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The Death of the Light Bulb as We Know It

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The standard incandescent light bulb as we know it is now a thing of the past. Due to the 2007 Energy Independence and Security Act signed by President Bush, beginning Jan 1, it is now illegal to manufacture or import 40-watt and 60-watt incandescent bulbs in the U.S. The law was enacted as a modest step to make the U.S. more energy efficient and less reliant on foreign oil.

Incandescent light bulbs have not changed much since Thomas Edison first invented it. The standard incandescent bulb converts approximately 10% of its energy into light. The rest is wasted as heat. 

Although more expensive, CFLs and LEDs, the two different types of light bulbs that will be replacing incandescent light bulbs, are at least three times more efficient.

CFLs and LEDs also last much longer than incandescent light bulbs with CFLs lasting up to 10 times longer and LEDs lasting up to 25 times longer.   

According to trade association NEMA, incandescent light bulbs made up around 75% of U.S. lighting sales in 2013.

Because of the new requirements, that 75% market share will now go to either CFLs or LEDs.

Companies that will benefit
General Electric (NYSE: GE  )  and Philips, the sector leaders in the incandescent light bulb market, also manufacture CFLs and LEDs.

The incandescent light bulb phase out will increase their lighting revenues in the short term because LEDs and CFLs cost more than the incandescent bulbs. 

Cree (NASDAQ: CREE  )  , the leading LED light bulb pure-play, will also benefit. Due to its vertical integration, Cree is one of the lowest cost LED bulb makers.  

Due to the fact that LEDs comprise only 1% of the U.S. lighting market, Cree also has a lot of growth ahead.   

Because bubbles often grow with extra media coverage, the retirement of the incandescent light bulb could be a catalyst to send Cree stock higher.

The companies that will lose
Electric utilities such as Southern Company (NYSE: SO  ) and Duke Energy (NYSE: DUK  ) will see less demand as consumers use more efficient light bulbs. Lower demand translates to lower profits. As more people buy LED light bulbs, utilities may also have to pay more for LED light bulb rebates.

Because coal makes up 37% of U.S. electricity generation, thermal coal companies such as Peabody Energy  (NYSE: BTU  )  will also lose as they will see less demand.  

The bottom line
The greatest source of energy is learning how to use it more efficiently. In the war against global warming, increasing light bulb efficiency is low-hanging fruit. 

Assuming 40% thermal to energy conversion, it takes 428 pounds of coal to power a single 60 watt light bulb continously for an entire year. 

Because they are at least three times more efficient, using a CFL or LED light bulb will save at least 300 pounds of coal from being burned.

By using more efficient light bulbs, consumers lower their energy bills while helping save the environment.

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Read/Post Comments (6) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 02, 2014, at 9:48 AM, Forestcutter wrote:

    One has to believe in the ruse of global warming caused by increased CO2 to feel good about government involvement in our personal decision making. I'd rather own Peabody Energy than GE, but the war on coal continues. To help make us more energy independent is not what it's about, student; it's about expanding government and the influence of the environmental Marxists into our everyday lives.

  • Report this Comment On January 02, 2014, at 9:49 AM, sapereaude1 wrote:

    When my great grandparents were born, the only light bulbs in this country (and perhaps in the world) were those invented and demonstrated by Moses Farmer in Salem, MA, in the 1850s (if my memory of history is correct). We can adopt to using more efficient bulbs; electric lights are a relatively recent phenomenon. But if we don't get more money into subsidizing graduate school tuitions, the next innovation is likely to be under a European or Asian, not an American, patent.

  • Report this Comment On January 02, 2014, at 9:53 AM, wjcoffman wrote:

    Just don't throw them in the trash when you're done or pick a broken one up:

  • Report this Comment On January 02, 2014, at 9:54 AM, sapereaude1 wrote:

    Environmental Marxist? What sort of buttons or mushrooms have you been eating? What's your educational level? How many countries have you lived in or visited? How many languages do you speak? Any real American would know that the foundations of this country (beyond the tidewater plantations) were in local communitarian socialism and communitarian capitalism, NOT in corporate capitalism. Not even the tidewater aristocracy had truck with corporate capitalism.

  • Report this Comment On January 08, 2014, at 12:40 PM, garyhemm wrote:

    I can tell you that these more expensive bulbs will not last longer. Power surges will destroy them just like they destroy normal bulbs. All we will do is to spend more on lighting. Period.

  • Report this Comment On January 08, 2014, at 11:12 PM, AbeMishima wrote:

    These bulbs are a bit too early in the usage cycle to tell if they will go the distance. So far, Hawaii's electrical system, one of the worst in the nation, has not killed my CREE LEDs. Hawaii suffers from undervoltage, overvoltage, power cycling and noisy power. A plasma tv, home theater receiver, a Playstation 3 and many incandescents and CFL's have been destroyed by my local power company (HECO). I'll tell you in five years how well the CREE's hold up in this environment. Has anybody ever had to file a warranty claim with the company? That would be more telling than random comments on the internet.

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Jay Yao

Jay is an energy and materials writer. He reports on oil and gas fundamentals and macro trends in the industry.

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