I get asked about warehouse LED upgrade ROI at least twice a week. The conversation usually starts with “we know LED saves money, but how much, and how fast do we get payback?”

Fair question. The answer is almost never what the sales brochure claims, but it’s also usually better than businesses expect once you account for all the benefits.

Let me walk through how to actually calculate this for your specific warehouse, not just generic numbers from a calculator that doesn’t know your situation.

Start With Your Current Reality

Before you can calculate savings, you need to know what you’re spending now. Most businesses have a vague idea but not precise numbers.

Energy consumption. Look at your electricity bills for the past 12 months. What portion is lighting? If you don’t meter lighting separately, you’ll need to estimate based on your current fixtures, wattage, and hours of operation.

For a typical warehouse running metal halide or fluorescent high bays, assume about 400-1000W per fixture depending on height and type. Count your fixtures. Multiply by hours per year of operation. That’s your annual kWh for lighting.

Energy cost. Australian commercial electricity rates vary wildly by location and contract, but figure somewhere between $0.15 to $0.35 per kWh. Check your actual rate on recent bills—demand charges and time-of-use rates complicate this, but you need a blended rate for the calculation.

Maintenance costs. This is the one most businesses underestimate. Metal halide lamps last maybe 10,000-15,000 hours. Fluorescents might get 20,000. That means relamping every 1-3 years depending on usage.

Cost out labour (often $50-150 per fixture change depending on height and access), plus the lamps themselves ($20-80 each). For a 200-fixture warehouse, annual maintenance might be $8,000-15,000. That’s real money.

Disposal costs. Many older lamp types have disposal requirements and fees, especially if they contain mercury. Factor that in.

Calculate LED Performance

Now the new system.

Energy consumption. Equivalent LED high bays typically run 100-200W to replace 400-1000W fixtures. The exact ratio depends on your ceiling height, current lumen output, and lighting requirements.

Don’t just trust sales specs. Ask for photometric reports showing actual light levels you’ll achieve with the proposed LED layout. Under-lighting a warehouse to save money on fixtures is a false economy if workers can’t see properly.

LED lifespan and maintenance. Quality LED fixtures are rated for 50,000-100,000 hours. At 4,000 hours/year operation, that’s 12-25 years before replacement. Maintenance is basically zero for the first 10 years.

Cheap LED fixtures fail faster. This matters. Budget fixtures rated for 50,000 hours might last 30,000 in real conditions. Industrial-grade fixtures actually hit their ratings. Don’t cheap out here.

Controls and optimisation. This is where LED really shines for warehouses. Older lighting is generally all-on or all-off. LED works beautifully with occupancy sensors, daylight harvesting, and dimming.

If you can reduce operating hours or intensity through controls, you save more. A warehouse I know in Western Sydney added occupancy sensors to LED upgrades and cut lighting energy by an additional 40% beyond the LED efficiency alone, because large areas of the warehouse aren’t continuously occupied.

The Real Costs of Upgrading

Now the investment side.

Fixture costs. Industrial LED high bays range from $200 to $800+ per unit depending on quality, features, and lumen output. For a typical warehouse, budget $300-500 per fixture for decent quality.

Installation labour. This varies hugely based on ceiling height, access difficulty, and whether you’re replacing like-for-like or redesigning the layout. Figure $100-300 per fixture for straightforward replacements in accessible warehouses. Difficult installs can be more.

Electrical upgrades. Sometimes the existing wiring and controls need updating, especially if you’re adding sensors or smart controls. Budget for this if relevant.

Disposal of old fixtures. There’s a cost to properly dispose of old lamps and ballasts, particularly if they contain hazardous materials.

Downtime. If you’re running operations 24/7, the cost of lighting downtime during installation can exceed the material costs. Can you do it in stages? Off-hours? What’s the productivity impact?

Running the Numbers

Let’s do a real example. 200-fixture warehouse currently running 400W metal halide high bays, operating 4,000 hours/year.

