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The last time I wrote about the new light bulb standards set by Congress as part of the Energy Independence and Security Act of 2007, I was accused of supporting “government meddling in our personal lives.”

I’m not in the government, and I don’t like it meddling in my life or anyone else’s. Lest you start bashing the current administration on this particular issue, note that the aforementioned legislation was passed when Bush was President.

Besides, there are plenty of other things we can deride the current Congress and Executive Branch about. But that wouldn’t leave any room for what I really want to talk about: the new bulb standards that start to take effect in just a few weeks.

The following chart from the EIA shows when the new standards take effect and the bulbs it affects.

light bulb efficiency chart

For those of you who made last minute hoarding buys, good for you. But if you visit Home Depot (NYSE:HD), Lowe’s, (NYSE:LOW) or just about anywhere else these days, you’ll be hard-pressed to find incandescents.

Your choices are primarily compact fluorescents (CFLs), halogen-based incandescents, or expensive LED bulbs.

While LEDs represent the least amount of energy use, they’re currently also the most expensive. I believe they’ll eventually supplant CFLs due to the disposal issue with those types of bulbs.

Like worn out rechargeable batteries, CFLs contain hazardous chemicals (in their case, a small amount of Mercury) and must be disposed of properly. Setting up that recycling infrastructure will probably happen at the store level. But the average consumer will just throw them in the trash.

LEDs are really the future of lighting. Many Christmas lights are already LED-based, and commercial lighting is heading in that direction and will drive costs down at the retail level.

When I checked on the price for a 100-watt equivalent LED bulb the other day at Home Depot, it was around $26. That’s steep, but still represents significant savings over the lifetime of the bulb. Prices will continue to drop though, and I expect we’ll see prices in the $4 to $5 range in just a couple of years.

Like the bulbs themselves, light bulb labeling is going through a big change, too. It’s similar to what happened to the appliance industry. It had to produce an energy-use rating for each air conditioner, refrigerator and freezer sold. It became simple for energy-conscious consumers to compare different models based on energy use.

lighting facts label

As you can see, brightness will now be expressed in lumens, not watts. That will take some getting used to. A 100-watt incandescent put out roughly 1,600 lumens, but consumed 100 watts of power in doing so.

The typical CFL 100-watt equivalent drops the power consumption down to about 23 watts. That same 1,600 lumens from an LED bulb takes only 13 watts, and lasts over 50,000 hours. The other big thing with LEDs is there’s no disposal or pollution to worry about.

The mercury contained in just one CFL bulb is enough to contaminate about 1,500 gallons of drinking water, according to Advanced Lumonics, a manufacturer of LED bulbs.

The real payoff comes from the life of the bulb and the lower power it uses. Take a look at the comparison chart below to see how LED bulbs can really make an impact. Both bulbs are assumed to operate eight hours per day for 10 years, with an electricity cost of $0.10 per kWh.

LED Bulbs Incandescent
Initial Cost $49.99 $1.25
Electricity Used $38.00 $292
Replacement $0 (0 bulbs) $37.50 (30 bulbs)
Total Cost $87.99 $330.75

These differences will be even more dramatic as cost for LED bulbs drop even further.

Lest you think the United States is the only country instituting higher efficiency-lighting standards, think again.

China recently announced a ban on the sale and import of nearly all incandescent bulbs starting in October 2012. Other countries have also instituted higher efficiency lighting standards.

How to Play the Big Light Bulb Switchover

There’s one pure-play company that’s at the forefront of LED lighting development. Cree, Inc. (Nasdaq: CREE) is a North Carolina-based company that’s primary focus is the development and production of high-output LEDs for use in residential and commercial lighting applications.

Cree makes and sells just the LEDs, LED modules and complete bulbs. The company’s stock is trading in the $25 per share range, way off its 52-week high of $75.85 per share. Buying into Cree now isn’t much of a gamble, as the company has revenue in the $300 million a year range and trades at a reasonable P/E of 27.

Timing is everything, as the old saying goes, and over the next several years, the demand for more LED bulbs will skyrocket. That should help Cree’s bottom line, and send its shares headed north again.

Like it or not, the great light bulb transition has begun, and Cree will be right in the middle of making it happen.

Disclosure: None

Source: LED Bulbs: The Future Of Lighting