The cumulative number of light emitting diodes (LEDs) installed across the United States has soared during the past two years—topping 215 million at the end of 2014 according to DOE’s latest data. That’s good for the environment (the amount of source energy needed to power the more efficient LEDs is about 143 trillion British thermal units less than the previous status quo) and consumers (savings topped an estimated $1.4 billion annually in 2014)—but not for growth-starved electric utilities. And, this is just the beginning of a transition that poses serious problems for utilities already grappling with long-term slow-growth forecasts.
In its latest assessment of the LED market (Adoption of Light-Emitting Diodes in Common Lighting Applications, which can be found here), DOE notes that “the adoption of LEDs in general illumination applications is just beginning.” Specifically, while the 215 million figure represents a quadrupling of the number of LEDs installed in just two years, it still amounts to just 3 percent of the U.S. market, which is pegged at some seven billion lighting fixtures.
In a blue sky projection, DOE estimates that if all seven billion lights could be replaced overnight with LEDs, the source energy savings would skyrocket to just under 4,900 trillion Btu (roughly 4.9 quads)—saving customers about $49 billion a year. While we won’t get there overnight, that is the direction we are headed, a direction bound to cause a significant amount of concern in utility C-suites nationwide. (For an earlier analysis of the LED threat, please see this story.)
The DOE report breaks the lighting market down into 10 major categories, including A-type lamps (the screw-in variety that make up the bulk of installed residential lighting) and linear and low/high bay fixtures, which dominate the commercial and industrial sectors. The full list can be found in the chart below, which also includes estimates of the current number of installed LEDs and their percentage of the market.
Roughly 45 percent of all the bulbs in use in the U.S. are A-type lamps—almost 3.3 billion overall, DOE said. So even though consumers have installed an estimated 77 million LEDs in their homes nationwide, this amounts to less than 2.5 percent of the market. Nonetheless, the savings are beginning to add up: DOE says that installed A-type LEDs cut site electricity consumption by 1.7 billion kilowatt-hours (kwh) in 2014. And this is almost certainly just the beginning: as prices continue to fall (40 and 60-watt equivalent LEDs are now commonly available for $2.50-$3/lamp at major home improvement centers, prices unheard of just a year or so ago) residential LED use will rise, cutting further into utility sales. Every residential light is unlikely to be switched out anytime soon, but if they were DOE estimates that this would cut electricity consumption by 51 billion kwh and save consumers roughly $5.3 billion every year.
But those potential savings (or lost sales, if you are a utility executive) pale in comparison to the opportunities available in the commercial and industrial sectors. Because many of these fixtures are on for hours at a time, the savings can really add up—DOE estimates that electricity consumption in the linear (the tube fluorescent lights familiar to everyone, commonly called T5, T8 and T12 bulbs) and low/high bay (high output lights to illuminate large indoor spaces like big box retail stores) lighting market segments would plummet by almost 290 billion kwh annually if all the fixtures were converted to LEDs overnight. That is a lot of lost load…..
The transition to LEDs in the commercial and industrial markets admittedly is not going to happen overnight, particularly since the installed lighting systems are relatively efficient and low cost. But as the two graphics below indicate, the trend lines are turning in favor of LEDs: Costs are dropping, output is improving and the economics are beginning to favor the long-lasting LED.
The market segment that may best indicate the upside potential of LEDs is the area/roadway lighting sector. Here, in just two years, LEDs’ market share has jumped 10 percent, accounting for 13 percent of all installations at the end of 2014. LEDs are still more expensive than traditional high intensity lighting, DOE points out, but they have a number of other attributes that more than outweigh the initial cost discrepancy. “LEDs are particularly advantageous in area and roadway lighting applications because they are excellent directional light sources, are durable, and exhibit long lifetimes. LED area and roadway luminaires also significantly decrease the amount of light pollution compared to incumbent HID fixtures, because their improved optical distribution substantially reduces the amount of light wasted upward into the atmosphere.”
The sector’s installed base of 5.7 million LEDs already saves 900 million kwh annually, and if all the currently installed area and roadway lights ultimately are converted to LEDs (not an outrageous assumption given their myriad advantages over conventional lighting) the yearly savings would jump to an estimated 19 billion kwh.
Utilities can’t fight this transition—doing so would put them at odds with customers in all classes looking to save money and do right by the environment. Counter-intuitive as it may seem, the best option may be to make the transition as seamless as possible—helping companies to plan for and implement a LED retrofit program may earn the utility a customer for the long term. Fighting them every step of the way undoubtedly would have the opposite impact. It’s up to the utility industry to choose.