multiple bare lightbulbs hanging from wooden ceiling

*Update: As commenter Cal Cho mentioned, there is evidence that LED lifespans can be shorter than what manufacturers claim. This means that LEDs, at least how they are currently priced, are not necessarily better investments than CFLs. See this article for more information.

Abstract:

LED light bulbs are the better investment than CFL bulbs starting in year 6, although they will probably continue to get more competitive as technology improves. Over the course of 10 years, the average house will probably save about $200 with LED bulbs vs. CFL bulbs.

Intro:

Welcome to my second official reader request.  The question at hand today is which kind of light bulb saves more money, a CFL (compact flourescent light – the spiral bulbs) or a LED (light-emitting diode). Both of these kinds of light bulbs are newer-generation bulbs and are way more efficient than the old school incandescent bulb.

From a financial perspective, the major tradeoff between the two kinds of bulbs is lifespan vs. cost. LED bulbs last longer but cost more, while CFL bulbs cost less but don’t last as long. So, I’m going to look at the lighting requirements for an average house over 10 years to figure out which one is more cost effective, but first, I’ll take a quick look at some of the main differences between CFL and LED lighting.

CFL bulbs:

  • Cost less
  • Don’t last as long
  • Use more energy
  • Contain toxic mercury
  • Need to “warm up”
  • On-off cycling significantly decreases lifespan
  • Emit more heat
  • Burn out
  • Less durable

LED bulbs:

  • Cost more
  • Last longer
  • Use less energy
  • Don’t contain mercury
  • Don’t need to “warm up”
  • On-off cycling doesn’t impact lifespan
  • Emit less heat
  • Gradually dim as opposed to burning out
  • More durable

The numbers:

So how much money would one save by replacing all 45 CFL light bulbs in their house with LED bulbs over 10 years?  At a cost of 12.2 cents per kilowatt hour, here’s what my model says:

  • 10-Year NPV: $199
  • 10-Year ROI: 17%
  • 10-Year Payback: 6.0 years

What the chart and numbers above show is that it will take about 6 years before LED bulbs become more profitable, but past that, they continue to save more and more money, all the way to year 17 when they need to be replaced and the whole things starts over again. The savings, however, are pretty modest at just barely under $200 for 10 years.

Some things that could make the savings of LED vs. CFL more substantial are increased electricity costs (a possibility as the U.S. moves away from carbon-intensive coal) and technology improvements on LED bulbs. Both are likely to happen, but on such a small base, it is hard to imagine those changes jumping the savings up to more than $500 anytime soon.

There is, however, this funny thing with LED’s that I alluded to earlier, mainly that instead of burning out, they just gradually dim. So there is a very good chance that someone would keep them in longer than their rated life, which is how long they will last until they fall below 70% of original brightness. This could save a few unintentional dollars as well.

Conclusion:

Outside of lower mercury content and less energy use, it doesn’t make sense to switch a CFL light bulb out for a LED one unless you plan to stay at your current location for more than 6 years. All-in-all, it doesn’t really matter that much either way because, with how technology and energy prices stand today, we’ve all got much bigger financial fish to fry.

Regardless of which option makes most sense for your particular situation out, Amazon has the goods:

CFL bulbs I used for this example
LED bulbs I used for this example

And don’t change them all at once…change bulbs one-by-one as they burn out for maximum savings.

Assumptions:

Most of my assumptions are documented in the table below that I used to calculate yearly costs for the ROI model:

Sources:

  • Amazon for light bulb costs (CFL bulbs, LED bulbs)
  • Amazon for bulb lifespans, although I cut the CFL lifespan in half because there is a ton of research that says CFL stated lifespan is vastly overstated
  • Amazon for bulb wattage
  • Google for electricity costs
  • Google for number of bulbs per house

Brand Category: 

About The Author

James Flannel Guy ROI's picture

Portland, Oregon-based Flannel Guy ROI is a working dude and family man that likes flannel shirts and wants to achieve financial independence a little sooner than most, particularly by making smart spending decisions and living intentionally. 

His overall idea is to look at spending decisions as investments: what decisions will return the most value to you over time? 

Each scenario is evaluated over a 10-year horizon with the following summary statistics:

Present value – what is the total value of your investment and expected returns in today’s dollars?
Return on investment (ROI) – how much of your original investment will you make back?
Payback period – how long will it take you to recoup your original investment?

Learn more at www.flannelguyroi.com

Add new comment

To prevent automated spam submissions leave this field empty.
CAPTCHA
This question is for testing whether or not you are a human visitor and to prevent automated spam submissions.
1 + 0 =
Solve this simple math problem and enter the result. E.g. for 1+3, enter 4.
By submitting this form, you accept the Mollom privacy policy.