Feds Pay $10 Million for $50 Light Bulb

The spectacular failure of a federal plan to create cheap, green lighting

In 2007, when Congress passed legislation that would gradually ban old school incandescent light bulbs, they added a carrot to the pile of sticks: A $10 million dollar prize to encourage the development of a cheap, green, domestic light bulb to replace the dearly departed Edison model.

Five years later, that bulb is coming to a hardware store near you. It will cost you 50 bucks. It also fails to meet many of the original prize specifications. The winner, Dutch electronics company Philips, was the one and only entrant, suggesting that the prize failed to stimulate widespread additional private spending on R&D. The portion of the LED bulb made in America is less than initially envisioned. And the guidelines for pricing were utterly ignored: The goal was $22 price tag in the first year, falling rapidly to $8 by year three.

Meanwhile, a lot has happened in those five years. Americans are (perhaps grudgingly) adopting new light bulb technologies; experimenting with CFLs, halogens, and LEDs. The florescence of options was partially due to the fact that the relevant technologies reached a natural tipping point, partially due to the increasing cost of energy, and partially a response to the impending ban. (The end of the 100-watt incandescent was targeted for this year, with lesser wattages slated to fall victim on subsequent New Year’s Days.) In other words, in the time that elapsed between conception and delivery the prize has become perfectly irrelevant.

The “L Prize” fiasco is a reminder that while prizes can be a wildly successful way to stimulate interest and investment in a particular problem—think of the X Prize—the way they are structured matters. A lot.

In this case, the prize was a first-past-the-post arrangement. So electronics giant Philips, which also makes a Chinese-manufactured version of the same product for half the cost, quickly fiddled with the specs and figured out a way to make some of the chips in San Jose—all jobs that will go to American citizens, no doubt—and do the assembly in Wisconsin. Two other companies had announced their intention to join the fray, General Electric and Lighting Science Group, when the Department of Energy abruptly declared a winner.

"We are pleased to be the only one who has submitted anything," chief executive of Philips Lighting North America Zia Eftekhar told National Geographic. "Even though I'm unbelievably happy we won, it's still good to challenge the entire industry to move the technology forward."

One part of that statement is undoubtedly true—Philips was likely quite satisfied to be the only company in the running—but the idea that the prize has moved or will move the industry forward is silly. Instead of spending the time and energy on genuine innovation, Philips diverted resources from developing the bulbs they were planning to build overseas and sell in the United States to tweak their product to conform (not even all that well) to semi-arbitrary guidelines written by a bunch of bureaucrats with the goal of dispensing some guilt cash that was tacked onto a bill that made a product preferred by virtually everyone in the country at the time illegal.

The goal for this prize shouldn't have been fastest, it should have been best. By the time the rules of the competition were announced, it was already apparent that the nation's basic light bulb needs were not going to go unmet. But rather than aim high, the Department of Energy set its sights squarely on a successful press conference at which the backs of congressmen, department officials, and energy execs could be patted and/or scratched. Mission accomplished.

The trade publication Energy Efficiency & Technology notes that the bulbs that are coming to market are actually a little different than the model that won the competition: “The commercial lamp has three rather than four optical segments and uses fewer LEDs. The reason, says Philips, is that LED technology has progressed a bit even since the end of the contest.” In other words, the carrot is worse than irrelevant. Philips dropped whatever they had into the feds’ laps in order to grab the prize and will continue to improve the bulb, running as fast as they can ahead of the stick. (Frankly, it’s a little surprising the sticky gears of the energy bureaucracy didn’t require the company to stick with the federally tested and approved model in order to maintain its favored status. Thanks goodness for small favors.)

While a $10 million check to sell a slight variation on a product you were developing anyway seems like a pretty sweet deal, it’s actually chump change compared to the real prize: preferential treatment by federal buyers and others major players who are beholden to the feds, such as the many utility companies offering subsidies to customers who purchase the bulbs. The knowledge of this pot of gold at the end of the rainbow further reduced Philips' incentive to keep prices low.

But wait: Why would a company that sells power want to subsidize products that help people consume less of what they’re selling? Ordinary economics no longer applies once you go through the looking glass into much of the heavily regulated utility sector. In California, for example, profits and consumption have been “decoupled”: Prices are based solely on what the state deems to be a fair rate of return. Which means that more demand for energy—accompanied by the possibility that new power plants must be built—is just an expensive pain in someone’s butt, not an opportunity to make more money.

