The other day the light bulb on my porch finally gave up the ghost, so I ran down to my favorite hardware store to pick up a new one. When I got there I was presented with a choice that many people struggle with: Is it better to stick with the regular old incandescent bulb or spend significantly more money for the energy efficient compact fluorescent light (CFL) instead?
In 2009, 13-Watt CFLs were running in the neighborhood of $7.50 apiece; but over time the price tag has dropped by half. As such, I can buy the same CFLs today for just $3.75 each. Even so, that’s still three times more expensive than the inefficient 60-Watt incandescent equivalents being offered at $1.25 — so it’s not too hard to see why some people are still loathe to make the conversion to CFLs.
The big question, of course, is just how quickly it takes the energy savings provided by the CFL to cover the product’s purchase price.
How to Determine the Payback Period of Energy Efficient Bulbs
In order to figure out if the CFL was really worth the extra money, I first had to calculate the simple payback period, which in this case is defined as:
Simple Payback = (CFL Cost) / (Annual Electricity Savings)
By calculating simple payback you can easily determine how long it will take to show a return on your investment in the more expensive CFLs.
Although it’s true that simple payback does not take into account inflation rates, compounded savings, or replacement costs, it’s a very useful tool nevertheless and more than adequate for this particular purpose.
Looking at the simple payback equation, all one needs to know is the cost of the CFL and the annual electricity savings. I found the former by simply looking at the price tag, but to get the latter I had to know two things: 1) how many hours per day the light was in use; and 2) the number of watts saved by going from an incandescent bulb to a CFL.
For the first point, I conservatively assumed my porch light was on two hours per day — but in reality it’s less than that. To determine the second point, I simply looked at the labeled wattage ratings of the two bulbs; in my case, the incandescent bulb was rated at 60 Watts while the CFL’s rating was listed at a miserly 13 Watts, for a total power savings of 47 Watts.
Calculating Your Annual Energy Savings
With that information in hand, I could then calculate my annual energy savings using this formula:
Annual Electricity Savings = ((Daily Hours Used x 365 days/year) x (Watts Saved))/1000 x (Cost of Electricity)
In my case, the numbers looked like this:
Annual Electricity Savings = ((2 hrs x 365 days/yr) x (47 Watts))/1000 x ($0.15/kWh)
… for an annual savings of $5.15.
Calculating the Payback Period
With our annual energy savings figured out, we can now calculate the payback. If the energy efficient product costs $3.75, and the annual electricity savings is $5.15 as shown above, the simple payback is:
$3.75/$5.15 = 0.73 years
It’s interesting to note that if you intend on replacing all of the bulbs in your home with CFLs, increasing the number of bulbs being replaced doesn’t decrease the payback period (assuming there are no economies of scale for buying additional bulbs); in my case it would still be 0.73 years — or slightly less than nine months. It will, however, increase your annual energy savings.
Evaluating the Payback Period
As a financial rule of thumb, payback periods of five years or less are often generally worth implementing, while projects with payback periods greater than ten years are generally not cost effective. In my case, the 0.73 year payback period made the decision to go with the CFL an easy one.
Of course, that doesn’t mean I’m going to immediately replace all of my incandescent bulbs with CFLs, but I am transitioning over to CFLs as my incandescent bulbs burn out.
And For the Mathematically Challenged…
By the way, if you don’t feel like taking the time do the calculations yourself, you’re in luck: It turns out there are handy web-based savings calculators you can use to determine the payback periods and annual savings from using CFLs instead of incandescent bulbs too.
It’s okay. I’ll never tell.
(This is an updated version of an article originally published on July 20, 2009.)
Photo Credit: Paul Keller