Replies to This Discussion

Permalink Reply by Ryan Arnold on May 19, 2011 at 4:11pm

Thanks for sharing Kathleen. I have a friend show runs a startup dealing in LED sales and installation, and some of the new products are nothing short of amazing. 

 

What do you (or the industry) predict as far as cost reduction over the next decade for LED lighting in general? I ask because I had an interesting conversation with my friend recently. I brought up that inevitable cost reduction over time and greater sales ubiquity will lead to lower margins for him over the long term. I assumed he would compensate by diversifying products and/or services or selling a larger quantity.

 

Since your company seems fairly established, I thought I'd ask. No need to divulge competitive advantages if you don't want :) Just a curious fellow who's an energy efficiency nerd. 

 

Take care, 

 

Ryan 

RyanSArnold.com 

Permalink Reply by Kathleen Sullivan on May 19, 2011 at 4:31pm

Ryan, I'm happy to answer your question in fact it comes up often and there are many misconceptions about it.

 

The technology used to create LED will prohibit the kinds of lamp costs that the consumers are used to in incandescent and CFL lamps. The lamps are made with an internal driver and a heat sink which keeps the lamp from overheating. Anyone who has tried to take out a light bulb that is really hot understands the need to keep these lamps cool. With such a high initial cost and such a long life (25,000-50,000 hrs) the protection of this investment is important. Relying on quality products is imperative as a result. The cost of LED will come down over the next couple years but so will the quality, in many cases. Just yesterday I heard someone placing an order at Lightfair for 10,000 units of a lamp from overseas without regard to UL listing, Energy Star ratings, DOE testing or warranty. These cheap lamps will flood the market and the quality of them will create an environment that makes LED look poorly made. In fact LED lamps are incredibly high in quality, if you use the manufacturers that are trustworthy and being held to quality standards. The good lamps, the ones that will last for the promised duration, dim smoothly and are supported by a long warranty will not come down in price more than 20% over what they are now.

 

The issue of waiting for the lamp cost to come down also creates another issue and that is the high cost of waiting. If a building's energy savings is $1000 per year for making this change, how much will the wait cost in the long run? It's important to factor in the value of the savings today, as well as the maintenance reduction. If someone has to rent a lift to change a ceiling light, getting lights that will last for 40,000 hours is a sound financial decision.

 

Also, there are federal tax benefits and utility support that will not be around once the official phase out of the old lamps is in place.

 

Waiting, in my opinion for a small price drop is not worth what you will lose in the meantime.

Permalink Reply by Ryan Arnold on May 20, 2011 at 8:23am

Thank you for the great response. They higher price point absolutely makes sense regarding the inherent technology that goes into LED lighting compared to other types. 20% seems reasonable, it's just hard to judge because every story about LED's seems to end with the generic "...price will come down over time." Which gives no relevant range. 

 

It seems like the challenge with LED lighting adoption then will be a branding dilemma in regarding the "cheap lamps" that will "flood the market" much like there is with CFLs. 

I worked with a low income energy efficiency program for the last two years and one of the main complaints about CFL's I heard was surprisingly not about mercury content, but about poor light quality and short life span. Most had bought a CFL which was poorly made, been burned by them not living up to their claims, and then disregarded the whole product. People don't differentiate between quality because they are seen as a commodity product, and with the race to the cost bottom, the whole family of CFL's get a bad rap. 

 

I fully agree with you on the high cost of waiting, especially with the modest cost reductions you spoke of. I've seen the ROI for LED retrofits, and it's a quick enough payback for commercial facilities that it's a no brainer to move now. No use waiting 4 years to reduce your payback period 6 months...

 

Thanks for the discussion!

Permalink Reply by Susanne Croft on May 20, 2011 at 10:07am

Kathleen:  Your company and customers might be interested to know about Avista's new energy efficiency loan program. Special financing is available now for measures recommended in an Avista energy audit which often includes lighting.  SLIP (a non-profit) is the loan coordinator for the program, so interested borrowers work through me to apply for the loans, but the first step is to get an energy audit from Avista. More information can be found at the link on our home page:  www.slipspokane.org.

Susanne Croft

SLIP, Executive Director