Break-even Calculations - Fact or Fiction

How many times have you seen unrealistically short breakeven calculations showing a payback or break-even of a few months or a couple of years without clearly stating what all the assumptions are? There is often also no ability to modify the assumptions as the document supplied is a pdf. There are even some advertising brochures claiming break-even periods for a particular product while not even specifying the application conditions.

At LEDwise we developed our own Cost Comparison Calculator more than 5 years ago with the specific goal of removing the mystique from break-even analysis. A key feature of our model is that it allows the user to change any of the assumptions so there can be no by unscrupulous lighting suppliers.

Our model allows for comparison of one product directly against another. Luminaire and lamp costs are separated (purchase and maintenance costs) allowing for the comparison of new vs. existing installations.

The most important assumptions in any cost calculator need to be disclosed and agreed by the client.

These key assumptions are:

  • Cost of fitting, life of fitting
  • Cost of lamp, life of lamp
  • Cost of driver, life of driver
  • Number of fittings per site
  • Rated power of luminaire and actual power of luminaire (i.e. plug power)
  • Cost of electricity in year 1, 2,3, 4…10
  • Maintenance costs
  • Installation costs
  • Number of hours per day that the luminaire is used
  • Number of days per year that the luminaire is used

Here is a run through of an example of how the breakeven for a product can change based on the operating conditions. This will be done by comparing our CL19-Dish200 fitting against an existing 2 x 26W CFL downlight. I have excluded the cost of the CFL housing as the client already has this installed.

A very important consideration in this assessment is that we are comparing products that achieve the same lux levels in their installed application i.e. the CL19-Dish200 can replace a 2 x 26W CFL downlight and achieve similar lux levels.

The table below shows the input information:


Cost Calculator 0022679 


Case 1

For the first case study we have taken an office environment where the lights are only on for 10 hrs per day and not used on weekends i.e. 261 days per year.

Breakeven is calculated at just under 3.5 years as seen in the graph below.




Case 2

If we now change from an office to a retail environment where the lights will be used 365 days per year and 10 hrs per day, the breakeven for the same product changes to 2.5 years.




Case 3

If we now change to a hospital or 24 hour retail environment the breakeven changes to one year.





For more information on our Cost Comparison Calculator or to obtain your copy please contact our team of engineers.