Tipping Point: Earth Day, 100W Light Bulb Reprieve and Alexander Hamilton

Last weekend, the world marked the 42nd anniversary of Earth Day and the world continues to look for ways to save energy and live a little bit greener every day.  LED lighting has been capturing a lot of mindshare as the next best energy-saving light source on the horizon since mercury-containing CFLs have lost favor. While the LED lighting market continues to build slowly, industry observers are keeping a keen eye on when it will explode.  Alexander Hamilton may have the answer.

In 2007, US legislators imposed strict energy efficient guidelines impacting 100W incandescent light bulbs.  The first set of regulations were set to hit in 2012, in effect banning traditional 100W light bulbs.  The “ban” was thought to help the LED lighting industry.  But, the 100W light bulb got a reprieve in December 2011 from Congress. In the midst of the holiday hustle and bustle, there was a little agreement inside of the massive 1,200-page spending package that took the teeth out of enforcing the incandescent light bulb ban. Incandescent bulbs were off the hook, temporarily.

Without the US government regulations spurring LED lighting adoption, it is anyone’s guess as to when consumer LED lighting will take off.   IMS analyst Jamie Fox recently wrote a post about LED lighting and the tipping point for consumer LED lighting adoption.  According to Fox, the residential market LED lighting is not quite ready to explode in 2012, but it is starting to get tantalizingly close.  Fox noted that residential LED lighting is the “holy grail” for LED manufacturers “who once saw it merely as a speck on the far horizon, but now can finally enjoy it coming squarely into view. If this market starts to suddenly move, then the whole market for LED general lighting, indeed the whole LED market, will really start to see growth rates increase, even surge.”

Fox and his associates at IMS calculate that LED light bulb prices need to fall to single digits before the market explodes.  Fox explained in his blog post, “It’s not just the psychological impact (i.e. $9.99 vs. $10.00); it also just happens that this is around the point where the payback arguments make sense. Factoring in energy costs, a $25 LED pays for itself relative to a $0.55 60W incandescent lamp in approximately 34 months assuming 4 hours of use per day and energy costs of $0.11 kWh.”  He continued that at $10 (Alexander Hamilton is on the $10 bill) or less, the payback period shrinks to a single year.

When this will happen is anyone’s guess, but Fox insists that the $10 mark will be good news for LED manufacturers.  He continued, “this translates into double digit growth for their whole LED business in 2013 and 2014.”

There is progress on pricing declines.  Market researchers at LEDinside indicate that they are seeing price drops in the vicinity of the $10 mark in South Korea, UK, Japan and United States due to competition and improvements in technology.  According to LEDinside, the 40W equivalent LED bulb’s prices in North America and the UK have been sliding toward US$10. The lowest prices in most areas are expected to fall below US$10 in 2H12.

Facts & Figures:

According to the US Department of Energy, artificial lighting consumes about 10% of a household’s electricity use.  The DOE says use of new lighting technologies can reduce lighting energy use in homes by 50%–75%. Upgrading 15 of the inefficient incandescent light bulbs in your home could save you about $50 per year. This could add up because the DoE says there is more lighting than ever in the US. The DoE attributes the vast majority of the growth to the residential sector, primarily due to the increase in number of households and the rise in the number of sockets per household, from 43 in 2001 to 51 in 2010.

For Further Reading …

IMS LED Blog, Doe LED Lighting Have a Tipping Point?, http://www.ledmarketresearch.com/blog/Does_LED_Lighting_Have_A_Tipping_Point_270

LEDinside.com, LED Bulb Price Dipped Sharply in 12’Jan, 40W Equivalent LED Bulb Price Dropped below US$10, http://www.ledinside.com/price_bulb_201201

USA Today, Congress’ bill may slow switch to efficient light bulbs, http://www.energysavers.gov/your_home/lighting_daylighting/index.cfm/mytopic=11985

LEDs Magazine, US Congress is poised to weaken light-bulb efficiency legislation, http://www.ledsmagazine.com/news/8/12/18

The Washington Times, Congress overturns incandescent light bulb ban, http://www.washingtontimes.com/news/2011/dec/16/congress-overturns-incandescent-light-bulb-ban/