The era of cheap electricity is coming to an end as the Ministry of Economic Affairs announced on Thursday a sweeping and dramatic price hike on electricity in an effort to “rationalize” the nation’s power pricing. People from all walks of life and industrial electricity power users will soon feel the pinch when the new electricity rates go into effect on May 15.
However, the latest electricity pricing policy will also have positive effects, one of which is not the resuscitation of the financially troubled Taiwan Power Co. Apparently, local LED companies will number among the few winners in this losing game. With the arrival of the high electricity bill age, people will be forced to think how they can reduce power consumption and become more willing to splurge on energy-efficient appliances and lighting, which carry higher price tags.
Currently, a LED bulb is still three times more expensive than a compact fluorescent light bulb, which is now commonly used to replace inefficient incandescent bulbs — only half the way to triggering an extensive replacement demand.
A rally in the share prices of local LED companies illuminated the stock market on Friday, one day after the ministry’s announcement to raise electricity rates by 17 percent for households in the main power consumption bracket and to jack up prices by an average of 35 percent for industrial users.
The ministry said it would subsidize the installation of 326,000 LED street lamps throughout the nation within three years as well as instilling other supporting measures aimed at minimizing the impact that the price hike will have on local government budgets. The demand for replacement LED bulbs is expected to generate NT$4.48 billion (US$151.8 million) in revenue of for local LED companies, the ministry said.
The stock prices of the nation’s two biggest LED chip packagers, Epistar Corp and Everlight Electronics jumped on Friday, eclipsing the main bourse’s 1.64 percent increase. LED chip suppliers Formosa Epitaxy Inc and Lextar Electronics Corp’s share prices soared 4.64 percent and 7 percent, respectively.
Hopefully, the new replacement demand and increasing global demand will help bring local LED companies out of the woods. Everlight is one of the very few Taiwanese LED suppliers that posted profits — NT$1.32 billion — amid oversupply and frozen demand on weak global economy. Lextar said last month revenue grew by 10 percent on the back of recovering demand and it expected factory usage to rise gradually over next few months from the current level of 70 percent.
In addition to encouraging the substitution of incandescent street lamps with energy-saving LED ones, the ministry will also subsidize rooftop solar panel installations and recreational power generation systems.
Taiwan’s high population density limits the scale of solar panel installation so increasing LED lighting installation should be a more practical strategy to cut electricity consumption, NPD DisplaySearch analyst Leo Liu (劉景民) said. LED lighting is expected to massively replace traditional forms of lighting in 2014, given the falling LED lighting price as well as world governments’ push for aggressive reduction of carbon emissions, Liu said.
Taiwan is not alone in embarking on this new era. In Europe, the LED lighting market is expected to grow 40 percent in annual composite growth rate to US$10 billion during the 2011 to 2015 period as more European countries curb the sale of incandescent bulbs and lamps and increase electricity rates, Taipei-based market researcher TrendForce Corp predicted. A 7-watt LED bulb used for eight hours a day will save eight units of power consumption a month, or US$2 per month, compared to a 40-watt incandescent bulb, it said.