Free lighting tool
Lighting upgrade ROI calculator
This calculator works out the annual energy saving, simple payback, five-year return on investment and CO₂ reduction of an LED lighting upgrade from six inputs: existing and proposed load in watts, operating hours, days per year, electricity tariff and installed cost. It is for facilities managers, contractors and designers building a retrofit business case.
By Nicholas RedicanLast reviewed
What is a lighting ROI calculator?
A lighting ROI calculator compares the running cost of an existing installation with a proposed one and expresses the difference as money, time and carbon. This tool returns annual savings in pounds and kWh, simple payback in years and months, five-year ROI as a percentage, the power reduction and the CO₂ avoided each year.
The arithmetic runs on NR Lighting's servers; inputs are used for the calculation only and are not published, and the free tier needs no account. The defaults in the table below are plain UK placeholders; replace each with your own building's figures.
How to use the ROI calculator
- 01Enter the existing and proposed connected load in watts, including control gear or drivers, from the luminaire schedule or a meter reading rather than the lamp rating alone.
- 02Enter the electricity unit rate in £/kWh from a recent bill, and the installed cost including luminaires, labour, access and disposal.
- 03Set hours per day and days per year; the annual hours appear beneath the fields.
- 04Leave the grid carbon factor at 0.18 kg CO₂/kWh for UK reporting, or override it for another region or year.
- 05Press Calculate ROI for annual savings, kWh saved, power reduction, payback, five-year ROI and CO₂ avoided; Pro subscribers can add project details, a rebate and NPV/IRR settings and export a PDF report.
The method: simple payback and five-year ROI
Annual saving (£) = (existing W − proposed W) × hours/day × days/year ÷ 1,000 × tariff (£/kWh). Payback (years) = installed cost ÷ annual saving. Five-year ROI (%) = (annual saving × 5 − installed cost) ÷ installed cost × 100.
The kWh saved is the wattage difference multiplied by annual operating hours, and the unit rate turns it into pounds. Simple payback divides the installed cost by that saving, reported in years and months. Five-year ROI is the net return, five years of savings less the investment, as a percentage of the investment: 0% means the upgrade has exactly repaid itself by year five. CO₂ avoided is kWh saved × the grid carbon factor. All free-tier figures are undiscounted.
The Pro tier adds a discounted view. With a discount rate (default 5%), inflation rate (default 3%) and analysis period (default 10 years), each year's saving is grown by inflation, discounted back to today and summed less the net investment to give net present value (NPV); internal rate of return (IRR) is solved numerically on the undiscounted stream. Any rebate entered is deducted from the investment first, and the Enterprise tier prices the CO₂ avoided at a £/tonne rate (default £50).
| Input | Default | Notes |
|---|---|---|
| Existing load (W) | 5,000 | Total connected load now, including control gear |
| Proposed load (W) | 2,000 | Total connected LED load, including drivers |
| Electricity tariff (£/kWh) | 0.30 | Unit rate from your bill, excluding standing charges |
| Installed cost (£) | 5,000 | Luminaires, labour, access and disposal; Pro can net off a rebate |
| Hours per day / days per year | 10 / 260 | 2,600 annual hours; a seven-day retailer might use 12 / 360 |
| Grid carbon factor (kg CO₂/kWh) | 0.18 | UK DESNZ 2025 basis; editable for other regions or years |
Worked example: retail track lighting retrofit
A high-street shop runs 40 metal halide track spotlights at 150 W each including gear, 6,000 W in total, to be replaced by 40 LED spotlights at 60 W each, 2,400 W. It trades 12 hours a day, 360 days a year, pays £0.28/kWh and has an installed quotation of £14,000.
