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Expanding Market, Compact Fluorescents Jim DiPeso Con.Web, June 26, 2003

CFL Sales Looking Bright, Even After Post-Energy Crisis Dip

Compact fluorescent lamps are holding on to an expanded beachhead in the residential lighting market, even as recent sales have dipped from their extraordinary high during the 2000-01 energy crisis, according to Northwest Energy Efficiency Alliance reports and industry observers.

With energy off the front pages, ongoing consumer interest in reducing electricity bills is likely to continue supporting CFL sales, the Alliance reported in a market evaluation study prepared by ECONorthwest in 2002.

CFL bulb prices have fallen by about two-thirds since 1997, which is attracting more consumers, according to Costco, the region’s leading CFL retailer.

Increasing manufacturer interest in CFLs also is evident.

CFLs, however, still account for a small share of the residential lighting market, and sustained high sales will be necessary to transform the household lighting market, the market evaluation study reported.

Even at the height of the energy crisis, with power shortages on the front pages and a compact fluorescent discount coupon campaign in full swing, CFLs accounted for only 11 percent of total Northwest light bulb sales, the study noted. Fewer than 40 percent of households purchased even one CFL.

Cost is still a significant barrier to expanded CFL sales. Quality also remains a concern, despite improvements.

"The product appears to be viable for some people for some applications," said Ken Keating, Bonneville Power Administration market transformation coordinator and Alliance board member. "Long term, there is still a lot more energy efficiency to be acquired in lighting. This is still a blip," Keating said.

CFL Sales Down ... But Still Up Northwest sales of compact fluorescent bulbs are running at about 4 million units per year, said Marci Sanders, the Alliance’s residential lighting program coordinator. While sales have fallen from the estimated 6.7 million snapped up in the region during 2001, the volume is substantially higher than the estimated 381,000 sold in 2000, according to Alliance figures. (In addition to the 6.7 million bulbs sold in 2001, utilities gave away an additional 1.6 million that year, according to the market evaluation study.)

The Alliance had expected 2002 CFL sales to reach 2.5 million, but an autumn buying surge helped push the volume to 4 million, Sanders told the Alliance board April 30. Northwest lighting sales typically rise in the fall, as daylight noticeably diminishes. In addition, a national Energy Star CFL promotion, Change a Light, was in full swing, Sanders said.

Since 1997 the Alliance has sponsored a residential lighting program to boost sales of compact fluorescent lights and fixtures. Between 1997 and 2000, manufacturers were given incentives through the compact fluorescent fixture and bulb programs to increase availability of CFLs and reduce prices, according to the market evaluation study. In 2000, the study continued, the programs were combined into one and revamped to emphasize marketing partnerships with retailers and to support only Energy Star-certified bulbs and fixtures. More than 1,000 Northwest retailers have participated in CFL marketing activities.

Nearly 90 utilities participated in a CFL coupon campaign funded by BPA and utilities during the boom year of 2001. Coupons accounted for nearly 40 percent of CFL sales that year.

The market evaluation study found evidence CFL sales can be sustained without coupons. In a 2001 survey of 1,421 Northwest consumers (included in the market evaluation study), 94 percent of respondents who had purchased a CFL said they would buy another even if coupons were unavailable.

Sanders estimated that 75 percent to 80 percent of CFLs sold in 2002 were purchased without coupons. "That is a very good sign," she said.

The survey sample included 246 people who had purchased a CFL, 38 who had received free CFLs from utilities, 316 who had purchased only incandescent bulbs in the three months preceding the survey, and 821 who were questioned about CFL awareness.

Another sign of market sustainability, the survey said, were the future intentions of respondents who had purchased only incandescent bulbs. "More surprisingly, 64 percent of incandescent buyers indicated they intend to purchase a CFL in the next year. This is a strong potential indication of the sustainability of future CFL sales," the survey said.

Efficiency Opportunity If so, there will be plenty of opportunity for CFLs to improve residential lighting efficiency. The medium load forecast for the Northwest Power Planning Council’s upcoming regional plan estimates that cost-effective residential lighting efficiency potential will total an estimated 660 average megawatts by 2025, said Tom Eckman, the council’s conservation resources manager. Existing housing stock accounts for about 80 percent of that prospective resource, he added.

