Commercial Lighting Tampa Florida

The Economy-Changing Power of the LED Bulb

Energy-efficient lighting has resulted in striking cost savings for Americans. And it’s just the beginning.

Per-capita electricity use peaked in the U.S. in 2007. With the exception of a post-recession rebound in 2010, it has declined every year since. I already wrote a column about this epochal shift last month, but the chart that went with it is so remarkable that I’m going to recycle it here.

Past the Peak, and Falling
U.S. annual per-capita electricity generation, in kilowatt-hours

Source: U.S. Energy Information Administration
What caused the decline? I offered several possible explanations. One of them was increased efficiency of electrical appliances. Several readers wrote in to suggest that perhaps it was the lightbulb that did it. Thomas Edison’s incandescent bulbs are being pushed aside by energy-efficient light-emitting diodes, aka LEDs, and that had to have had an impact on electricity use.

I’d been meaning to follow up on this. Then, in a blog post Monday, economist Lucas Davis of the University of California at Berkeley’s Haas School of Business beat me to it. The residential portion of the decline in electricity use, at least (my chart above includes commercial and industrial use), can be attributed largely to LEDs and other energy-efficient lighting:

Over 450 million LEDs have been installed to date in the United States, up from less than half a million in 2009, and nearly 70% of Americans have purchased at least one LED bulb. Compact fluorescent lightbulbs (CFLs) are even more common, with 70%+ of households owning some CFLs. All told, energy-efficient lighting now accounts for 80% of all U.S. lighting sales.

LEDs use 85 percent less electricity than incandescent bulbs. Going on an estimate of 1 billion LEDs and CFLs now in U.S. homes, operating three hours per day, Davis estimated an energy savings so far of 50 billion kilowatt-hours per year, or 160 kilowatt-hours per capita, which was about equal to the decline in residential consumption he found. The total decline in my chart above comes to 1,161 kilowatt-hours per capita, which still leaves a lot of electricity savings to explain away — but LEDs and CFLs are surely cutting electricity use in commercial and industrial settings, too.

The savings are really just getting started. LED bulbs were in fewer than 30 percent of U.S. homes in 2015, according to the U.S. Energy Information Administration, and constituted the majority of bulbs in fewer than 5 percent. After crunching the numbers from a September government report on the energy impact of solid-state lighting, veteran energy lawyer Steve Huntoon wrote in utility trade publication RTO Insider in January that over the next 20 years, LED lighting would:

reduce annual retail electric sales by 300 billion kWh under a “current path” and by 435 billion kWh under a more aggressive path.

Three hundred billion kilowatt-hours amounts to about 8 percent of 2016 retail electricity sales for all uses; 435 billion kilowatt-hours is almost 12 percent. Rooftop solar, meanwhile, is expected to generate 100 billion kilowatt-hours a year in 20 years. Here’s Huntoon again:

For all the attention given rooftop solar as environmental boon, new age investment and regulatory flashpoint, the LED bulb is three times more significant.

Economist Davis cautions, though, that there could be something of a “rebound effect” from LED adoption: As LEDs make lighting cheaper and less, well, bulb-oriented, we’ll find more things to light up:

Outdoor lighting, in particular, would seem particularly ripe for price-induced increases in consumption. These behavioral changes may take many years to manifest, as homeowners retrofit their outdoor areas to include additional lighting.

I guess we should also consider the risk of political backlash. You may recall the pro-incandescent-bulb campaign waged by congressional Republicans early this decade. “I think Thomas Edison did a pretty patriotic thing for this country by inventing the lightbulb,” former U.S. Representative Michele Bachmann famously said in 2011. At that point the main alternative to Edison’s bulbs was still compact fluorescent lamps, which had their detractors. Since then, though, LED bulbs have flooded the market, and their price has steadily declined. 1 It seems a little too late for an incandescent comeback now.

Finally, in case you were wondering: The LED was invented in Syracuse, New York, in 1962 by a scientist at the company Edison founded, General Electric. So, yes, using LEDs is patriotic, too.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Halogen bulbs, which are somewhat more energy-efficient than incandescent bulbs but much less so than LEDs, have actually taken more of incandescents’ market share so far than LEDs have. But the future almost certainly belongs to the LEDs.

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