What’s the problem with LEDs?

LED lighting is clearly a path forward.  The challenge, as with all "promising but currently too expensive" new clean energy technologies is how to get from here (low volume, high costs) to there (high volume, low costs).  The bulk of cost reductions typically come from economies of scale, which moves industries down the learning curve. So what brings us the larger volumes?  Is it more government subsidies for research?  Is it regulations or rebates that drive market demand?  In a recent Technology Review article (LEDs Are Getting Ready for the Spotlight), Josie Garthwaite describes another option, which follows on my earlier post about finding new problems for old solutions.

Ask anyone these days, and they will tell you that LEDs are a more efficient light source—for the same light levels, they consume roughly 10% of the energy of an incandescent.  LEDs, in essence, are a solution for problems of energy costs (and carbon output).  Except that they are still too expensive for most people to justify the resulting savings:

LED light fixtures that are designed to replace screw-in incandescent bulbs still cost $40 or more for the equivalent of a 60-watt bulb and $20 for a 40-watt equivalent. LED tubes often cost as much as $50 to $100, versus as little as $2 to $10 for fluorescent counterparts. But LEDs save money over their life span because they use less electricity and last longer. A four-foot LED tube will typically require only about 15 to 25 watts of power, compared with 30 watts or more for a fluorescent tube that will last half as long.

Walmart is one of the leading customers adoption LEDs, and they acknowledge the energy efficiency of LEDs. At the same time, however, they also acknowledge that energy costs really aren't a compelling problem across most of the U.S.  As Charles Zimmerman, vice president of international design and construction, explains, Walmart is adopting LEDs across their stores, beginning where energy is most expensive—which is in Puerto Rico.  LED lighting will move "from marketplace to marketplace based on the cost of energy. Eventually it will move to the U.S. and Canada, where we have the lowest electricity rates."

In other words, until LEDs come down in cost, or the electricity rates go up, LEDs are not a great solution yet.  

Except, Zimmerman notes, while LEDs are not the best solution yet for saving energy costs, they are a great solution for saving on maintenance costs—which often exceed the costs of the lamps in the first place.  

"The biggest piece is always the maintenance aspect."  LED parking-lot lamps and streetlights last roughly 60,000 hours, while typical mercury lamps last 20,000 – 30,000 hrs and sodium lamps last 6,000 – 10,000 hrs. That's between 2X and 10X the usable life, thus cutting the number of times someone has to roll a truck to replace a lightbulb by 1/2 to 1/10th.

The problem LEDs solve best right now (in the U.S.) is not high energy costs, it's high maintenance costs.  Doubling the life of a street or parking lot lamp, by eliminating one maintenance task, complete with technicians and a cherry-picker, can often offset the entire original costs of the lamps and more.  We talked with one city manager who rolled out LED streetlights because while they costs $400 extra, they saved an $800 replacement effort.  

So with this new problem in mind, which markets face high maintenance and replacement costs (not energy costs)?  Also, with this problem in mind, how do we (re)calculate the value proposition of LEDs, and optimize for what today's consumer really value?  Keep the solution, change the problem, and whole new markets may open up.