Every lighting salesperson has a payback calculator. And every single one of them makes the numbers look better than they are in reality.

I’m not saying they’re dishonest. But they’ve got an incentive to show you the shortest possible payback period. So let me walk you through how to calculate LED retrofit ROI properly, including the costs everyone conveniently forgets to mention.

The Basic Formula

At its core, the calculation is simple:

Net Investment / Annual Savings = Simple Payback (years)

But getting accurate numbers for those two sides of the equation? That’s where it gets interesting.

Calculating Your Net Investment

Start with the obvious costs, then add what’s usually missing.

Direct Costs

Fixtures: The cost of the LED fittings themselves. Get actual quotes, not budgetary estimates. Prices vary more than you’d expect between suppliers.

Installation labour: How many fittings? What’s the mounting height? Do you need cherry pickers or scaffolding? Are there after-hours access requirements?

For rough budgeting, I use these labour rates per fitting (installation only):

• Standard office panel: $25-40
• Highbay under 6m: $45-70
• Highbay 6-10m: $80-120
• Highbay over 10m: $150+ (depends heavily on access)

These are ballpark figures. Your electrician should quote properly.

Access equipment hire: If you need a scissor lift or boom lift for multiple days, this adds up. A 19m boom lift might run $450-600 per day plus delivery.

Disposal costs: Old fittings need proper disposal. Fluorescent tubes contain mercury. This isn’t free.

Indirect Costs

Project management time: Someone has to coordinate quotes, manage the contractor, handle rebate paperwork. If that’s you, your time has value.

Production disruption: In some facilities, installation has to happen after hours or during shutdowns. That might mean premium labour rates.

Electrical upgrades: Sometimes the existing wiring or circuit breakers need work. Old facilities might need distribution board upgrades.

Rebates and Incentives

Now subtract the good stuff:

Energy Savings Certificates (NSW) or Victorian Energy Efficiency Certificates (VIC): These can cover 30-50% of project costs in some cases. But don’t count chickens before they hatch. Get your ACP to confirm the expected certificate quantity in writing.

Other state schemes: Queensland and South Australia have their own programs. Check what’s current in your state.

Supplier rebates: Some distributors run manufacturer-backed promotions. Always ask.

The Net Investment Number

Let’s work through an example.

A 5,000 sqm warehouse with 80 x 400W metal halide highbays:

Item	Cost
80 x 150W LED highbays @ $280 each	$22,400
Installation labour (8m height, boom lift required)	$8,500
Boom lift hire (3 days)	$1,800
Disposal of old fittings	$600
Electrical inspection and certificates	$450
Gross Cost	$33,750
Less: ESCs (estimated 650 @ $36)	-$23,400
Net Investment	$10,350

That’s a realistic worked example. Notice how the rebates transform the project economics.

Calculating Annual Savings

This is where salespeople get creative. Let me show you how to keep it honest.

Energy Savings

Old consumption: 80 fittings x 400W x operating hours per year

New consumption: 80 fittings x 150W x operating hours per year

Difference = kWh saved annually

But wait. What are your operating hours? Don’t guess. Look at your actual facility schedule. A warehouse running 24/7 is very different from an office running 8am-6pm weekdays.

For our example:

• Operating hours: 12 hours/day, 5.5 days/week = 3,432 hours/year
• Old: 80 x 0.4 x 3,432 = 109,824 kWh
• New: 80 x 0.15 x 3,432 = 41,184 kWh
• Saving: 68,640 kWh

At $0.25/kWh (a reasonable commercial rate in 2025): $17,160/year

Maintenance Savings

This is real but harder to quantify. Metal halide lamps fail regularly and need replacement on a schedule. LEDs should last 50,000+ hours without lamp changes.

For our example warehouse:

• Old system: approximately 20 lamp replacements per year @ $80 each (lamp + labour) = $1,600
• New system: negligible maintenance for first 10+ years

Maintenance saving: $1,600/year

What NOT to Include

I’ve seen ROI calculations include:

• “Improved productivity due to better light quality” - maybe real, but nearly impossible to quantify reliably
• “Reduced HVAC costs” - technically true (LEDs produce less heat) but marginal in most applications
• “Brand image improvement” - come on

Stick to what you can actually measure.

The Final Calculation

Total annual savings: $17,160 + $1,600 = $18,760

Net investment: $10,350

Simple payback: 10,350 / 18,760 = 0.55 years (approximately 7 months)

That’s a legitimate result for this type of project. The high ESC rebate is doing a lot of heavy lifting.

When the Numbers Don’t Work

Not every project makes sense. Here are scenarios where I’d tell a client to wait:

Recent fluorescent installation: If you installed T5 fluorescents in the last 5 years, the energy savings from LED are much smaller. Paybacks stretch to 5-7 years.

Very low operating hours: A storage facility used 10 hours per week doesn’t generate enough energy savings to justify the capital cost.

Certificate prices are depressed: If ESC/VEEC prices drop significantly, the rebate component shrinks. Check current prices before committing.

Facility lease is ending: If you’re moving in 2 years, you won’t capture enough savings. Unless the landlord will contribute—and get that in writing.

Tools to Help

I’m old-fashioned. I still use spreadsheets for this stuff. But there are online calculators from:

• Energy NSW (for ESS estimates)
• Victorian Energy Efficiency Target scheme administrators
• Most major lighting manufacturers

Just remember they all have limitations. None of them know your specific operating hours, electricity rates, or access constraints.

Getting Professional Help

For straightforward single-site retrofits, this guide should get you to a reliable number. For multi-site rollouts or projects involving lighting controls, the calculation gets more complex.

When you’re integrating occupancy sensors, scheduling systems, or connecting to building management systems, you need to model different scenarios. That’s when bringing in specialists who focus on smart lighting integration makes sense—the energy modelling for controls-based projects requires more sophisticated analysis than a simple lamp-for-lamp swap.

But for a basic highbay or panel replacement? Grab your electricity bills, count your fittings, and run the numbers. If the payback is under 3 years after rebates, it’s usually worth doing.