Add in a nudge from your industry’s primary federal regulator, and voila!: Power companies are dropping boatloads of Hamiltons on their customers. In fact, that $10 figure is likely to increase as the Department of Energy pressures utilities to take a bigger bite out of the $50 monster they helped create.

The race to create better, greener light bulbs was underway before the 2007 legislation. The ban intensified the pace. The badly designed, poorly executed L Prize did little more than introduce an overpriced lame duck light bulb into the mix.

Katherine Mangu-Ward is managing editor of Reason magazine.

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  • Hoarder||

    Stocked up, thank you. Got 90 bulbs out in the garage.

  • elian||

    Im a single bisexual girl,but i am confident, Ijust wanna to find people who like me,be friends,start a relationship,dating,even marrige....and my friend recommended===datebi.c/o/m'It is the best place for looking for bisexual men & women dating relationship or marriage.Hope you all find your true love..

  • Just Saying||

    A $10 million dollar prize

    "dollar" is superfluous.

  • ||

    I find it quite amusing that they've banned 100W and up, but you can find 95W bulbs all day long.

  • Fatty Bolger||

    First they came for the 100 watt bulbs, and I didn't speak up because I only used 60 watt bulbs.

  • Paul||

    Any pistol under $100 is a danger to society...

  • DarrenM.||

    I find it quite amusing that they've banned 100W and up, but you can find 95W bulbs all day long.

    People will just replace 100W bulbs with 2 60W bulbs using even more energy than they would have otherwise.

  • Fist of Etiquette||

    Instead of spending the time and energy on genuine innovation, Philips diverted resources from developing the bulbs they were planning to build overseas and sell in the United States to tweak their product...

    They should have just taken an existing bulb and put a clock in it.

  • Brandon||

    There's some dipshit trolling the WaPo story about this who keeps talking about how this bulb will *only* cost you about 20 bucks more than an incandescent once you account for the energy savings, tax rebates and extended life. He seems to think that this is an effective argument.

  • ||

    I'm sure he will be puzzled when the thing doesn't sell very well.

    What will be interesting is what government decides to do when people take a pass on buying the bulb.

  • Lorider||

    The Government (TM) will require people to buy the bulbs, as to not buy them will affect Interstate Commerce (TM),and the Cronies (TM) want their (your) money....

  • Jeffersonian||

    Wow, so I only lose $20 a bulb? Will I make it up in volume?

  • Sevo||

    Yeah, but it'll take a *LOT* of volume.

  • Trent||

    You've got to spend money to make money!

  • ||

    Need to post as 2 comments due to character limit.

    Part I:

    One thing you will notice about the energy ignorant is their calculations on how much energy you will save is done in a vacuum. If you happen to live in an area where part of your energy budget is heating your home the simple savings calculation can be wrong by a not insignificant amount. During the heating season the waste heat from all your electrical use is not wasted at all. This waste heat is heat the heating system doesn’t have to supply. IOW, the net energy savings by switching light bulbs during the heating season is zero.

  • ||

    you really shouldn't toss phrases like 'energy ignorant' when you have no clue what you are talking about. even in a superinsulated, low energy house - incandescent lightbulbs would only contribute nominally to the space heating demand. on a typical (underinsulated or even non-insulated) house in a heating-dominated climate, the effective heat output is virtually zero. you have no idea what you're talking about. this is reason.com, not fox news...

  • ||

    Part II:

    To make a calculation on how much the heating season affects the energy savings where I live I considered a 60 watt bulb in the living room. I assumed that that bulb gets turned on in the evening 1 hour before sunset and goes off at 11:00 PM every night. This is important as the days in the summer are longer while shorter during the winter. Using sunset times for my area I calculated how many hours the light would be lit for one year as well as how many of those hours in the heating season. Based on monthly average temperatures I determined the heating season be conservatively 8 months.

  • ||

    Part III:

    Based on the above the bulb would be lit 2,157 hours of which 1,586 of those hours would be during the heating season when there would be no energy savings. That leaves me with about 571 hours during the non heating season where the LED bulb would save energy. The energy use differential between the 60 watt incandescent and the LED bulb is 50.3 watts. The total energy savings for the year by swapping the 60 watt bulb with the significantly more expensive LED bulb would be28.7 kWh’s.

  • Sparky||

    No PM Links yet and I'm not staying at work tonight waiting so this is going here.

    OT: UAVs, coming soon to your neighborhood.

  • Tim||

    IS there a chance the track could bend?

  • ||

    Not on your life, my Hindu friend.

  • Katherine Mangles Wards||

    MONORAIL!

