The lightbulb is dead… long live the lightbulb! Four years ago, the U.S. Congress, to great fanfare, passed a law aiming to phase out the incandescent lightbulb in favor of longer-lasting, more energy-efficient alternatives. Recently, to even more fanfare, the U.S. Congress changed its mind.
Rather than starting the phase-out on Jan. 1 with a ban on the sale of 100-watt incandescent bulbs, as envisioned in the 2007 law, Congress has instructed government agencies to sit tight till Sept. 30, 2012. What happens after that is anyone’s guess.
A Bright Idea?
Whether this is good news or bad news is a matter of opinion. “Pro-lightbulb” folks will never like Washington telling them what to do with their lives — even (or perhaps, especially) if it’s something they’d probably do on their own if there wasn’t some politician nagging them about it.
On the other hand, “anti-lightbulb” people will tell you it’s silly to spend $0.10 per kilowatt hour on 19th-century lighting technology when we can stretch that dime so much farther along the curlicues of a compact fluorescent lightbulb (CFL)… or even better, an LED.
Energy Efficiency 101
For anyone not yet aware, these are the two big “improvements” in lighting technology lately. CFLs are basically “lightbulb-size” versions of the buzzing fluorescent tubes that have been the bane of America’s cubicle serfs for decades. Thanks to rapidly scaled production, they’re not all that much more expensive than incandescents these days — but they last upward of five years, and they cost much, much less to operate than a conventional incandescent.
LEDs, in contrast, are the next big thing. They last longer than CFLs, cost even less to operate, and don’t contain toxic mercury. On the downside, though, production isn’t plentiful, and as a result the things cost an arm and a leg to begin with — perhaps $25 a pop to outfit a standard household light fixture.
As Patrick Martin pointed out here on DailyFinance a couple of months ago, it’s this $25 start-up cost that keeps many homeowners from buying into the LED concept. Perversely, though, what the LED industry needs to get prices down is for more people to buy them. This would increase demand, grow the scale of production, and deliver greater efficiencies to the manufacturers as a result. This would in turn enable manufacturers to charge less per bulb… and attract even more buyers, in a true virtuous cycle of price drops.
To date, of course, it’s been more of a Catch-22 situation for the LED industry… but perhaps not for long.
How Many Dollars Does It Cost to Change a Lightbulb?
In a recent report on conventional lighting’s “heavy users,” The Wall Street Journal calculated how LEDs are already beginning to make economic sense to corporate buyers.
Using the example of a Wal-Mart (WMT) or Target (TGT) “big box” store that maintains (and lights) acres of parking lots surrounding it, the Journal paints the following picture: The lights in these lots are generally located on poles 20 or 40 feet off the ground. Changing bulbs at such a height is no easy task, requiring “a bucket truck and an electrician to replace those lamps every two years.”
Even if a company is buying the cheapest possible incandescent bulbs for these lights, it’s paying through the nose in equipment rental and labor to change them when they go dark. This being the case, it might make sense to pay a bit more up front for a fancy LED light if doing so lets you go a decade or more between changings.
Indeed, according to results just in from a case study conducted at a Wal-Mart in Kansas, it does make cents — and dollars, too. Comparing the costs of lighting a parking lot with LEDs to lighting the lot with conventional bulbs, the study found that an average Wal-Mart can cut its annual lighting costs by more than 12% by going with the newer technology. The reason: While the bulbs cost much more, the initial installation doesn’t. More important, the company spends only about 60% its pre-LED rate on electricity, and reaps a threefold savings on maintenance costs!
What’s It Mean to You?
“Good for Wal-Mart,” you say. “But what’s in it for me?” And I can tell you in one word: scale.
What this study means, in a nutshell, is that already businesses are finding they’ve reached the tipping point at which it makes sense to spend big bucks buying lots of LED lights. As they begin doing this, manufacturers will increase production, spread production costs among more lights — and drive the cost of each individual LED light down for everybody. The lightbulb is dead… long live the LED!
Motley Fool contributor Rich Smith does not own shares of, nor is he short, any companies named above, but The Motley Fool owns shares of Wal-Mart Stores, and Motley Fool newsletter services have recommended buying shares of Wal-Mart Stores as well as creating a diagonal call position in Wal-Mart Stores.