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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Jay Yao has no position in any stocks mentioned. The Motley Fool recommends Southern Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.