Building a better, greener light bulb

Lighting is a $40 billion-a-year business, and getting the world to switch bulbs is a formidable task. Fortune's Marc Gunther lights up the race for a better bulb.

By Marc Gunther, Fortune senior writer

NEW YORK (Fortune) -- Everyone from Wal-Mart (Change a Light, Change the World) to Yahoo (www.18seconds.org) to the Coalition on the Environment and Jewish Life (How Many Jews Does It Take to Change a Lightbulb?) wants you to buy compact fluorescent light bulbs to help save the planet.

CFLs, as they're known, cost more than old-style incandescent bulbs, but they last longer, use far less electricity, save consumers' money in the long run and reduce greenhouse gases.

All of which is well and good. But the next, next big thing in lighting - a $40 billion global business - could turn out to be the technology known as LEDs, or light emitting diodes, which are a whole lot "greener" than CFLs. The newest LEDs use even less energy than CFLs. They last for as long as a decade. And, unlike CFLs, they are mercury-free.

They're also very small, they can be programmed to emit different hues of light and they are just about ready for prime time - that is, for commercial, industrial and residential use. "This is no longer just a technology," says Chuck Swoboda, the chief executive of Cree, a $400-million-a-year company based in Durhan, N.C., that makes LEDs. "We have real products in real environments that are economically viable today."

This week, Cree and the city of Raleigh, N.C., announced a plan to turn Raleigh into an "LED City". The city will install LEDs in garages, parking lots and outside buildings, and replace about 33,000 street lights. After testing the LED lights in a downtown parking deck. Raleigh's mayor, Charles Meeker, said they "increase energy cost savings, reduce environmental impact and improve the quality of light."

LEDs have been around awhile; they were invented in the 1960s by a General Electric (Charts) scientist. Cree, GE, Philips Electronics, Siemen's Osram Sylvania unit and a Japanese firm called Nichia all make LEDs.

The market for lighting and lamps adds up to about $12 billion in the United States and about $40 billion worldwide, according to the Next Generation Lighting Industry Alliance, an association that promotes LEDs. To succeed, LEDs will have to unseat an entrenched incumbent with staying power: the incandescent bulb, invented in 1879 by Thomas Edison. Incandescent bulbs work by heating an electrified wire filament in a vacuum tube. They are wasteful: 95 percent of the power used by incandescents is given off as heat. This is why an Easy-Bake Oven can make a cookie using a light bulb.

Energy-conscious buyers, as a result, are replacing incandescents with CFLs. These work by using electricity to excite mercury vapor in gases, which produce ultraviolet light; fluorescent technology has been deployed commercially since the 1930s. Today's CFLs use about one-third as much power as incandescents, to produce the same amount of light.

LEDs are entirely different. They don't need bulbs at all - they are semiconductor chips that emit light when zapped with electricity; the colors differ depending on the material in the chip.

The first LEDs were red; blue ones weren't invented until 1993, and bright white light is even more recent. The technology's not simple; the U.S. government has funded more than 70 LED projects, according to The Economist. The federal energy department is pushing LED technology because about 20 percent of all electricity in the U.S. is used for lighting; LEDs could slow down the demand growth.

"There are large numbers of incandescent, halogen and fluorescent bulbs in use, and while they vary in efficiency, none is as extraordinarily efficient as LEDs," says Steve Landau of Philips Lumileds, a leading maker of bright LEDS based in San Jose, Calif.

LEDs are being rolled out as the technology has improved and costs have dropped. For starters, they are being deployed in lights that are on all the time and that are cumbersome to replace. (LEDs have a lifespan of up to 10,000 hours, or 11 years.) That's why they are now in more than half the traffic lights in the U.S., and in that Raleigh parking garage.

Next, they are likely to find their way into office and industrial buildings, particularly as states enact tougher building codes that require energy efficiency, as California has done. "The state of California is our best ally," Swoboda says. California says discarded CFL bulbs must be treated as toxic waste because they contain mercury; this year, believe it or not, state legislators have introduced bills that would eventually ban incandescent light bulbs.

Wal-Mart is experimenting with LEDs in its stores. In several "green" stores, the giant retailer installed LEDs made by GE in freezer and refrigerator cases, along with motion detectors that turn off the lights when no customers are nearby.

Last to come along will be the home. The appeal to homeowners will likely be based not on energy or environmental attributes but on style. LEDS are "not bulbs," says Landau. "The lighting that goes into your home tomorrow need not look at all like the lighting that goes into your home today."

No one knows how long it will take for LEDs to be widely adopted. The global lighting industry - manufacturers, wholesalers, retailers, designers and architects - is built around an infrastructure of sockets and bulbs. Big players like Philips (Charts) and GE may have mixed feelings about selling LEDs. "They want to promote LEDs but they're not in a hurry to replace what they already sell," says Cree's Chuck Swoboda. Think of it this way: It's easy to change a light bulb, but replacing the bulb with something entirely different will take a bit more time.  Top of page

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.