Have you switched to LED bulbs for your indoor lighting?
I was giving this question some thought recently as I pulled out the ladder once again to change one of the indoor floods in the kitchen. I seem to be constantly replacing these bulbs, since the center of my family’s home life revolves around the kitchen. Those lights are among the most heavily used in the house. The prices of LED bulbs have dropped, and the light quality from LED bulbs is quickly approaching what we are accustomed to with incandescent bulbs. Among all the considerations that factor into the decision of incandescent versus LED bulbs, I decided to apply my MBA skills and focus on one: does it make economic sense to switch to LED bulbs?
To answer this question, let’s examine the underlying total cost for a bulb. First, there is the “fixed cost” of buying the bulb itself. Browsing on Amazon, I found a typical 65-watt BR30 incandescent flood that outputs 635 lumens (think of “lumens” as the brightness over an area) at a color of 2700K (this is the warm color I prefer) that costs $28.47 for a 12-pack. That equates to about $2.37 per bulb.
I found an equivalent LED BR30 flood that requires 10.5 watts to operate, outputs 730 lumens at a color of 2700K, for $19.98. From a brightness and color standpoint, these are comparable bulbs. Obviously, the LED bulb costs more to purchase, but because of the lower operating power required – 10.5 watts versus 65 watts – it is cheaper to operate than an incandescent bulb.
This is a classic tradeoff problem between the combinations of fixed and variable costs. In the case of a bulb, the variable cost is driven by the electricity cost and the amount of power necessary to operate the bulb. The general “rule of thumb” is that if I have the resources to invest up front in a larger fixed cost to gain a lower variable cost, I will come out ahead in the longer term. Let’s see if that is true for incandescent versus LED bulbs.
I pay about 12 cents per kilowatt-hour for electricity. Typical regional average costs for residential power range from about 10 cents per kilowatt-hour to 18 cents per kilowatt-hour. Let’s suspend credulity for a moment and compare the totals costs of a “magic” incandescent bulb that never burns out versus an LED bulb. At the lower operating cost for an LED bulb, when do I “break even” on its higher fixed cost? Basically, we need to find the operating time required where the total cost of an incandescent bulb is the same as an LED bulb when all costs are taken into account.
At 12 cents per kilowatt-hour, the breakeven occurs at 2692 hours of operation. Beyond 2692 hours of operation, the LED bulb is more cost effective. Conversely, it does not make economic sense to replace working incandescent bulbs that are used so infrequently that the total operating time falls below 2692 hours.
Depending on where you live, your electricity rate may be something other than $0.12 per kilowatt-hour. Different rates shift the breakeven point; higher rates move the breakeven point sooner, lower rates move the breakeven point later. If your rates are a lot higher than mine, you’ll reach the breakeven point a lot sooner.
That is the short-term view. How about the long-term view? Doesn’t the high price of LED bulbs somehow cause the economics to work out differently? To address this, we need to recognize that bulbs have a lifetime, and factor in bulb replacement into our analysis.
An incandescent bulb has a mean time to failure that is expressed as lifetime hours. Let’s suspend credulity in another way. Let’s pretend our incandescent bulb lasts until the rated lifetime exactly, then burns out and must be replaced. The typical 65-watt BR30 incandescent floods are rated for 2,000 hours.
What about LEDs? The equivalence to lifetime for an LED is when its brightness degrades to 70% of original, at which point the degraded LED performance becomes perceptible. The LED BR30 floods I found are rated for 25,000 hours. Some other LED bulbs are rated for 50,000 hours and even higher! I’ll use 25,000 hours for the next step.
The long-term analysis shown next takes into account replacement of incandescent bulbs every 2,000 hours of operation, and replacement of LED bulbs every 25,000 hours. When the cost to operate each bulb is taken into account, it is clear that the long-term cost of using LEDs is well below the long-term cost of using incandescent bulbs.
The lifetime of an LED bulb would have to be much shorter – less than 4,000 hours – for the LED not to be more cost effective than incandescent bulbs.
What do I conclude from this analysis? Based on an economic viewpoint, for bulbs that see medium to high usage the LED is superior to the equivalent incandescent bulb. I consider high usage as 6 hours per day or more, such as my kitchen and home office. At 6 hours per day, 2,000 hours is reached in less than a year. Medium usage is cited on bulb packages – 3 hours per day. For 3 hours per day, 2,000 hours is reached in a little less than two years. One to two years to reach the breakeven point sounds very reasonable.
For low-usage bulbs, it does not make sense to replace them with LEDs unless the price per bulb drops even further. Low-usage bulbs are those that might see a few minutes per day. Assuming 10 minutes per day of usage, 2,000 hours is not reached until after 30 years have elapsed. That is a long time to wait to get close to the breakeven point.
What’s my plan? A few weeks ago, the 40-W incandescent bulbs in a desktop lamp located in my home office burned out. As I mentioned earlier, lamps in the home office see a lot of operating time. I replaced the burned-out bulbs with a pair of 7-W A19 LEDs I bought from Amazon for $14.20 each. I purposely picked LEDs with ratings in lumens and color to mimic the incandescent bulbs they replaced, and waited to see if anyone noticed anything different. Other than noticing the lamp was working once again, no one has said anything.
In all fairness, I have a few bulbs around the house that see very little operating time. Bulbs in the garage and bathrooms around the house are still original and going strong after 9 years. I see no sense in replacing them with LED equivalents while the current bulbs are still operating. Economic reasoning says that I’ll probably never reach the breakeven point on them at the current cost of LED bulbs.
However, my next target is to slowly replace the floods in the kitchen, which get the most use of any lights at my house, with LEDs as the current bulbs burn out. I‘ll continue by replacing other medium- to high-usage bulbs in the house as they burn out. Low-usage bulbs I won’t touch. Given the current brightness and color output qualities of LED bulbs, I bet no one notices the difference with the replaced bulbs – that is, except for me since I pay the electricity bill!
Update (October 27, 2014): I started the replacement in my kitchen with 9.5-W LED bulbs rated at 650 lumens and 2700K, for $14.95 each. Updated economic analysis is here.