by Richard T. Stuebi
While grocery shopping yesterday, I found that our local store has finally started stocking GE (NYSE: GE) compact flourescent lightbulbs (CFLs).
Candidly, my experience to date with CFLs has not been positive. Last year, I went to Home Depot (NYSE: HD), where I tend to buy household gadgets, thinking they would have the best selection of CFLs. At least back then, Home Depot didn’t carry GE CFLs (some say this was because of ex-CEO Bob Nardelli’s lingering resentment of having been passed over for Jeff Immelt when Jack Welch stepped down as CEO of GE), so I bought what Home Depot had in stock: a carton of private-label CFLs, for about $10 for a 5-pack.
I wish I could say that I was blown away by the CFLs, but regrettably, I wasn’t. In my assessment, the light quality provided by the CFLs was too pale, and it took far too long (10-20 seconds) to reach even a minimally acceptable “warm” color. Furthermore, the CFLs were not usable in many of the applications in my home: they don’t fit into lamps with tight covers/shades, and when installed to a fixture with dimmers, they emit an annoying loud buzzing sound — and an awful Snap-Crackle-Pop (and I don’t mean Rice Krispies) when the dimmer is turned down.
My initial foray into CFLs thus resulted in considerable disappointment. Although I don’t feel good about it at all, so far I’ve generally stuck with the old horribly inefficient incandescents — they at least produce a quality of light that I’ve come to expect.
I’ve been told that CFL quality varies, and that GE’s CFL products are quite a bit better — albeit more expensive — than the generic brands of the kind I had bought. I didn’t search all over town for GE CFLs, but I never saw them anywhere I happened to be shopping. Until this weekend.
Now, here in front of me finally were individually-packaged GE CFLs, the 15 watt (60 watt incandescent equivalent) priced at $4.49. Two shelves below were the standard GE incandescent 60 watt soft white lightbulbs, priced at $1.59 for a 4-pack, or about $0.40 per bulb. The CFL is thus 11 times more expensive, on a first-cost basis, than the incandescent. For the average customer, who is typically very conscious of the initial cost and pretty clueless about life-cycle economics, this is a really big spread.
In small print on the CFL packaging, GE claims that the 15 watt CFL bulb will save over its 3000-hour lifetime $13 worth of electricity (at $0.10/kwh) relative to 60 watt incandescents offering the same lumination.
$13 worth of electricity savings for an extra $4 up-front sounds like a pretty good deal. However, of course, it all depends on how many years it will take the user to generate the $13 of electricity savings — which in turn depends on how much the user uses the lightbulb.
A year is comprised of 8760 hours, so if the CFL operates 24/7, it will only take a few months to generate $13 in savings. Perhaps more importantly, it will only take a few weeks to pay back the extra $4 for the CFL instead of the incandescent. But, few of us use any lights anywhere near that much.
For a lamp used an hour a day, or about 300 hours a year, it will take 10 years to achieve the $13 in savings — or about 3 years to recover the $4 extra premium for buying the CFL instead of incandescents. A 3-year payback represents a good internal rate of return, on the order of 20%, which is far better than the long-term returns historically offered by the stock market.
So why don’t I pursue a 20% financial return? On further consideration, I am put off for two reasons.
First, I can see for sure the $4 extra leaving my hands today to buy the CFL — but I don’t have anywhere near the same degree of confidence that I’ll actually generate the economic savings at the desired pace. Will I really use the CFL about an hour a day? It might be more like 15 minutes a day, leading instead to a 12 year payback period — an outright unattractive financial return.
Second, I am strongly influenced my past negative experience with CFLs. If I buy this expensive lightbulb today, will I like its light? Will I be annoyed every time I turn it on and wait for it to have a color I can barely tolerate? Will I swap it out for a regular incandescent after a few weeks?
When I reflect upon it further, it’s the second set of considerations that put me off from buying that GE CFL. I bought CFLs in the past that I disliked, and don’t use. They were a bad investment. Even though it’s relatively small dollars involved, I don’t like making mistakes — and I really hate making the same mistake twice.
I speculate that I might not be alone in having a poor first impression of CFLs. Such a bias will probably need to be overcome by a no-cost favorable experience with a good CFL. If they really want to build the market, players like GE might consider an investment in a mass-scale public free trial — a mailbox stuffer? — of CFLs. I know that if I got a GE CFL for free, I’d give it a go — and assuming I liked the product, maybe then I’d consider buying some at $4.49 per.