Feds Pay $10 Million for $50 Light Bulb

The spectacular failure of a federal plan to create cheap, green lighting




Meanwhile, a lot has happened in those five years. Americans are (perhaps grudgingly) adopting new light bulb technologies; experimenting with CFLs, halogens, and LEDs. The florescence of options was partially due to the fact that the relevant technologies reached a natural tipping point, partially due to the increasing cost of energy, and partially a response to the impending ban. (The end of the 100-watt incandescent was targeted for this year, with lesser wattages slated to fall victim on subsequent New Year's Days.) In other words, in the time that elapsed between conception and delivery the prize has become perfectly irrelevant.

The "L Prize" fiasco is a reminder that while prizes can be a wildly successful way to stimulate interest and investment in a particular problem—think of the X Prize—the way they are structured matters. A lot.





The trade publication Energy Efficiency & Technology notes that the bulbs that are coming to market are actually a little different than the model that won the competition: "The commercial lamp has three rather than four optical segments and uses fewer LEDs. The reason, says Philips, is that LED technology has progressed a bit even since the end of the contest." In other words, the carrot is worse than irrelevant. Philips dropped whatever they had into the feds' laps in order to grab the prize and will continue to improve the bulb, running as fast as they can ahead of the stick. (Frankly, it's a little surprising the sticky gears of the energy bureaucracy didn't require the company to stick with the federally tested and approved model in order to maintain its favored status. Thanks goodness for small favors.)


But wait: Why would a company that sells power want to subsidize products that help people consume less of what they're selling? Ordinary economics no longer applies once you go through the looking glass into much of the heavily regulated utility sector. In California, for example, profits and consumption have been "decoupled": Prices are based solely on what the state deems to be a fair rate of return. Which means that more demand for energy—accompanied by the possibility that new power plants must be built—is just an expensive pain in someone's butt, not an opportunity to make more money.

Add in a nudge from your industry's primary federal regulator, and voila!: Power companies are dropping boatloads of Hamiltons on their customers. In fact, that $10 figure is likely to increase as the Department of Energy pressures utilities to take a bigger bite out of the $50 monster they helped create.

The race to create better, greener light bulbs was underway before the 2007 legislation. The ban intensified the pace. The badly designed, poorly executed L Prize did little more than introduce an overpriced lame duck light bulb into the mix.

Katherine Mangu-Ward is managing editor of Reason magazine.