include thermal pads, reflective, venting, gaskets, insulators, diffusers and more.

Colorimetry Research

Specializes in the field of optics, manufacturing, electronics and software enables us engineer products with the right balance of hardware and software.

eldoLED America Inc

Designs and manufactures drive solutions for LED based lighting systems. Our technologies empower our customers to deliver the promise of LED lighting.

Cirrus Logic Inc

Cirrus Logic develops high-precision, analog and mixed-signal integrated circuits for a broad range of innovative customers across a variety of energy-related applications, including the ...


Established in 2002 as an ecommerce store for all your LED product needs.


Designer and manufacturer of custom and industry standard LED, DC-DC and AC-DC power supplies from 1W to 1600W. Cincon also designs and manufacturers lighting controllers, interfaces...

Illumination Machines

Illumination Machines designs custom optics, heat sinks, and remote phosphor systems for LED luminaires and lamps.

eldoLED BV

eldoLED is a world leader in the design and manufacture of intelligent drive solutions for LED based lighting systems. Our technologies empower our customers to deliver the promise of LED...

Cree CXA LED Array Family

Cree’s CXA LED Arrays are optimized to simplify design and lower system cost, delivering high lumen output and efficacy with a family of single, easy-to-use arrays.

Cree LED Modules

Cree LED modules deliver beautiful, consistent light, backed by a 5-year warranty. They offer a choice of dimming options, while reducing the lighting power load by 80%.

Cree XLamp® XP-L LEDs-the industry’s highest efficacy single-die LED.

Cree® XP-L LED is the first commercially available single-die LED to achieve up to 200LPW at 350mA. The XP-L enables 50% or more performance increase as a drop-in upgrade.

Surface Mount Wire Gripper - Part Number 1301

The Zierick 1301 is designed to allow customers to easier terminate a stripped wire to a PCB. Wire sizes to 24 AWG. Terminal is UL Recognized.

Surface Mount Wire Gripper - Part Number 1262

The Zierick 1262 is designed to allow customers to easier terminate a stripped wire to a PCB. Wire sizes from 0.025" to 0.095". Terminal is UL Recognized.

Unlock new LED lighting solutions with Cree High Density LEDs

Cree® High Density LEDs deliver the industry’s highest optical control factor enabling lighting manufacturers to improve performance, cost and size of LED lighting—enabling never before p...

Cree XLamp® XM-L2 EasyWhite® LED

The first 5mmx5mm LED to enable color-consistent 50W halogen performance; the XM-L2 EasyWhite delivers 1,100 lumens and is optimized to replace halogen technology.

Surface Mount Insulation Piercing Terminals

Surface Mount Wire-to-Board terminals available for wire gauges ranging from 24 to 14 AWG. Parts can be terminated to allow daisy-chain applications. Eliminates difficulty with direct...

LED flexible strip and aluminum LED bar

Full range of LED strip and bar including the unique high lumen strip. Protection degree up to IP68.Epistar 3528/5050 SMD LED.Compliant with CE & RoHS.2-year warranty.3528: 60LED/m,120LED...

P3 Indoor Full Color LED Display Video screen

High-density pixel pitch,high resolution,high refresh rate,magnificent and high-definition image and video effect.P3,P5,P6,P7.62 to P10 available.Epistar SMD LED,wide viewing angle.High r...

LED Panel Light

Designed to replace T8 fluorescent tube or Phillip Grille light.Epistar 3528/3014 SMD LED.Aluminum alloy body.Even and Soft light beam.Various mounting means.50,000 hours lifetime.Environ...

Rotatable LED Down Light, beam angle adjustable 10-60°

Beam angle adjustable 10-60 degree.Shell can rotate 360°,vertical 0-40°.High power CREE LED,even and uniform light output,Die casting aluminum alloy housing,good heat sinking.Widely used ...

Solar LED Paver Light

100% solor powered.No wires, no electricians.Super capacitors instead of battery,maintenance-free.Absorb sunlight in daytime and illuminate 8-12 hours during night. Epistar LED.Activation...

T8 LED tube light

Epistar Super bright 3528/2835 SMD LED.Aluminum alloy body with plastic cover.Consist with traditional fluorescent tubes.Easy mounting.PF>0.90,CRI>72,Over 60% energy-saving,Low degradatio...

LED light Bulb – LED spotlight

The AR111,GU10,MR16,PAR30,PAR38 LED bulbs are ideal replacement of 10-75W halogen or CFL bulbs.Cree/Everlight LEDs.PMMA lens.Aluminum housing.Good heat dissipation.Surface temperature les...

Super bright Injection LED modules

Housed by ABS material,covered by epoxy resin on surface with good insulation.Beautiful appearance.Waterproof.Anti-fire.Super bright 5050/3528 LED.12V voltage.Ideal light source for backl...

Flexible LED screen - Rental and Stage LED billboard

Special design,flexible use,light weight,super slim,transparent,SMD technology,easy to install.Can realize any curved and creative installation horizontally and vertically.IP65 protection...

iVAR COB LED Downlight

iVAR COB LED Downlight use die-casting magnesium alloy to make the main body,has Excellent heat dissipation performance,and Unique and delicate looking design.

LIMS - Liquid Injection Molding System

Silicone LIMS can be used to injection mold silicone components such as lenses or gaskets in an automated process. The two-component, thermoset material ranges in Shore A hardness from 5-80.

360 degree 10W led bulb

360 degree 10W led bulb has high efficiency, high power factor,environmental friendly, unique heat-dissipating design and perfect thermal management.







Have a press release or other announcement you'd like to share?

Submit Announcement

Miss a webcast? Watch it in the archives


LEDs Magazine Newsletter

Our weekly flagship news source

Product Focus

Monthly newsletter

Illumination in Focus

Bi-monthly newsletter

Copyright © 2007-2014. PennWell Corporation, Tulsa, OK. All Rights Reserved.