A lot of people say, oh man, that LED bulb is really expensive, I don't know if it's worth it. It's a valid concern, but the other part of it is, you're going to start saving money on electricity the very first month you start using it.
There's an obvious parallel to this. If you put $1,000 in say a certificate of deposit (CD), you'd start earning interest on it in the very first month as well. Your money would be locked up in the length of the term (unless you wanted to take a penalty for early withdrawal), but at least that money would be invested in something.
Now in a sense, this is exactly the same effect as investing in some efficient lighting. You put some amount of money into an investment, saying a bunch of LED bulbs for your home. You make some money on it, namely the electricity you're not having to pay for. You're not exactly being paid in the form of a check, but rather paid in the savings you're not having to pay out each month. The effect on your bottom line is exactly the same.
The one difference between the two investments is that at the end of the life of your bulb, you don't get the money back (like you would in a CD). But still, we can use financial tools to estimate our return on our investment on a principal we will not get back.
I was using this with a friend who was balking at an $18 bulb cost. They were 12-watt LEDs that would replace a 75-watt unit. They're for a room he uses quite frequently (probably 3-4 hours a day most every day). The bulbs is expected to last 25,000 hours.
I pointed out that at 3 hours a day, the annual savings of that electricity is about $9.00 per bulb. That's a 50% return on investment every year the bulb will be in use versus an incandescent bulb. They're expected to last about 22.8 years, so we can amortize that cost of $18 over the 22.8 year span, say $1 a year (to round it up), so you save $9 a year in electricity, but your principal declines by $1, or about $8 return on your investment.
That's a return of 44% per year, every year for the next 23 years. And not only is it a good investment, it's practically a sure thing. Of course bulbs can break over time, but even if you use it for 2 years, the bulb pays for itself, and then it's paying you every year after that. (Most LED bulbs are guaranteed for at least 3-5 years, so they are guaranteed by the company for at least that long.)
Mind you, I didn't even include other costs such as bulb costs. If an incandescent bulb costs $2 and lasts 2,000 hours (for example's sake), and the LED bulb lasts 25,000 hours, that means it would need to be replaced 13 times in the LED bulb's lifetime, or costing $26 in bulbs alone, ignoring electricity costs. That brings your ROI up to about 52%.
Obviously this is just an example. But if we stop just looking at the initial cost and ask ourselves, how can I put my money to work, it makes clear that efficient lighting isn't just saving money, it's a good investment. Actually, it's a fantastic investment. Because if you can find any other investment that pays that much with that much certainty, please, do let all of us know!