That potential number doubled following a lighting log study carried out in 160 homes by Tacoma Power, Eugene Water & Electric Board and other utilities in the late 1990s, Eckman said. The study found that homes have more lighting fixtures than previously thought and lights are being left on longer. "We had an empirical basis to do a better forecast," Eckman noted.

Falling Prices The consumer survey showed saving energy was the leading reason why Northwesterners bought CFLs in 2001.

Even though energy no longer headlines the news, CFL energy savings remain attractive and falling product prices have helped the products hold their own in the market, said Collin Cremo, assistant general manager for Costco’s U.S. hardware purchasing division.

"Pricing is going down and that is very positive for the consumer. You used to pay $15.99 for a two-pack of bulbs. Now, you can get a four-pack for $11.99," Cremo said.

The Alliance estimates average prices fell from $14-$28 per bulb in 1997 to $5-$10 in 2002.

Large retailers such as Costco and Home Depot have led the market in offering multibulb packages that have driven down prices, Sanders said. These two major retailers account for a significant share of Northwest sales, she said.

In the consumer survey, 38 percent of CFL buyers indicated they had purchased the bulbs at a discount retailer. However, 35 percent said they normally buy light bulbs at grocery stores, an indicator that supermarkets could be "an important retail target for increasing market penetration," the survey said.

Manufacturer Interest The growing consumer interest in CFLs has attracted an influx of manufacturers to the market.

Sanders said only 10 percent of the CFLs purchased in 2002 were made by the three big multiproduct lighting companies--Philips, Osram Sylvania, and GE. Smaller manufacturers that sell only CFLs "are getting (shelf) placement with better pricing because they are willing to cut deals with retailers," Sanders said.

Another reason CFLs are holding their own is the introduction of new bulb designs to suit consumer tastes.

Keating said manufacturers are "responding to customer demands for products that fit in different applications. You can get bug lights, chandelier lights, recessed can lights, even green and red CFLs for holiday use. You can get really small ones. I have one that measures no more than 4 inches from stem to stern."

Keating said manufacturers understand they can’t compete solely on price. "They need to give customers something they can use."

For example, consumers have asked for smaller bulbs, to which manufacturers have responded, said Matt Donati, CFL product manager for Philips Lighting in the U.S.

"We sell eight-packs of 60-watt-equivalent lights that are small enough for light bars in bathrooms," Cremo said.

Donati believes consumers will be more receptive to CFLs that fit their idea of what light bulbs are supposed to look like. "The key is to try to make them as incandescent-appearing as possible," Donati said. "People see the spiral shape and it looks like curly fries. They ask, ‘What’s that?’ If you give them a bulb that looks more like a, quote, light bulb, they will be more appealing."

Philips’ Marathon family of compact fluorescents includes globe-like "A-shaped" bulbs that resemble incandescents, as well as conventionally designed CFLs.

Sanders said Westinghouse plans to launch a "designer bulb" in different colors that will be specially suited to accent lighting typically provided by small halogen incandescent lights.

Quality Issues Quality, however, remains a bugaboo afflicting the CFL market, Keating said. Despite continuing improvements, enough low-quality bulbs are on the market that the U.S. Department of Energy is concerned they reflect poorly on the Energy Star label for energy-efficient consumer products, Keating said.

Energy Star is a self-certification brand, so manufacturers are responsible for ensuring their products meet Energy Star standards. Unlike the appliance industry, the residential lighting industry has not developed internal testing protocols to make sure products are worthy of the Energy Star label, according to the Alliance.

DOE has proposed changing Energy Star specifications to require CFL manufacturers to submit long-term performance data before they can use the Energy Star label.

As a result of quality issues, the Program for the Evaluation and Analysis for Residential Lighting (PEARL) has tested bulbs for quality since 2000. PEARL sponsors include BPA, Sacramento Municipal Utility District, Pacific Gas & Electric and energy efficiency utilities in the Northeast.

