LEDs have a huge advantage over standard incandescent bulbs in that they draw less current for a given lumen output and have a longer useable life span. They are, however, currently more expensive to initially purchase. Once they are installed, they quickly pay for themselves in reduced strain on electrical supply equipment and reduced energy bills.
Electrical utilities calculate the cost of their customers’ electrical bill based on a unit of energy called the kilowatt-hour, or kWh. Different utilities will have different rates, or $/kWh, and some will even have peak and off-peak rates, meaning they charge more money per kilowatt of energy used during the high-demand periods of the day, and a lower rate during the low demand evenings.
To determine the cost of running a particular electrical load we use the following formula:
When comparing the cost of two different lighting loads, such as an LED lamp replacing an older incandescent lamp, it is important to recognize that the only term in the equation that we have any control of is the kilowatt rating, as both loads would have to be used for the same number of hours and charged at the same utility rate.
The following examples will compare the cost benefits of replacing an older style 100-watt incandescent lamp with a more energy-efficient 25-watt LED system.