As a parent of two preschoolers, I get talked in to many things. This past weekend, I was talked in to decorating our front porch with a string of holiday lights.
For the pre-tax price of $16.99 at Costco, my husband brought home a 33-foot string of 100 multi-colored miniature holiday lights for me to indulge my two little chickadees’ wishes.
Reading the not-so-fine print on the box, I discovered $16.99 buys you a string of LED holiday lights. My virtually identical string was a string of standard incandescent holiday lights.
Having just replaced all of our recessed ceiling light fixtures with LED retrofits, here is my lay-person’s description of the difference between standard incandescent lights and LED lights. While LED lights and standard incandescent lights both create light, the way in which they do it is substantially different. Standard incandescent light fixtures create light by passing electricity through a metal filament until it becomes so hot that it glows. LEDs, or light-emitting diodes, on the other hand, create light from the movement of electrons through a semiconductor material.
These technological differences create some substantial differences in other features of the light fixture that consumers surely care about. For example, incandescent lights generate heat and have a relatively short lifespan because the metal filament burns out. LED lights, on the other hand, generate virtually no heat and have a substantially longer lifespan than incandescent lights. LED lights also use less electricity than standard incandescent lights, which means lower electricity costs to run LED lights compared to incandescent lights. And my personal experience with our new recessed ceiling lights is that LED lights provide a much nicer looking light than standard incandescent ceiling lights.
Is there a downside to LED lights? The biggest drawback of LEDs is the sticker shock: The upfront cost of an LED is substantially more than an incandescent.
I’ll be completely honest: It was easy for me to justify the $16.99 based simply on the warm-glow I received from fulfilling my kids’ wishes.
But as we hung-up the lights together last night, I considered the table of “Energy Savings Comparison” that the LED holiday light manufacturer provided on the box, presumably put there to help consumers overcome the sticker shock.
In the table that I replicate below, I use my expected seasonal use (8 hours a day for 35 days) and I replace the U.S. average cost of electricity shown on the box with the marginal cost of electricity that I pay to PG&E:
My one-season electricity savings amounts to roughly $2.72, far less than the $8 more in upfront costs from the LED lights. But taking an NPV approach with a 1% discount rate, in just three holiday seasons, the annual electricity cost savings start to swamp the higher upfront costs.
One last calculation before I go back to basking in the warm glow of our holiday lights: The manufacturer states that the average lifespan of the LED holiday light string is 20,000 hours. By that account, I should get around 71 holiday seasons out of my new string of LED lights!
Cross-posted from Energy Economics Exchange (tag line: Research that Informs Business and Social Policy), a blog of the Energy Institute at Haas.