How to Calculate Cost of Electricity After Upgrading to LEDs

By October 1, 2021 LED

Upgrading from a halogen, fluorescent, compact fluorescent (CFL), or incandescent lighting system to LED can be advantageous for saving energy and money, especially in commercial use. Before improving the type of lighting, calculating energy savings is a shrewd step to further prove the worth of your investment in an upgrade.

Prior to calculating energy use and energy savings, you must understand how to calculate kWh and why it is vital to use a lighting system that reduces energy and power consumption.

What is a Kilowatt-hour?

Kilowatt-hour — or kWh — is a standard unit of measurement for determining the amount of energy a lighting system, or another item that runs on electricity, consumes in an hour. Although we might not use kilowatt-hour on a daily basis, when broken down, learning to read kWh can help businesses and homes consume energy more effectively.

One of the steps integral in breaking down the question, “What is a kilowatt-hour?” is to understand wattage. A watt is a measurement of the rate at which energy flows in a lighting system. Kilo, on the other hand, simply refers to 1000. So, a kilowatt, which is a unit of power, refers to one thousand watts. Therefore, a kilowatt-hour measures the power put in over the time of one hour which equals the energy output.

Not only are kilowatt-hours used in residential settings on monthly electric bills, they are also used in commercial settings like office buildings, warehouses, parking garages, as well as in municipal street lighting. Therefore, understanding how to calculate kWh and the cost of electricity has its place in both residential and commercial applications.

Calculating Kilowatt-hours

Calculating kilowatt-hours is a fairly simple mathematical formula. To simplify the math problem, say you’re looking at a power bill, regardless of whether it’s for residential or commercial use. Take the number of watts used and multiply that number by the number of hours an appliance or tool uses. Then, divide that total number by one thousand.

As an example, if a 150 watt lamp is used in a commercial setting for 10 hours per day, the lamp will consume 1,500 watts of power per day. Once that 1,500 watts is known, that number can then be divided by 1,000 to calculate kilowatt-hours. In this specific case, the kWh would be 1.5 per day.

Gas, energy, and electricity companies have the kWh often displayed on a bill but it’s good practice to know how to calculate kilowatt-hours, especially if you have a concern with the energy use of one specific item or appliance.

In terms of calculating energy use, once you understand and can break down calculating kilowatt-hours, it’ll be a lightbulb moment for how to calculate cost of electricity, and of course, subsequent energy savings.

Calculating Energy Use

The next step in calculating energy savings is to next calculate energy use with total energy cost. Like kWh, total energy cost is rather easy to understand if it’s broken down. First, you have to find kWh; we’ll take 1.5 from the previous example. Then, multiply that number by the cost per kWh, which can be found on the electric bill; we’ll use $6.776 which is the electric rate here in Illinois. This brings us to a total energy cost of $10.16 per day. By tallying the number of days your facility’s lights are operational in a year based on this daily rate, you can calculate the total operating costs of a lighting system based on the number of fixtures and wattages, which will help you determine the annual energy usage

Why is it Important to Understand kWh & Calculate Energy Savings?

Calculating kilowatt-hours will ultimately allow you to determine annual spend on your facility’s electricity consumption. Additionally, the cost of electricity equation will help you determine if and when it’s time for an energy efficient lighting upgrade if you see that your annual energy costs look high or your lights are not as bright or high-quality as you would like them to be.

What’s more, having a clear understanding of the energy usage of the lighting system at your facility or property is a powerful tool that gives you the ability to see where ongoing savings can be found. For instance, if you are using an HID or fluorescent lighting system, it’s likely this usage number would be significantly higher than it would be with an LED system.

Lighting upgrades are often an extremely effective and efficient means to reduce energy costs and the projects themselves can typically be relatively low-cost with a short payback period. And once the project cost is covered by the energy savings, the rest is money back in your pocket.

Side by side comparison of before and after photos of a parking garage lighting upgrade. Before photo shows the interior of a parking garage with dark corners and dim lights. The after photo on the right shows the same parking garage with brighter LED lights.

What to Expect in Energy Savings With LEDs

The biggest difference in switching from halogen or fluorescent lighting to LEDs is that LEDs consume less power. LED lamps are often seen as superior to other types, due to their long lifespan since an LED uses a diode to produce light instead of filaments. Not only do LEDs have a long lifetime and consume less power, an LED — a light-emitting diode — offers a higher quality of light and light distribution than other lighting systems.

And nowhere does that quality come through quite like on an energy bill at the end of the month. If you calculate the cost of electricity consistently, you will likely see a large difference in savings after upgrading to a commercial LED lighting system. This was the case in Evanston, IL where our lighting experts successfully completed a parking garage lighting upgrade that resulted in annual savings and energy efficiency. The garage was suffering from low light levels and high maintenance costs due to outdated lights. After making the switch to 42W LED luminaries, the garage reduced their total wattage by nearly 9,000 watts, resulting in $7,000 in savings off of their annual electricity bill.

If your company is considering an upgrade, you can calculate the total wattage of the proposed lighting system and apply this to the overall cost of the project. Then, factor in any available utility incentives to get a sense of how much you can save and conserve in a year’s time. Read our Guide to LED Lighting Rebates if you’re interested in figuring out if you could have even more savings.

Imperial Lighting performs these calculations on all of our lighting upgrade project proposals, making it easy to see what the overall savings and return on investment would be by upgrading your lighting to a more efficient system. Contact us to find out more about our expert commercial lighting services and get a quote on your next lighting project.