Opinion: the L Prize and the LED lamp market

Philips has won the L Prize – specifically the 60W-replacement LED lamp category – and deserves to be congratulated for its achievement.

The company receives $10 million in cash (more on this below), along with participation in Federal procurement contracts and energy-efficiency programs, which could prove to be even more valuable over the longer term.

But some questions and issues remain. The jury is still out on whether the L Prize can be considered a success, or a worthwhile use of taxpayers’ money.

Since inception, the L Prize attracted only one entrant – Philips – which has now been declared the winner. Two other teams declared their intent to participate but have not (to the best of our knowledge) submitted their samples for testing.

When the L Prize was first conceived, one can imagine that its proponents were hoping for a head-to-head race for the line, with multiple participants each spurring the others to greater achievements, and creating a positive knock-on effect for the whole LED industry.

Instead, the world’s largest lighting company has been the only entrant. While it’s not necessarily the DOE’s fault that only one company entered, was there ever much chance that the winner would come from outside of a very small list of major companies? And has the competition created the type of positive impetus to justify the investment of $10 million?

Another point is that the 60W-replacement category was one of three originally put forward. The PAR38-replacement category has been put on hold (or shelved – we wait to find out), while the 21st Century Lamp category was never defined beyond a headline 150-lm/W number.

Earlier this week, Cree said it had built a prototype lamp that had surpassed this 150-lm/W figure. And GE recently talked about the likely commercial availability of its dimmable 75W- and 100W-replacement lamps, which “are expected to arrive on store shelves in late 2012” – in other words, at least one year from now. Were the timings of these announcements a coincidence, given that GE and Cree were one of the teams that said they intended to participate in the L Prize?

It’s also interesting to note that the L Prize announcement comes hot on the heels of the House vote that rejected an attempt to repeal lamp-related legislation contained within the 2007 Energy Independence and Security Act (EISA). The L Prize is mandated by EISA.

The most important point concerns pricing and availability of the lamps. The Philips lamps were evaluated for various performance characteristics, and thoroughly field-tested. So far, so good. But these were a set of 2000 lamps that were lovingly hand-crafted, and were not in any sense the product of a high-volume manufacturing line.

The L Prize requirements say that “the intent of the L Prize is for products to be available on a mass-production basis in a competitive commercial market… Entrants must provide evidence that they are fully prepared to begin production at a capacity which exceeds 250,000 units per year for the first year of production and increased production in subsequent years.” Of course, this is for lamps meeting or exceeding the L prize performance parameters. Philips has said that its lamp “could arrive in stores as soon as early 2012.”

Target retail prices – which are prices to the consumer or end-user, after potential utility or retailer incentives are applied – were also listed in the L Prize document, but these were definitely targets rather than requirements. For 60W-replacement lamps, the target prices are $22 in the first year of production, $15 in year 2 and $8 in year 3.

To recap, as far as the $10 million prize is concerned, there are no strict timescales for when Philips has to start selling its L Prize lamp, and no mandatory price points that must be achieved. However, Philips’ manufacturing plan was clearly deemed acceptable – and since it’s Philips, the chances are that they will deliver. Otherwise, I guess DOE will just ask for its money back.

So what about the non-cash benefits of winning the L Prize? Multiple qualifiers from each prize category (if there are any others) may be selected to participate in promotional activities and incentives with various energy-efficiency programs (EEPs). If there are, eventually, multiple qualifiers, then competition will force these companies to push their lamp prices down. But what about the Federal procurement contracts, where Philips as the outright L Prize winner will – apparently – enjoy a monopoly? *

Back to the $10 million prize…the L Prize document says that “EISA authorizes cash prizes for the first successful entrant in each prize category. Cash prizes will be based on the availability of funding from future appropriations and private funding contributions as authorized by the EISA.” But a comment from “lightguy us” on our recent article said that “the budget bill passed yesterday by the US congress cut all the funding for enforcement of energy-standard regulations.” So perhaps Philips is not going to receive $10 million after all.

In conclusion, we look forward to hearing more details surrounding the issues raised in this article, perhaps demonstrating how the L Prize will benefit not just Philips but the rest of the SSL industry in the US. Your comments are very welcome (and can be made anonymously) - use the Post a COmment button below.

(*The L Prize document states: In addition to cash prizes, the L Prize authorization provides that the Secretary of Energy is to consult with the Administrator of General Services to develop federal purchase guidelines with the goal of conducting a Federal procurement of SSL products from the winner under the 60-watt incandescent and PAR 38 halogen categories.)

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