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Beyond the Bulb Ban: LEDs to Burn Competition in $100 Billion Market

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Incandescents will burn out -- and CFLs will fade away.

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If you haven't heard, there's a controversy brewing over new lighting regulations that will ban "normal" bulbs in favor of the curly CFL (Compact Fluorescent Lamp) type. Many Americans hate CFL bulbs, and resent the idea of government regulations dictating rules about the kinds of light bulbs they can use. But their rant is misguided. Both CFL and incandescent bulbs will be eclipsed as LED technology becomes dominant, offering a huge source of revenue to the semiconductor industry.

Confused? Let's back this up.

New efficiency standards in Europe and the U.S. will soon mean that the iconic light bulb as we know it will be obsolete and no longer available. They won't go dim without a fight, however. "President Bachmann will allow you to buy any light bulb you want," she promised at the Republican Leadership Conference in New Orleans this past June. The leading GOP 2012 president candidate (debatably Bachmann) sees the 2007 Energy Independence and Security Act as a source of oppression. It contains light bulb efficiency standards to be phased in starting next year.

In January, the new standards will apply to 100W incandescent (a.k.a. "normal") bulbs, which usually have a brightness of 1490-2600 Lumens. Their efficiency must improve to 72W and offer the same amount of light. Higher efficiencies will be required for 75W incandescent bulbs in 2013, and 60W and 40W in 2014. The law has exceptions allowing Americans to still use incandescent bulbs in appliances, for 3-way switches, etc.

Mrs. Bachmann suffered a setback in her Tea Party charge against regulations when her "Light Bulb Freedom of Choice Act" was recently defeated. Her bill would have terminated the efficiency laws unless it could be shown that they would introduce consumer savings, lower CO2 emissions, and pose no health risks to consumers (a small amount of mercury is found in fluorescent bulbs). In an ironic twist, her "Freedom" bill may not have been constitutional anyway, according to Legal Planet.

In anticipation of the coming regulations, some Americans are stocking up on regular old incandescent light bulbs before the "ban" takes effect. It seems to be a waste of time. Philip Smallwood of IMS Research wrote, "In the European markets, it was seen that hoarded supplies of lamps only lasted four to six months." German company Heatball is trying to sell incandescent bulbs marketed as heaters to circumvent European rules, but has had its last shipment held by customs.

The problem with incandescent bulbs -- and the reason the German company tried to classify them as heaters -- is that they only convert 10% of the electricity they use into light, with the rest being converted to heat. Think of a blacksmith warming up a piece of iron until it glows and using that to light his workshop -- you can imagine how most of the energy is transferred to heat to get just a bit of light.
No positions in stocks mentioned.
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