Current state:

• Energy: 200 fixtures × 400W × 4,000 hours = 320,000 kWh/year
• Energy cost: 320,000 × $0.25 = $80,000/year
• Maintenance: 200 fixtures ÷ 2 years average = 100 lamp changes/year × $100 (labour + materials) = $10,000/year
• Total annual cost: $90,000

LED replacement:

• Energy: 200 fixtures × 150W × 4,000 hours = 120,000 kWh/year (adding 20% reduction from occupancy sensors = 96,000 kWh/year)
• Energy cost: 96,000 × $0.25 = $24,000/year
• Maintenance: ~$500/year for occasional failures
• Total annual cost: $24,500/year
• Annual savings: $65,500

Investment:

• Fixtures: 200 × $400 = $80,000
• Installation: 200 × $150 = $30,000
• Controls: $15,000
• Old fixture disposal: $3,000
• Total investment: $128,000

Simple payback: 1.95 years

That’s before any rebates or incentives, which can reduce the upfront cost significantly.

What Most Calculators Miss

The standard ROI calculation captures energy and basic maintenance. But there are other factors worth considering:

Productivity. Better lighting quality often improves worker performance and reduces errors. This is hard to quantify but real. Studies show 5-15% productivity improvements from better warehouse lighting. For a facility with $2M annual labour costs, even 5% improvement is $100K/year.

Safety. Fewer ladder climbs for relamping means fewer fall risks. Better visibility reduces forklift incidents. Again, hard to dollar-value, but it matters for safety culture and workers’ comp costs.

Heat reduction. LEDs run cooler than metal halides. In climate-controlled warehouses, that reduces cooling loads. In hot warehouses, it improves working conditions.

Environmental and ESG. If your business tracks carbon emissions or has sustainability targets, lighting upgrades contribute meaningfully. Some businesses value this, some don’t, but it’s increasingly part of the decision.

Property value and lease terms. For owned facilities, modern efficient lighting can improve property values. For leased spaces, who pays the upgrade cost vs. who captures the energy savings matters. Negotiate this with landlords—sometimes they’ll fund upgrades in exchange for lease extensions.

Rebates and Incentives

Don’t forget to check for programs that reduce upfront costs. Some Australian states and utilities offer commercial lighting rebates. The Energy Savings Scheme in NSW, Victorian Energy Upgrades, and similar programs can offset 20-40% of upgrade costs in some cases.

These change frequently and have eligibility requirements, so check current offerings. But they can dramatically improve ROI—turning a 2-year payback into a 1-year payback changes decision-making.

When It Doesn’t Make Sense

LED upgrades aren’t always the right move.

Short-term leases. If you’re moving facilities in 18 months, a 2-year payback doesn’t work unless you negotiate cost-sharing with the landlord.

Already efficient. If you upgraded to T5 fluorescents recently, the incremental benefit of LED might not justify replacement yet. Wait until the fluorescents reach end-of-life.

Lighting isn’t the problem. I’ve seen businesses focus on lighting when their real energy waste is HVAC or compressed air. Fix the biggest problems first.

Unreliable power. In areas with frequent outages or power quality issues, LED drivers can fail prematurely. This isn’t common, but it’s worth considering in industrial areas with problematic power.

Getting It Right

If you’re seriously considering a warehouse LED upgrade:

Get a proper lighting audit. Not a sales pitch disguised as an audit—an actual assessment of current light levels, required light levels, and optimised LED design. Spending $2,000 on a real audit can save you $20,000 in over-specification or poor design.

Compare multiple quotes. Fixture quality varies wildly. Get proposals from 2-3 suppliers with comparable specs and check references.

Plan for controls. If you’re upgrading, add occupancy sensors and daylight harvesting where it makes sense. The incremental cost is small and the savings are large.

Consider phasing. You don’t have to do everything at once. Upgrade the highest-use areas first, prove the ROI, then expand.

Specify quality. A 10-year warranty matters. L70 ratings (lumen maintenance) matter. IP ratings for harsh environments matter. Don’t just buy the cheapest option.

For most warehouses in Australia, LED upgrades pay for themselves in 1.5 to 3 years and deliver benefits for 15+ years after that. That’s a compelling ROI. But do the maths for your specific situation before committing.

The numbers work when you’re realistic about costs and benefits. And once you account for maintenance reduction, productivity gains, and incentives, they often work better than you’d expect.