Compact fluorescent lamps (CFLs) have become required in recent years, but do th

Question

Compact fluorescent lamps (CFLs) have become required in recent years, but do they make financial sense? Suppose a typical 60-watt incandescent lightbulb costs $.48 and lasts for 1,000 hours. A 15-watt CFL, which provides the same light, costs $3.55 and lasts for 12,000 hours. A kilowatt-hour is 1,000 watts for 1 hour. Suppose you have a residence with a lot of incandescent bulbs that are used on average 500 hours a year. The average bulb will be about halfway through its life, so it will have 500 hours remaining (and you can’t tell which bulbs are older or newer). If you require a 10 percent return, at what cost per kilowatt-hour does it make sense to replace your incandescent bulbs today?

Explanation / Answer

Answer: We are again solving for the breakeven kilowatt hour cost, but now the incandescent bulb hasonly 500 hours of useful life. In this case, the incandescent bulb has only one year of life left.The breakeven electricity cost under these circumstances is:

[–$0.48 – (60 / 1,000×500×C)PVIFA10%,1] / PVIFA10%,1= [–$3.55 – (15 / 1,000×500×C)PVIFA10%,24] / PVIFA10%,24

C = –$0.005905

Unless the electricity cost is negative (Not very likely!), it does not make financial sense to replace the incandescent bulb until it burns out.

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