My Return On Investment Case with Philips LED Lighting

Posted on 19. May, 2011 by Ross in New Technologies, North America

The New York Times announced the arrival of a new LED light bulb from Philips this week, capable of deliver enough light to replace a 75W light bulb (until now LED lights had only been able to emit enough light to replace a 60W bulb). The EnduraLED A21 is expected to cost $40, last 25,000 hours, consume only 17W of energy and save $160 over it’s lifetime.

Sounds good? I’m always looking out for advances in LED lighting but I haven’t got money to throw away without reason, so the first thing that I want to know when looking at the figures for a new product is whether it’s worth the cost. (I blame that mindset on working for an energy-efficient lighting company myself where we on average provide 74% savings and return on investment periods of 12-24 months to our commercial and industrial customers based on their actual usage patterns rather than just idealised scenarios. Nerdy - yes!)

There’s no point in comparing the financial case of LED lighting vs CFL light bulbs for this product, since Philips’ own CFL 75W replacement lights only consume 14W and cost around $2, thereby starting much cheaper and staying much cheaper too. The EnduraLED A21 is being marketed more towards those people who won’t give up their incandescent lights for CFL lights due to concerns about light quality (which is supposed to be superior with this LED light), for whom there are still savings to be made.

So instead I decided to see what those savings would mean to me, should I still use incandescents rather than energy-saving CFL bulbs.

The press release doesn’t state whether the $160 savings include or exclude the cost of the bulb, so I’ll give them the benefit of the doubt and assume the total energy savings are $200 and the total cost savings are $160. The energy savings will be spread linearly over the lifetime of the bulb, so I’ll have broken even after 5000 hours of use (25,000*40/200). We’ll also ignore the fact that the savings based on those figures rely on an energy price of around 14¢ per kWh - very few US states pay that much for residential energy at the moment though.

If I leave my lights on 24/7, I would then see a return on investment after 7 months.

Problem 1: Being someone who cares about the environment and energy usage (and a good night’s sleep in a dark room!) means that I don’t leave all my lights on 24/7. They are all turned off when my family is at school and work, when we are asleep at night and when there is sufficient natural sunlight to light our house. The latter obviously varies with the seasons, meaning that the lights are for around an hour a day during the summer and around 7 hours a day in the winter - on average therefore the lights are on for 4 hours a day rather than 24.

So based on the lights being on ‘4/7′, I would see a return on investment after 3 years and 5 months.

Problem 2: Not only do I not leave my lights on all day, but my family and I only have the lights on in the rooms which we are currently in. On average there are no more than two lights on during the hours in which lighting is necessary, but there are 10 light fittings into which these LED light bulbs can be placed.

I could reduce initial costs by not replacing those lights used most infrequently - the porch, the two in the hallway and the landing - but this would still leave 6 bulbs to buy for $240 with a total break-even threshold of 30,000 hours, for an average of 8 hours total daily usage.

The return on investment period under those circumstances would be a whopping 10 years and 3 months! That’s before seeing a single penny back in gross financial savings.

On the same basis of calculation, my CFL bulbs return my investment after just six months rather than 10 years, and I’m saving more in the longer term too.

There’s probably a few extra factors which would alter the equation (current local energy price, energy price rises, risk of failure due to my landlord’s dodgy electrics!) but the bottom line is that it’s a big price to pay for an extra slice of LED-based energy efficiency, and that’s in the opinion of someone who’s completely on board the energy efficiency bandwagon.

According to CNET, the CEO of Philips Lighting North America believes that costs of household LED lights may drop by 50% over the next five years, but that would still leave me with a 5 year payback period which in these austere times would push that purchase to the very bottom of the pile.

LED lighting at this price point makes sense to those who leave their lights on all the time, but if you genuinely care about the costs then CFL bulbs are still the way to go - just as energy efficient and a lot cheaper. If light quality is your preference then the new Philips LED bulb may be a preferable option… but then incandescents might be too…

Energy-Savingnews.com editor Ross Tucknott lives, eats and breathes energy saving from his house in Cornwall because he’d rather spend his money on good food, good local ales, surfing and Redruth RFC. Come on you Reds!

Image of Canary Wharf (the lights are on, but no-one’s home!) by poolski @ Flickr