By Jennifer Kho and Adena DeMonte

If you have an energy-efficient lighting business plan lying around somewhere, it might be time to dust it off.

After Australia announced earlier this week that it will phase out conventional incandescent light bulbs over the next three years, Canada’s Ontario province is considering a similar move, and California’s proposal to ban the bulb seems somewhat more possible (See Could California Ban the Bulb?). These legislative moves come after giant discount retailer Wal-Mart announced it wants to sell 100 million compact fluorescent bulbs by 2008.

Compact fluorescent bulbs are the cheapest incandescent alternative, making them the main focus for now. But some researchers and entrepreneurs say they have superior alternatives in the works. More efficient and less toxic, these alternatives include light-emitting diodes (LEDs), and technologies based on conventional television displays, such as electroluminescence and field-emission lighting.

The ban in Australia is already sparking business for some of these startups. Gary Trott, vice president of product development for North Carolina-based LED Lighting Fixtures, said Thursday the company has received several inquiries from Australia in response to the ban. “Anything that happens like the incandescent ban is really going to help push our technology,” he said.

Venture capitalists also said Thursday they expect to see more lighting-related business plans as a result of all this attention. “People are going to start digging up their old LED ventures to see if there’s a way to go after the market,” said Ajit Nazre, a partner at Kleiner Perkins Caufield & Byers.

Energy-efficient lighting has always been an interest, he said, but it’s hard for startups and VCs to make money in compact fluorescents. That’s because big lighting companies, such as General Electric, Osram Sylvania, and Philips, dominate the light-bulb market and also are the major players in compact fluorescents.

Luring VC Interest

But energy-efficient lighting is attracting some VC interest. In May, Luminus Devices raised $38 million from Battery Ventures, Argonaut Private Equity, and Strata Venture Partners. And Orion Energy Systems, which has developed dimmable high-intensity fluorescent lighting with power-management controls, in October announced it closed a $5-million round led by Expansion Capital.

Diana Propper de Callejon, a general partner at Expansion Capital, said while there has been “relatively little” technology innovation in lighting until now, that’s changing with improvements in fluorescents, LEDs, and other lighting sources. “Energy efficiency is a huge play for climate change and delivering cost reductions, and within energy efficiency, lighting is one of the biggest opportunities and investment areas for firms like us,” she said. “The [Australian ban] is definitely part of a trend of energy-efficient lighting becoming much more prevalent and ubiquitous.”

While most of the interest in energy-efficient lighting is being driven by corporate bottom-line interests, not by policies like Australia’s ban, such policies accelerate the market, Ms. Propper de Callejon said.

Still, Expansion doesn’t invest in companies if regulation and policy are the main drivers behind the technology, she said. She’s looking for technologies that are cost-competitive without government incentives.

The Bottom Line

Therein lies the problem for those pushing lighting beyond fluorescents. Sure, many people say they hate the yellow-green light that typical fluorescents cast. (“That endless flicker fatigues the eyes and drives people nuts!” wrote one reader, Roger Smith in Bishop, California, who added he would stock up on incandescent bulbs from other states if California banned them.)

Mr. Makower even said there’s little question that LEDs are the future for many lighting solutions.

But it could be years before they’re cheap enough. “We’ve looked at a lot of them, but the problem is competing with as commoditized an item as you can think of,” Mr. Nazre said. “Cost is key.”

Because energy-efficient lights tend to last longer, people won’t need to replace them as often, so they aren’t likely to sell at the same volumes as incandescents. If higher volumes equal lower costs, that puts them at a disadvantage. And Mr. Nazre said he doesn’t think homeowners are willing to pay $20 for bulbs. “We want to invest in a company that will make the costs come down,” he said.

The technology isn’t all the way there yet either, Mr. Nazre said. To complete with incandescents, LEDs need to reach 100 lumens per watt and need to be able to deliver white light, which LEDs have had trouble with so far. “For traffic lights, it’s perfect, and with automobiles, you don’t care as long as you can see in front of you, but indoor light has to mimic sunlight,” he said.