A few months back I wrote about the new E-Core LED lightbulb developed by Toshiba. At that time the E-Core had received a lot of fanfare coming out of the Consumer Electronics Show, and seemed poised to be the first LED bulb to be made widely available on the US market. Well as it turns out the other big players in the light bulb industry where not far behind with their own LED bulbs. GE, Panasonic, Philips and Osram Sylvania, amongst others have all jumped in the race to provided their own LED light bulb by the end of the year. It seems all but decided that Light Emitting Diodes will shortly become the new standard of luminescence, however at a price of $30-$40 a piece, any mass transition may not occur for some time.
The reason these manufacturers are focused primarily on 60-watt equivalent bulbs is because the standard 60 watt incandescent bulb represents the highest proportion of replacement bulbs sold today. By taking on the mainstream market bulb makers are actively seeking to rapidly distribute this new technology with the end goal of driving down the purchasing cost. The price of a 60 watt equivalent LED bulb has already dropped considerably, from around $90 2 years ago, down to about $30 per bulb. The problem is that standard incandescent bulbs are extremely inexpensive, around $0.50.
So here lies the challenge; how to convince a consumer to pay $30 when they can meet the same immediate need for just 50 cents. The new LED bulbs are far and away more efficient than their Incandescent and compact florescent predecessors, using only 9 watts of electricity and lasting up to 12 times as long as standard bulbs. As I mentioned in my previous post, it’s difficult to sell a consumer on a product with superior efficiency when over-time savings are reflected in decades rather than individual months or years. Light bulbs are considered a disposable product, in some cases nothing more than a chore or a nuisance, something you HAVE to take time to replace every so often. Can you really turn that into a $30 – $40 proposition to the average consumer? Well maybe…if you make it free!
Earlier this month, in an article posted on GreenTech:Media, it was mentioned that once these LED bulbs approach a $20 price point it is feasible that utility providers my begin providing them to their customers for free. The rational for this argument is that once you get bellow a certain price per unit the efficiency savings in energy usage outweigh the cost. If utilities can take measures to reduce energy usage (a counter-intuitive point, I agree) they inevitably reduce the need to bring new power plants online in the future. Next to delivery infrastructure, new power plants are by far the highest costs facing most energy utilities. Several years ago when Compact Florescent bulbs where flooding the market we saw several utilities implement similar strategies of providing vouchers for free CFL bulbs. Though CFLs are far less expensive it remains a relevant precedent because it also reveals the marketing potential for such a program. Energy utilities have spent millions in trying to make their brands appear more environmentally responsible, some have even set up entirely new subsidiary brands to cater to a rising eco-audience amongst consumers. While actual supply and production metrics tell a strong story, marketing may add an even more compelling element to the future rise of LED bulbs. It would be very interesting to explore how this business logic could be applied to other energy efficient products. In the mean time get ready for a new kid on the block when it comes to light bulbs.