Here is how PEARL works, according to a presentation at an Energy Star meeting this year by Noah Horowitz of the Natural Resources Defense Council, chairman of the PEARL advisory board. Bulbs are purchased anonymously from retail stores. Bulbs and ballasts are tested at Rensselaer Polytechnic University’s Lighting Research Center. Tests cover lighting and ballast performance, lamp life, lamp start time, dimming, color rendition, power factor and other characteristics. Two testing cycles are carried out per year. Ten fixtures and 20 CFL products are tested in each cycle.

Horowitz said test results are given to Energy Star program managers at the Department of Energy and Environmental Protection Agency. The agencies can use the information to remove the Energy Star label from substandard products.

The recent growth in the CFL market "has attracted many new, unknown, and in some cases, unreliable manufacturers offering products with the Energy Star label," said an article about PEARL in a recent Alliance newsletter.

Keating said PEARL is negotiating with manufacturers, distributors and retailers to share testing costs. "They want to get the bad products out of the market," he said.

Costco’s Cremo said "stricter tests" are needed to determine how well CFLs really hold up when used in real-world environments such as inside fixtures. In comments on DOE’s proposed Energy Star specification changes, NRDC pointed out that higher operating temperatures common in recessed can fixtures can shorten bulb life. NRDC also pointed out that CFL manufacturers often change contract manufacturers and component suppliers, which can result in uneven quality.

Still, Keating said compact fluorescents have come a long way since the late 1980s, when ungainly bulbs dominated what was then a tiny CFL market. Keating chuckled as he recalled a brand he nicknamed "Smoky Joes" because of a bulb that overheated and began smoldering.

In the consumer survey, only 3 percent to 4 percent of CFL buyers indicated they were dissatisfied with their purchases, and 78 percent of the dissatisfied indicated they were likely to buy another CFL in the coming year. The leading reason for dissatisfaction, cited by 34 percent of those not satisfied, was that CFLs were not bright enough. Eleven percent cited early burnout.

Nearly 55 percent of CFL buyers who were satisfied with their purchases listed long product life as the leading reason for their satisfaction. Thirty-six percent cited energy efficiency, while 31 percent mentioned light quality.

CFL Barriers Cost remains the leading barrier to expanded CFL sales, according to the consumer survey. Of the 316 respondents who had purchased incandescent bulbs only, 38 percent listed price as a reason they had not purchased CFLs. Nineteen percent had not heard of CFLs, while 15 percent said they could not find a type or size they wanted.

One way around the price barrier, Philips’ Donati said, is to change the identity of light bulbs from a commodity to a value product by educating consumers about the varying ways different kinds of lighting can be used to decorate their homes. "Show them how lighting adds value and how lighting can be used to change the look of their homes," Donati said.

He advocated expanded awareness of CFLs and their attributes. "I do the mom test," Donati said. "I show my mom a CFL and ask her, ‘What’s this?’ She doesn’t know. I say, ‘Come on, mom, it’s a light bulb, I work for Philips Lighting.’ People just aren’t as aware of them."

In a May 2002 report, ECOS Consulting described barriers to CFLs in new home construction. At least 11 parties--few with lighting design expertise--may be involved in specifying new home lighting. Most new home energy efficiency programs do not address optimizing lighting or architectural designs that complement daylighting, the report said.

Home-buyers rank style and aesthetics as their highest lighting priority, ECOS said. "The more that energy-efficient lighting is designed to be attractive and aesthetic, the more marketable and permanent it will be, even if this means giving up some potential energy savings to ensure consumer satisfaction," the report said.

Lower prices, better quality, and expanded consumer awareness all will be keys to building the CFL market, Keating said, observing that market transformation often takes time.

Costco’s Cremo is confident CFLs eventually will replace incandescents entirely. "From what I’ve seen of the (CFL) technology lately, the incandescent’s days are numbered," he said. "I tell utilities to keep bombarding people with CFL information. They’re going to get better and better."

More Information:
Northwest Energy Efficiency Alliance CFL market evaluation study
Alliance residential lighting program