Lighting manufacturer Precision-Paragon [P2] announced that in the past three years, the cost difference between LED and fluorescent lighting has shrunk dramatically, thanks to substantial reductions in the cost of LED technology. 

"We've seen the installation costs for LED lighting cut by more than 60 percent since 2010," said Joe Martin, [P2]'s vice president and general manager. "This drop has made the energy savings of a LED lighting retrofit attainable for many businesses."

In 2010, the average cost per lumen of a commercial or industrial LED fixture was approximately 12 cents per lumen. Today, that cost has dropped to approximately 5 cents per lumen installed.  While comparable fluorescent fixtures might cost 3 cents per lumen, the optical efficiency of LED lighting allows us to achieve the same lighting results with fewer lumens.

The cost reduction in LED lighting has been driven by several factors. "There are three primary sources behind the cost of a commercial or industrial LED fixture," explained Martin. "The cost of the LED light engine itself, the cost of the mechanical heat sink and fixture body, and the cost of the LED driver. By taking advantage of reductions in all three cost-sources, we’re now able to offer LED lighting at significantly lower costs." 

As the market for LED lighting expanded dramatically over the past few years, economies of scale helped the costs of both LED light engines and drivers to come down. At the same time, new developments in LED technology made the light engines more efficient than ever.

The increased efficiency of a LED light engine not only increases the lumen output per watt of electricity; it also reduces the amount of heat produced by the fixture. This in turn allows for fixtures to be designed with smaller, less expensive mechanical heat sinks. 

When they were originally introduced to the market, the high initial cost for LED fixtures meant that they were limited to specialty applications where the characteristics of LED lighting provided a notable advantage.  Today, with the cost of LED lighting reduced significantly, the technology has become a viable option for many energy-efficient lighting retrofits. 

"LED lighting still generally has a slightly higher initial cost than fluorescent lighting," said Martin.  "But to pick the right technology, you have to evaluate more than just the initial costs." 

Over the course of a fixture's lifespan, LED lighting can often provide maintenance cost savings by requiring fewer relamp cycles than fluorescent systems. Also, some energy efficiency rebates can be tied to a specific technology, providing an incentive for business owners to pick one technology over another.

"Just a few years ago, LED lighting was a new technology with narrow applications," said Martin. "Today it's something our customers consider in nearly every energy-efficient lighting retrofit they perform.”