The Higher Cost of LEDs: The Reasons May Surprise You|
Article- November 2011 By Larson Electronics.com
Larson Electronics LED Light Bar
By now most of you have heard in some way or another about how LEDs are revolutionizing lighting. With major advancements in LED output seemingly occurring every day, and manufacturers scrambling to develop their own particular LED alternatives to the classic incandescent bulb, it seems almost a certainty that LEDs are the lighting of the future. And why not? LEDs are far more efficient than the trusty incandescent, they last tens of thousands of hours longer, and if you drop one on the floor you won’t be paranoid for a week about stepping on a shard of glass. Although the early LED entrants into the everyday consumer markets were met with some less than flattering reviews due to their cold bluish color light and weak output, these problems are pretty well solved and no longer an issue. Now we have LED lights with all the warmth of a 60 watt incandescent and the ability to produce temporary blindness if we were to look directly at them. So, with all this being the case, why in the world haven’t we ditched the incandescent bulb and embraced LEDs already?
To put it bluntly, LEDs are expensive. Sure, you can make a solid case for the total lifetime savings in energy and bulb replacement costs that LEDs provide and you’d be right. Over the long haul, LEDs are simply much more cost effective over the long run. We’ve made this point many times ourselves. The savings LEDs can provide are even faster appearing for larger commercial operations that replace old fixtures with LEDs on a grand scale, with many companies seeing net savings after investment as soon as a year and a half after installation. For the everyday consumer like you and me however, such savings are much slower in coming and harder to solidify into numbers we can appreciate while sitting at the kitchen table balancing the checkbooks. For most folks, when they are about to purchase new light bulbs, anything over five dollars for a 4 pack of 60 watt’s is expensive. Paying ten or fifteen dollars for a single LED bulb then is just plain ridiculous in their book. And just as it is fairly accepted that LEDs are now a viable lighting alternative poised to take over the market, it is also still understood that this simply is not going to happen until either LEDs become a great deal cheaper, or alternatives to LEDs disappear and the public acclimates to an entirely different perception of lighting in their homes. You can imagine which route would be most readily palatable for the average Joe.
Along with the great advances in LED technology there have indeed also come some improvements in their costs. Most experts agree that as the technology matures and demand increases, the price of an LED light bulb will certainly become more reasonable. There are, however, a few flies in the ointment here; ones which have little to do with the adolescence of a new technology and everything to do with geographic economics and politics. If there is one thing that can really wreak havoc with a new market, it’s international economics and political wrangling. If you want to really make a mess of a potential new market, one good way is to make sure it is beholden to foreign interests and that politicians are in charge of managing these interests. We are of course referring to the fact that the manufacture of LEDs relies on raw materials which China, by the luck of the geographical draw, has managed to have the vast majority of in their possession. Some experts estimate that China holds over 90% of these raw materials, and there is little doubt they are aware of the implications this holds.
LEDs require phosphors and rare earth elements in order to be produced in an effective form. China, with its heavy emphasis on developing its economic and political power, has seen an explosion of potential in the market for its rare earth minerals and as a result taken several steps towards managing this now almost indispensible resource. Manufacturers of everything from to cell phones, televisions, and solar power equipment and yes, LEDs, rely on a steady and adequate supply of these minerals. In 2010, manufacturers became quite alarmed when China announced its plans to cut back on its export of rare earth minerals. Although “sustainable development an overexploited industry” is one of the explanations given by Chinese officials, it’s difficult not to notice how rare earth prices going up 5 times their starting levels benefits their national economy. In some instances, rare earth prices rose so high that LED manufacturers cut production by 30-50% in an effort to wait until these mineral prices begin to drop again. Prices rose fourfold between January and July, an up to 1,500 per cent on average in the last year.
At the beginning of November this year, the Chinese government began a new program of issuing specialized invoices for its rare earth sector. This has resulted in many small Chinese companies who held significant rare earth reserves and illegal holders of rare minerals dumping their stockpiles into the market. While some are quite happy with this development as it has served to produce a quick drop in prices, this is a temporary reprieve at best. This latest effort by the Chinese government to consolidate and manipulate the rare earth markets will almost certainly result in a return to a steady increase in costs. The problem isn’t restricted to economic profiting either. In 2010, the flow of rare earth metals to Japan were interrupted when a dispute over territorial waters arose, perhaps signaling the first serious cause for alarm regarding these vital materials. If this demonstrated one thing, it was that China fully appreciates its position, and isn’t afraid to use the advantage it provides.
All of this has led many manufacturers to begin seeking ways to develop their products without a reliance on rare earth metals, but to date there has been little success. Everything from I-pods, to wind turbines, to LED light bars rely on these materials heavily in order to perform well enough for practical use. And so far, the decline in costs for these items has been quite perfunctory due to the severe spikes in the costs of the materials needed to manufacture them. So, although LEDs continue to be a strong alternative to incandescent lighting that “should” by all rights become the standard for illumination in the very near future, until some means of avoiding the use of rare earth minerals is devised, or China decides to loosen its grip on these now precious materials, prices will continue to remain too high for the average person to simply accept them as a practical replacement for the incandescent light bulb.