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Friday, October 10, 2014

CFL vs. LED light bulb, Which is less expensive?

Problem Statement

As with all optimization problems, determining if you want to buy CFL bulbs to light your home, or the new LED bulbs, is a serious decision. (Especially now that the LED guys got the Nobel Prize!) I'm here to help. I've put together a few graphs of my findings. The long and the short if it is, it depends...

The total cost of CFL vs. LED is in some way related to the following factors:
  • Initial cost of the bulb ($)
  • Electricity consumption of the bulb (W/hr)
  • Average electricity costs in your area (kW/hr)
  • Return on Investment aka: ROI (%)
  • The number of bulbs you have in your house (#)
  • The average number of hours the bulbs are on during the day (hours on/day)
All of these variables are combined to come up with a unique profile of your costs. Our approach includes an assessment of the time value of money. To determine to total expenses of both products, we calculate total amount of money spent on the product including initial costs and reoccurring costs, as well as what that money would have been worth if it had been invested rather than spent. I will give you the rundown of a few scenarios.:

Scenario 1

15 bulbs are installed in a house that are on for an average of 5 hours / day. ROI is 3%. Electricity costs are 0.12$/(kW/hr), 800 Lumen CFL consumes 14W/hr and costs 1.66$ each, 800 Lumen LED consumes 9.5W/hr and costs $9.34 each.

So let's talk about what's happening here. On these graph, higher numbers on the Y axis is bad (we're looking to minimize expenses).  CFL beats out the LED option until year 14. However. Those shallow savings are soon wiped in year 15 as the LED bulbs have reached their 25,000 hour rating and must now be replaced. However, after this time, the values steadily diverge yielding a $200 savings after 30 years. That really isn't something to write home about.

Scenario 2

15 bulbs are installed in a house that are on for an average of 5 hours / day. ROI is 3%. Electricity costs are 0.12$/(kW/hr), 800 Lumen CFL consumes 14W/hr and costs 1.66$ each, 800 Lumen LED consumes 9.5W/hr and costs $5.00 each (only change).

This is a much more promising scenario where the price of LED bulbs has fallen by almost 1/2. Here we see it takes 4-5 years to break even and we have relatively steady savings from there on out to 30 years where our total savings is around $500. Not bad but still a long time to wait to save $500!.

Scenario 3

15 bulbs are installed in a house that are on for an average of 5 hours / day. ROI is 3%. Electricity costs are 0.20$/(kW/hr), 800 Lumen CFL consumes 14W/hr and costs 1.66$ each, 800 Lumen LED consumes 9.5W/hr and costs $5.00 each.

Here we have a scenario where the price of power has now also increased. This results in a pretty clear winner even in the short term. A $250 savings is realized within 5 years by switching to LED lights and over 30 years, a $2,500 savings is realized.

Conclusions

There are no simple answers here. It is hard to tell which solution will really save you a significant amount of cash in the near term. You might not want to rip out those CFLs till they burn out. What is clear from these studies is that no one can tell you for sure which one is less expensive unless they take a detailed look at your usage habits. One thing I would not do is just read the back of the package and assume that your usage profile fits theirs. (They are trying to get you to buy that box you're holding remember, so they have an incentive to paint it in a good light.) Any type of simple quick decision in this field is probably going to lead you down the path of spending more money.

Based on my usage profile, I'm expecting that once the bulbs hit $5.00 I'll slowly replace my CFLs with LEDs. I have to have something to show for 3 hours of work on a Friday :). And it'll insulate me against future price hikes by the electricity suppliers. $10.00 for the LED lights is just too expensive to make it worthwhile.

I've supplied the spreadsheet that I used for all the graphs included in this posting. I recommend that you check it out and plug in your own numbers. I hope it can help you figure out if CFL or LED is better for your application in less than the three hours it took me to put the analysis together!

Download Spreadsheet from Google Drive


Notes

Specs on the bulbs compared in this study can be found here:
CFL & LED

Disclosures

I am in no way affiliated with any light bulb manufacturers and I don't own any stock in them either and I have only purchased CFL bulbs in the last 5 years.

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