Adoption of New Bulbs Requires Big Subsidies and Killing Incandescents
The full implementation of the incandescent light bulb ban takes effect in two weeks, which in the U.S. government’s anti-liberty wisdom will effectively eliminate the competition to companies like Cree, Inc., who one industry analyst has said is trying to do a “land grab” of the alternative lighting market.
Besides the illegalization of the Thomas Edison’s filamentous light, Cree last week received a $30 million tax credit from the Department of Energy to expand its manufacturing in Racine, Wisc. and Durham, N.C., where it is also headquartered. That was the second installment for Cree from the Advanced Energy Manufacturing Tax Credit Program, which was funded by $2.3 billion from the Recovery Act. The first windfall for Cree from the stimulus was a $39-million tax credit, as well as $1.8 million for research and development. This is in addition to millions of dollars in federal grants and contracts, plus deals for much more with state and local governments to essentially smash perfectly good incandescents to replace them with Cree’s light-emitting diodes (LEDs).
“With this project,” an announcement of the latest DOE giveaway explained, “Cree is taking the next step toward its goal of making traditional lighting products obsolete through the use of advanced LED technology with significant estimated annual energy savings.”
It always helps when your government mandates your competitor’s destruction while at the same time pours other peoples’ money into your company’s development – presumably a recipe for victory. Unfortunately those darn consumers keep getting in the way, and some retailers are trying to find a way to accommodate them as long as possible. According to FoxNews.com, Home Depot is urging customers to buy up the last of the incandescent bulbs before they are criminalized.
“Get them while you still can,” the nation’s largest bulb retailer urges on its Web site. “Stock up on incandescent light bulbs before they are completely discontinued.”
FoxNews.com reported that Home Depot has stockpiled enough of the old-fashioned version to last six months into 2014, at which time they expect to be out of 40-watt and 60-watt bulbs. Seventy-five watt and 100-watt bulbs are already outlawed. Then the only legal choices that will likely be widely available are compact fluorescents (a mercury-filled toxic hazard when broken) and the LEDs made by Cree and a few others.
The fact that retailers have built up a huge inventory of the incandescent bulbs shows there has been no diminished demand for them. Yet Congress and President Bush in 2007 passed the law that treated incandescents as though they were the endangerment to public health.
The choice left for consumers will be far less disposable income because of what they are forced to spend on light bulbs. Last month NLPC found a six-pack of General Electric, “Double Life” 40-watt soft whites online at Home Depot for $3.97. That works out to 66 cents per bulb. Cree’s LED competitor to that bulb, while it consumes only six watts of energy, costs $9.97 at Home Depot – per bulb. That means 15 of the GE soft white incandescent bulbs could be bought for the same price as the single Cree LED. Or put another way, Cree wants you to believe its LED will last longer than if you replaced a bulb in the same fixture 15 times, and/or that the energy savings will make up the difference.
Maybe it will, or maybe it won’t, but shouldn’t it be the customers’ choice to decide whether they want the cheaper bulb that uses more electricity and delivers a light quality that many people prefer?
As Americans’ preferred lighting delivery method vanishes, Cree looks to fill the void. With the multi-millions of DOE dollars to get a leg up and the ban to make the competition “obsolete,” the company is trying to capitalize.
“Remember, Cree is still in expansion mode where they’re trying to do a land-grab, effectively, of the LED and alternative lighting space,” said Peter Wahlstrom, a senior analyst with the investment research firm Morningstar, to the Durham Herald-Sun. “I would just reiterate that it’s still an under-penetrated market, particularly on the residential side.”
Two years ago a Rasmussen poll found that 67 percent of respondents disapproved of the incandescent ban. Seventy-two percent said light-bulb choices are none of the government’s business. And whether new bulb technologies would have a positive or negative impact on the environment – which is the justification for the incandescent ban in the first place – was split down the middle in the poll.
In order to get customers to adopt the different lighting technology, Cree and its LED competitors like Philips are seeking the help (again) of – you guessed it – even more government-funded or –mandated programs to subsidize the costs of the higher-priced bulbs they sell.
“They’re all trying to take advantage of rebates and Energy Star qualifications, and things like that,” Wahlstrom said.
The stimulus grants ($69 million plus), of course, are also intended to help the “land grab.” While DOE publicized the current $30 million award last week, so also did Cree earlier this month announced a new 75-watt incandescent equivalent LED bulb. The only way that product becomes remotely appealing to consumers is if it receives millions of dollars more in government subsidies, because right now it retails for $23.97 per unit. The $30 million is intended to help cover the costs of new manufacturing machinery at Cree’s two plants, so maybe that will bring the 75-watt bulb price down a few cents.
“Our initial reaction was sticker shock given that the 75 watt equivalent is 85 percent more expensive than the 60 watt equivalent, yet produces only 38 percent more light,” said analyst Andrew Huang of Birmingham, Ala.-based investment firm Sterne Agee, to the Triangle Business Journal.
In other words, no one is going to buy it – no one, that is, except for the same people who can afford to buy taxpayer-subsidized $100,000 electric cars. Even Cree has admitted in its filings with the Securities and Exchange Commission that its business model depends on government mandates and subsidies.
“If governments, their agencies or utilities reduce their demand for our products or discontinue or curtail their funding,” Cree reported, “our business may suffer.
“Changes in governmental budget priorities could adversely affect our business and results of operations. U.S. and foreign government agencies have purchased products directly from us, and products from our customers, and U.S. government agencies have historically funded a portion of our research and development activities…. If government or utility funding is discontinued or significantly reduced, our business and results of operations could be adversely affected.”
Thus the “sustainability” that the alternative energy industry, environmental groups and the Obama administration emphasize so often has nothing to do with support from the free market, and everything to do with endless government subsidies.
“We do whatever it takes to try to drive adoption and right now,” said Mike Watson, Cree’s vice president of corporate marketing, to the Triangle Business Journal.
Yes, that 137 percent increase in Cree’s lobbying expenditures as the stimulus bill was pieced together in 2009 is still paying off – “whatever it takes.”
Paul Chesser is an associate fellow for the National Legal and Policy Center and publishes CarolinaPlottHound.com, an aggregator of North Carolina news.