  • Wiggum||

    The ring came off my pudding can!

  • ||

    A single 100 watt blub is what I prefer for my living room. But I couldn't find one so I'm using 2 60 watt bulbs. Is that the kind of savings government had in mind?

  • ||

    You apparently didn't look very hard: 4 pack of 100 watt bulbs for $6.74, with free shimping if you are an Amazon Prime member: http://www.amazon.com/gp/produ.....JTDA6FAQ8C

  • ||

    Drat: "free shipping".

  • Ska||

    Shimping ain't easy but sure is fun.

  • Paul||

    Shimpin' ain't easy but it's necessary.

    Chasin' them bulbs like Tom chases... Jerry

  • ||

    Well, crap. I would pay a pretty penny to be shimped. I was excited at the prospect of a free one.

  • Shemp Howard||

    Do what, now?

  • ||

    Kind of like 1.6 gallon low-flow toilets you have to flush 4 times if you crap bigger than a 2 year old?

  • DarrenM.||

    A single 100 watt blub is what I prefer for my living room. But I couldn't find one so I'm using 2 60 watt bulbs. Is that the kind of savings government had in mind?

    LOL! I should have read before I posted.

  • Bob||

    10 million barely buys 9 million. No story here.

  • Yogi||

    and a dime ain't worth a nickel anymore.

  • Paul||

    Nickels still going for five cents, though.

  • Grandpa||

    In my days, nickels had pictures of bumblebees on 'em. Give me five bees for a quarter, you'd say.

  • Hooha||

    It's because dimes have FDR on them, and he's debasing their value.

  • ||

    I actually worked on this project as an EE for the company that makes the driver's for the Philips bulb (and the thing looks amazing in person).

    However, I really wish the government would stop getting involved in this stuff. They have no freakin idea what they are doing.

    I just can't wait until LEDs (not the bulbs) are commoditized. Once that happens, the price hump should be overcome and place them in the same territory as CFLs. Soon, very soon...

    Disclosure: I don't work for that company anymore, so I have nothing to gain by promoting the Philips bulb.

  • Paul||

    It's aight, Squeej. It's alternative energy all the way down. We'll all be cooking on open fires soon enough.

  • Colonel_Angus||

    "Two other companies had announced their intention to join the fray, when the Department of Energy abruptly declared a winner.

    "We are pleased to be the only one who has submitted anything,""

    Blow it out your ass, fuckstick.

  • Paul||

    See the Adam Smith post on distrusting businessmen.

  • Colonel_Angus||

    "The goal for this prize shouldn't have been fastest, it should have been best."

    How could the government define "best" and come up with a result any different than what happened?

  • candle power||

    I see a huge future demand for candles.

  • WarrenT||

    Children could go door to door collecting candles. We could call it Talloween.

  • Trent||

    I knew I should have signed the Candlemakers' petition...

  • ||

    A way better idea than tweaking the structure of the prize would be to do away with the mandate that necessitated it in the first place. The market is more than capable of deciding if and when incandescent light bulbs have outlived their usefulness. This is the kind of policy recommendation I'd expect from the Weekly Standard, not from Reason.

  • Gleep Glop||

    Actually, incandescent light bulbs are ok to produce if you have a waiver from the Department of Energy. Apparently two companies do have waivers to produce these bulbs. Here is a link to the one company I know of:

    http://newcandescent.com/

    I heard the owner of the company call into the Limbaugh show and explain the waiver and his wares.

    No affiliation here just informing...

  • Merrill Guice||

    Here is why utilities always encourage more efficient products:

    When you make a product more efficient, that means it works faster and cheaper. This encourages extra use as the new technology is then put into applications that were not envisioned by the inventor. Thus, we now have LED lights in lots of places that there were not lights before. In the aggregate, electrical demand increases. We've seen this played out many times since the 1970's. Utilities employ economists and this is why they are always looking for subsidies to increase the efficiency of electrical products.

  • CatoTheElder||

    Jevons Paradox

    "the proposition that technological progress that increases the efficiency with which a resource is used, tends to increase (rather than decrease) the rate of consumption of that resource"

    http://en.wikipedia.org/wiki/Jevons_paradox

  • CatoTheElder||

    BTW, Jevons Paradox isn't some idiotic Keynesian-bozo economic paradox based upon false premises and heavily massaged data. It dates back to 1865 and was based upon both repeated empirical observation and a priori reasoning.

  • ||

    Like that prize bulb,
    LEDs and CFLs are supposed to get cheaper when everyone has to buy them.