- Annual hours: 12 × 360 = 4,320 h
- Power reduction: (6,000 − 2,400) ÷ 6,000 = 60.0%
- Energy saved: 3,600 W × 4,320 h ÷ 1,000 = 15,552 kWh/year
- Annual saving: 15,552 kWh × £0.28 = £4,354.56
- Payback: £14,000 ÷ £4,354.56 = 3.22 years (39 months)
- Five-year ROI: (£21,772.80 − £14,000) ÷ £14,000 × 100 = 55.5%
- CO₂ avoided: 15,552 kWh × 0.18 = 2,799 kg/year
- Pro view at default settings: NPV about £24,100, IRR 28.6%, ten-year saving about £49,900 (257% ROI)
Limitations, and when to involve a lighting designer
This is an energy-only model, deliberately simple. It does not check that the proposed scheme still meets the maintained illuminance and uniformity in BS EN 12464-1, so a wattage saving bought by under-lighting the space looks excellent here and fails on site. It assumes a flat tariff and constant schedule, ignores lamp life and relamping costs, takes no account of controls or daylight, and reports operational CO₂ only, not embodied carbon. It gives indicative design values, not compliance sign-off.
I use this calculation at feasibility stage to decide whether a retrofit is worth pursuing. A business case I would put my name to goes further: a lumen-method or Dialux check that the LED scheme still lights the merchandise, a Part L efficacy check on the luminaires, a controls strategy priced with the lighting control savings calculator, a CIBSE TM66 view on whether existing luminaires can be retained rather than replaced, and an evidenced hours-of-use figure, because operating hours move payback more than any other input. Between three and six years of payback, those details decide the project.
Standards and guidance referenced
- Approved Document L (Part L 2021, England): minimum luminaire efficacy and controls for replacement lighting in non-domestic buildings
- BS EN 15193-1: Lighting Energy Numeric Indicator (LENI) for comparing lighting energy use in kWh/m²/year
- BS EN 12464-1:2021: the maintained illuminance and uniformity a proposed scheme must still achieve
- CIBSE TM66: circular economy assessment, including whether to retain, re-engineer or replace existing luminaires
- UK Government GHG conversion factors (DESNZ): basis of the default 0.18 kg CO₂/kWh grid electricity factor
Frequently asked questions
How is LED payback calculated?
Simple payback is the installed cost divided by the annual energy saving. The saving is the wattage difference multiplied by annual operating hours, divided by 1,000 for kWh, then multiplied by your unit rate. A £5,000 upgrade saving £2,340 a year pays back in 2.14 years (26 months). It is undiscounted and ignores energy price rises.
What is a typical payback period for an LED lighting upgrade?
Replacing halogen, metal halide or older fluorescent lighting that runs 10 to 12 hours a day commonly pays back in two to four years in the UK, sooner where hours are longer or the lamps are due for replacement. It stretches to five years or more where the existing installation is already efficient, hours are low, or new ceilings, wiring or access are needed.
Can I include maintenance savings in the payback?
Not as a separate field: the calculator models energy only. The practical workaround is to deduct the maintenance spend the upgrade avoids during the payback period, such as a scheduled group relamp with its lamps and access hire, from the installed cost you enter, and state that assumption in the report. Ongoing annual maintenance savings belong in your wider appraisal.
How do I add savings from lighting controls?
Use the lighting control savings calculator, which models dimming, daylight linking and occupancy control. To combine the two, enter the LED load reduced by the expected controls saving as the proposed wattage here and add the controls cost to the investment. Keep them distinct in the report: controls savings depend on occupancy and daylight and are less certain than a wattage reduction.
How is the CO₂ saving calculated?
CO₂ avoided is the kWh saved per year multiplied by the grid carbon factor in kg CO₂/kWh. The default of 0.18 kg CO₂/kWh is based on the UK Government (DESNZ) greenhouse gas conversion factor for grid electricity for 2025, and the field is editable for other regions or years. It is operational carbon only and excludes the embodied carbon of new luminaires.
Which electricity price should I enter?
Use the unit rate from a recent bill, converted to £/kWh (28p becomes 0.28), and exclude standing charges, which the upgrade does not change. If the site has day and night rates, weight them by the hours the lighting runs in each. The £0.30/kWh default is a round placeholder, not a forecast; a fixed contract rate is safest for a business case.