The $50 Light Bulb that Can Save You a Fortune

The $50 Light Bulb that Can Save You a Fortune

It’s hard to know exactly when the light bulb went off in Minnesota Congresswoman Michele Bachmann’s head, but on the campaign trail she targeted her most vitriolic scorn for the Obama administration’s efforts to develop more energy efficient light bulbs. "I think Thomas Edison did a pretty patriotic thing for this country by inventing the light bulb," she said during a campaign stop in New Hampshire. "And I think darn well, you New Hampshirites, if you want to buy Thomas Edison's wonderful invention, you should be able to!"

The Washington Post joined in the fun this morning with an article  attacking the prize program set up by the Energy Department to develop a greener, more affordable light bulb. Like so much mainstream journalism, the story feeds into popular skepticism about the wisdom of clean energy programs in general, and the efficient light bulb effort in particular.

The prize winner – Philips Electronics – came up with a $50 LED (light emitting diode) bulb. “Are there many consumers who think a $50 light bulb is affordable? I don’t think so,” the Post quoted one retailer as saying. “This is a Cadillac product and that’s why you have a premium on it,” said the man in charge of selling light bulbs for Home Depot, the nation’s largest seller of lighting supplies.

It’s too bad the Washington Post doesn’t know how to do math, and retailers have no idea what they’re selling. LED bulbs are one of the most cost-efficient investments consumers can make. And if you operate commercial buildings, the savings are even more dramatic.

In a graphic accompanying the article, the Post conducted an analysis of the ten-year costs for consumers who buy the new, pricey bulbs and compared it to the cost to consumers who stick with traditional incandescent bulbs. The Cadillac of light bulbs will last that long before it starts to degrade. Consumers sticking with traditional bulbs will have to buy about 30 over that time. At $1 a bulb, that would be $30 – far less than the $50 cost of the LED.

So far, that doesn’t look like a cost-effective switch. But then you have to add in the cost of electricity. Both types will provide about 30,000 hours of lighting. But a regular bulb burns 60 watts per hour or 1,800 kilowatt hours over the decade. The LED bulb burns a sixth of that or 300 KWH over the decade.

This is where the Post went wrong. They said the LED electricity costs would be $3 over the decade compared to $18 for the 60-watt bulbs. Huh? That’s a penny per kilowatt hour. Do you know anyone who pays a penny per KWH? In my market (outside Washington, D.C.), it’s about 15 cents per KWH. In some markets around the country, it’s as high as 30 cents per KWH. Even at a dime, the difference in electricity costs for the two competing lighting systems would not be $3 versus $18, but $30 versus $180.

So now let’s do the proper math for the competing bulbs. Under Michele Bachmann’s choice, consumers will pay $210 for the bulbs and electricity, with most of the money going to the local utility. If they use President Obama’s prize-winning bulb, consumers will spend $80 with most of the money going to the manufacturer of the bulb and the retailers.

“LED bulbs are a great way to save money,” said Reuven Walder, vice president of Ecobeco, a home energy auditing firm in Montgomery County, Maryland. “In a residential setting, the straight math makes absolute sense. And if you’re in a commercial setting, because they won’t have to pay maintenance staff to be constantly replacing light bulbs, the savings are dramatic.

“The cost of the bulbs are coming down every six months, too,” he added. “That’s why these things are just exploding out of factories.”

Of course, utilities don’t like them because they cut down on electricity sales. So here’s a deal that can make everyone happy.

Since many consumers can’t afford the upfront cost of $50 light bulbs (if your poor and lower middle class, you are more likely to live paycheck to paycheck and can’t afford extravagant capital purchases that lower your long-term costs and promote savings), it makes sense for someone with access to capital – say the local electric utility – to go door to door and install the new bulbs in peoples’ homes.

The utilities could then pass along the financing cost of the bulbs in homeowners’ monthly utility bills, which would actually be slightly lower since they would be using much less electricity. It’s a shared savings model. The utility earns a return on capital investment that has shifted from costly generating plants and transmission lines to long-lasting and energy-efficient appliances. And the consumer saves on lower electricity costs.

That it also reduces coal, gas and nuclear fuel usage and the free-riding environmental costs those industries impose on society doesn’t even have to enter into the equation. LED bulbs? They’re a prizewinner.