    But that does not necessarily follow,
    just one of the many Deception arguments behind banning simple incandescent bulbs
    (http://freedomlightbulb.blogspot.com
    the deception listing)

    Firstly from supply and demand:
    Having removed the most popular cheap incandescent bulb choices,
    there may be insufficient supply for the new demand.
    That raises rather than lowers prices.
    (continued)

  • ||

    (continued)
    Secondly, it is irrelevant how many bulbs are sold,
    in that manufacturers / distributors / retailers simply charge what they can.
    Since the cheap competition has been removed, and since there are
    fewer manufacturers of newer more complex bulbs, there is less
    pressure to reduce prices
    (besides which light bulb manufacturers have a history of cartels, eg Phoebus cartel, which is why standard lifespan is 1000 hours).

    Meanwhile, on the Governmental side, pre-ban price lowering subsidies
    are no longer seen as so necessary
    -so removing American LED manufacturer (eg Cree) subsidies, or
    California, Ohio etc bulb subsidies also raises prices
    - continued -

  • ||

    (continued)
    That is not all.
    CFLs and LEDs contain rare earth elements, the price rise in recent
    years giving an increase in their prices, as covered in 2011 news
    reports.
    Also they are mostly made in China, where wages are rising, and
    shipping transport fuel cost has also risen in recent years.

    Finally, CFLs (and possibly LEDs, based on Univ of California Davis
    research 2011) will be subject to increasing recycling mandates on
    manufacturers and retailers, which will again add to consumer purchase
    cost.

    In comparison, incandescents are of course more simply and often
    locally made, and have no recycling requirement.
    (more on http://ceolas.net/#li1x
    why the light bulb regulations are wrong)

  • ||

    Like the bulb prize,
    other LEDs and CFLs are supposed to get cheaper when everyone has to buy them.

    But that does not necessarily follow,
    just one of the many Deception arguments behind banning simple
    incandescent bulbs
    (freedomlightbulb blogspot com Deception listing)

    Firstly  from supply and demand:
    Having removed the most popular cheap incandescent  bulb choices,
    there may be insufficient supply for the new demand.
    That raises rather than lowers prices.
    (continued)

  • ||

    RE the newcandescent link above

    Others like Aerotech also sell legal long life rough service bulbs
    However their lumen (brightness) rating
    is down from standard bulbs 100W =75w equivalent typically, and if sales increase they will be banned

    Exemption reversal condition: The Act includes a provision whereby, in cooperation with NEMA, sales of certain exempted lamps will be monitored, specifically:
    • rough service
    • vibration service
    • 2601-3300 lumen general service (150-200W)
    • 3-way
    • shatter-resistant lamps
    If sales double, the lamp type will lose the exemption

    (http://ceolas.net/#li01inx
    regulation updates and 10 local state repeal ban bill progress, legislated Texas)

  • Allen Mitchum||

    Sounds like a parody from the Onion.

  • ||

    I went to Lowe's and bought a UtilTech Pro #0338931 LED 60W equivalent bulb. Its has none of the yellow plastic that the Philips bulb has. 800 lumens, 13.5W, 25,000 hours of life. Cheaper at $18.79 (after Lowe's credit card 5% discount), so break-even is quicker at around 3400 hours (142 days). Dimmability is also not fade-to-black (with my dimmer) but acceptable. A better choice than the Phillips bulb. Economically, I say wait except for lights that you leave on for 10 hours/day or more.

  • ||

    Regarding Philips etc...
    Philips, Osram, the UN and the World Bank:
    How we will "en.lighten" the World in 2012

    The worldwide en.lighten program:
    Public subsidies to allow major manufacturers to dump otherwise unsold bulbs on developing countries
    freedomlightbulb blogspot com/2012/02/philips-osram-and-un-how-we-will.html
    .

  • ||

    These guys already cracked one open, pretty interesting inside, perhaps not still worth $50!:

    http://store.earthled.com/blog.....o-2700-900

  • LED Lighting Wholesale||

    There are many different LED light bulbs now in 2012. I suggest you look at http://www.ledlightingwholesale.com for a huge selection of premium LED lighting solutiona.

GET REASON MAGAZINE

Get Reason's print or digital edition before it’s posted online

  • Progressive Puritans: From e-cigs to sex classifieds, the once transgressive left wants to criminalize fun.
  • Port Authoritarians: Chris Christie’s Bridgegate scandal
  • The Menace of Secret Government: Obama’s proposed intelligence reforms don’t safeguard civil liberties

SUBSCRIBE

advertisement