The Bottom Line - Understanding Energy Consumption And Costs

While our company uses sophisticated software to calculate the economic benefits of a lighting upgrade, it pays to understand the principles.

Your utility company bills you in a variety of ways, but they are nearly all tied to the energy your business consumes each month, so we therefore focus on reducing energy consumption.

A “Watt” is a unit of power. One thousand “Watts” is a “Kilowatt”. Watts used per hour is measured in “kiloWatt hours” or “kWh”. For electricity use, your utility company prices the energy you use per “kWh”.

Your annual energy use is calculated by using the following simple formula:

Annual Energy Consumption = Watts X Time (number of hours lights in use annually)

From this calculation we arrive at the number of “kilo Watt hours” (kWh) your business uses in a given year.


Let's look at two lighting system examples, comparing the existing system to the proposed one. They both produce comparable light output.

  Existing system Proposed system
Watts/Fixture 75 watts 15 watts
Hours of usage per year 3,000 hours 3,000 hours
Number of fixtures 200 300
Energy consumption per year= watts per fixture X number of fixtures X annual hours of usage:
75 watts X 200 fixtures x 3,000 hours = 45,000 kwh 9,000 kwh
At a cost of 20 cents per kwh $9,000 per year $1,800 per year
An 80% savings, or $7,200 per year!
We therefore save 80% over the old system in lighting electricity costs alone, which is $7,200 per year

Additional energy savings will also be achieved from the air conditioning system, which now works less because less heat is being produced by the lights. Less heat means less air conditioning; for every $3 saved in reduced energy costs through your new lighting system, a further $1 is typically achieved in savings for air conditioning.

For this project, the savings on air conditioning will be approximately $2,400 per year

Maintenance is dramatically reduced. For a typical facility with 200 incandescent lamps, each lamp is being changed every 2,000 hours - in this case that means each lamp is being changed every 8 months. The “life” of new LED lamps is typically 25,000 hours, or, for this example, over 8 years. That means instead of changing the lamp every 8 months, it will be changed every 8 years! No lamp changing means not sending your maintenance person up a ladder. No lamps to buy, or dispose of either- it is a win however you look at it.

For a 200 lamp facility, the lamp costs alone (at $3 per lamp) will be approximately $900 per year

The cost to send a maintenance person up a ladder 300 times per year to change those light can easily amount to a further $3,000 per year

In the past 5 years in San Diego, electricity costs have increased, on average, approximately 7% per year. Your electric bill today is therefore not the same today as it will be in 5 years. At 7% annual increases, this is how much your electric bill will increase:

  Present system New system
Year one $9,000 $1,800
Year two $9,630 $1,926
Year three $10,304 $2,061
Year four $11,025 $2,205
Year five $11,797 $2,359
Total $51,756 $10,351
Electricity Savings $41,405
Electricity savings, present versus new $41,405
Air conditioning savings $12,000
Lamp replacement savings $4,500
Maintenance savings $15,000
Total savings over 5 years $72,905