A Light Emitting Diode (LED) is a semiconductor device which converts electricity into light. LED lighting has been around since the 1960s, but is just now beginning to appear in the residential market for space lighting. At first white LEDs were only possible by "rainbow" groups of three LEDs — red, green, and blue — by controlling the current to each to yield an overall white light. This changed in 1993 when Nichia created a blue indium gallium chip with a phosphor coating that is used to create the wave shift necessary to emit white light from a single diode. This process is much less expensive for the amount of light generated.

Each diode is about 1/4 inch in diameter and uses about ten milliamps to operate at about a tenth of a watt. LEDs are small in size, but can be grouped together for higher intensity applications. LED fixtures require a driver which is analogous to the ballast in fluorescent fixtures. The drivers are typically built into the fixture (like fluorescent ballasts) or they are a plug transformer for portable (plug-in) fixtures. The plug-in transformers allow the fixture to run on standard 120 volt alternating current (AC), with a modest (about 15 to 20 percent) power loss.

The efficacy of a typical residential application LED is approximately 20 lumens per watt (LPW), though efficacies of up to 100 LPW have been created in laboratory settings. Incandescent bulbs have an efficacy of about 15 LPW and ENERGY STAR® qualified compact fluorescents are about 60 LPW, depending on the wattage and lamp type. Some manufacturers claim efficacies much higher than 20 LPW; make sure to examine system efficacy, which accounts for the power use of all components. In December 2006, the U.S. Department of Energy studied the efficacy of four luminaries. All four fell short of the manufacturers’ claims; the study implies that manufacturers are relying on measurements of how much light an isolated LED produces, rather than how much light an LED luminaire actually delivers.

LEDs are better at placing light in a single direction than incandescent or fluorescent bulbs. Because of their directional output, they have unique design features that can be exploited by clever designs. LED strip lights can be installed under counters, in hallways, and in staircases; concentrated arrays can be used for room lighting. Waterproof, outdoor fixtures are also available. Some manufacturers consider applications such as gardens, walkways, and decorative fixtures outside garage doors to be the most cost-efficient.

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