Friday, 5 May 2017

LEDs and life cycle costing

It’s late in the evening. The sun is going down steadily and darkness is slowly creeping in your room. You move over to the switch and turn on the lights. A flicker of light and then darkness prevails. The bulb had failed. It’s still not late enough for the shops to close, so you head out to buy a new light bulb. The shopkeeper shows you the “latest low- energy technology” which is 10 times costlier than your regular bulb. You ignore it as usual and buy the cheap light bulb and go home. Sounds familiar?
They say technology comes at a price. But is it really true? A lot of time and energy is spent in developing new and improved systems and it is natural that a higher price is demanded for it. Almost all of the legitimately developed new technology assist the user in a better way than the existing ones. They are either more resource efficient, are more accurate and precise or simply offer a better user experience and it is precisely these features that result in a higher price being quoted for these new systems. But if a new technology is more efficient, doesn’t it mean that it will result in savings during its usage? Is it cheaper in an overall context which in other words is called Life Cycle Costing?
In this article, we are going to see how technology has changed in the area of household lighting systems and is it really worth paying more for new technology.
In the late 90’s and early 2000’s one of the most commonly used form of domestic lighting in India apart from the tube-lights were the incandescent bulbs. These gave a typical yellowish light and would become very hot as one used it for prolonged duration. A slight fluctuation in voltage or a small drop of water on the bulb’s surface would immediately damage it. These were typically 40W or 60W bulbs. They are still manufactured and probably used by a lot of people in the country. These were quite cheap and as of 2017, cost around ₹15 only.
In the mid 2000’s CFL or Compact Fluorescent Lamps started becoming more popular. They were already there in the market but took some time to gain popularity due the exact reason why LEDs have taken so much time to become popular today. These used a similar technology to the aforementioned fluorescent tube-lights. However, their initial cost was much higher than the conventionally used incandescent bulbs. People would say things like “You have to pay for the technology” or “technology comes at a price”. However, it was quickly proved that although one pays a higher price for the CFL they would last longer, were less prone to damages and gave same amount of light while consuming lesser power. A typical 15W CFL consumes 1/4th the power of a 60W incandescent bulb but gives more light than it. This led to significant savings in the long run.
Fast forward to 2010 and onward and a new technology was gaining popularity. Light Emitting Diodes or LEDs were making their way in into the lighting market. Initially they were really expensive but their key feature was almost 1/3rd power consumption of CFL and less than 1/10th power of an incandescent. Most large scale industries realized the potential for savings and started switching over to LED lighting however up till 2015-16 LEDs still hadn’t made it into the households. As of 2017 too they are not very commonly seen in houses. The reason is the same old misconception that it is “expensive” but it certainly is not! LED lights last for 10 years as compared to just about a year of incandescent. Hence, it is important that one compares the Life Cycle Cost and not make a decision just based on the initial cost.
Let’s compare. The following is a simple table that compares these three types of lighting systems along with their costs and lighting levels (Lumens).
Values in red colour are extrapolated.
It can be observed from the above table and the pictures that a 60W incandescent bulb is capable of giving 710 lumens of light and costs ₹15 only. However, we know from experience that it lasts for just about a year. A 15W CFL on the other hand costs around ₹120, consumes only 25% of the power of incandescent bulb but gives out 810 lumens of light. It lasts for around 2 years.
Coming to the LEDs, one can see that two LEDs have been compared. The first one is a 4W LED bought in 2014 whereas the second one is a 9W LED by the same manufacturer bought in 2017. The 4W LED was bought in 2014 for a whopping ₹450! The 9W LED was bought for ₹150 in 2017. Although the M.R.P on the 9W LED reads ₹250, the shopkeeper was happy to offer 1 lamp for ₹200, 3 lamps for ₹500 and 6 lamps for ₹900, which results in the lowest price of ₹150 per lamp. The reason behind explaining all of this is to throw some light on the rapid fall in prices of LED lamps. While LEDs were costing ₹ 113/ watt in 2014, they have fallen down to ₹ 17/ watt in 2017 which is an 85% drop in prices!
It is evident that LEDs are becoming cheaper by the day and the government as well as manufacturers are doing their part to make it affordable for the common man. But the question is, was it not affordable before? Did it not make financial sense in 2014 when it was costing ₹ 113/ watt?
Let’s have a look at the last column, LCC over a period of 10 years. This is the most interesting observation.
Taking current price of ₹150 for a 9W LED light, 2.7 hours of daily operation, ₹7/ kWh of average electricity cost and the life of 1, 2 and 10 years for the incandescent, CFL and LED respectively. It is observed that over a period of 10 years, an individual buying only 60W incandescent lamps would end up spending around ₹4,289 including the initial cost, cost of replacement every year and the electricity consumed. Whereas, an individual using LEDs would spend only ₹771 over a period of 10 years. Point to be noted that the time value of money and the ever increasing cost of electricity has not been accounted for. In an actual scenario the difference will be more significant.
For argument’s sake, if one replaces the cost of 9W LEDs by the actual M.R.P of ₹ 250, it still shows an expense of just ₹871 over 10 years as compared to ₹1635 for CFL and ₹4,289 for incandescent.
But the most interesting observation is this.
If one just takes the prices of the year 2014 when LEDs were “expensive” and do the same calculation.
It is observed that the LCC over a period of 10 years is almost the same as CFL and still much lower than an incandescent lamp. This just emphasizes the fact that the typical human mentality is to get bogged down by the initial cost of a new technology without analyzing the life cycle costing and making a poor choice. This is particularly true for new, resource efficient and clean technologies such as LEDs and solar power.
In the case of solar, people generally shoot it down assuming that it is very expensive. However, a solar power plant lasts for 25 years as compared to 5-6 years of a diesel genset. Taking into account the rising fuel prices, and genset maintenance expenses, it is clearly seen that a solar power plant is much cheaper. The same is the case with BEE star rated appliances. Although they are a tad bit expensive up front, they lead to an overall savings when one understands the life cycle costing.
In conclusion, adopting energy efficient technology is not an expense but an investment. One should always look into the LCC of an investment and compare it with existing conventional methods to get a true understanding. This will allow for faster adoption of energy efficient technology. Our country has its fair share of power woes and while the government is trying to do its part by offering subsidies and addressing power issues, it is up to the common man to be smart, understand the life cycle costs and make use of energy efficient technology.