When the Christmas tree at the U.S. Capitol was illuminated this year, it shone with the light of 10,000 light-emitting diodes (LEDs). And next year the giant New Year’s Eve ball in Times Square will also be festooned with LED lights. Such milestones are another indication that the use of solid-state lighting made from semiconductor chips or organic polymers is advancing rapidly.

According to projections from Sandia National Laboratories, the energy-saving benefits of LED lighting would be impressive: If the technology can be improved so that half of all lighting is solid-state by 2025, it will cut worldwide power use by 120 gigawatts, saving $100 billion a year and reducing carbon dioxide emissions from power plants by 350 megatons a year.

Moreover, lighting experts say, semiconductor LEDs and organic light-emitting diodes (OLEDs) would change the way people think about lighting their homes. Rather than static fixtures holding single-color bulbs, solid-state lighting will be more flexible, allowing for glowing ceiling tiles or accent lights whose colors can be digitally adjusted at the touch of a button.

Before that can happen, however, plenty of technological hurdles need to be overcome. The U.S. Department of Energy’s Lighting Technology Roadmap calls for LEDs to be able to produce 150 lumens of illumination per watt of input power by 2012, up from just 25 lumens/watt in 2002. That’s 10 times the efficiency of an incandescent bulb and substantially more than the 50-100 lumens/watt from a fluorescent bulb.

Nadarajah Narendran, director of research at Rensselaer Polytechnic Institute’s Lighting Research Center, isn’t worried about hitting that target. “Three years ago a lot of people were skeptical that that could happen, but now when you look at the numbers it’s not an issue,” he says. In fact, researchers have already demonstrated 110 lumens/watt in the lab. If anything, Narendran says, scientists may be ahead of the DOE’s goal.

Researchers are pursuing two tracks for increasing the light output of LEDs. One is to improve the internal quantum efficiency – the percentage of electricity that gets turned into photons; the other is to boost the external quantum efficiency – the percentage of photons that get out of the LED and into the world.

Jerry Simmons, head of Sandia’s solid-state lighting program, thinks his group may have done both.

They use nanoscale engineering to etch special features into a semiconductor chip, near the active area of material that produces the photons. When photons are emitted, they can travel in any direction – but it’s only the ones at a 90-degree angle to the surface of the chip that make it out of the chip; the others are reabsorbed. The etched features, called photolattices, are patterns of lines whose spacing is similar to the wavelength of the light they’re dealing with. Hence, the lattices act like lenses, diverting more of the photons out of the chip, thereby improving the external efficiency.

It’s also possible, though not yet proven, Simmons says, that they’re improving the internal efficiency at the same time. It may be that the photolattices, by making it impossible for photons to exist in certain places in the material, are causing more of the photons that are produced to be emitted in the right direction in the first place.

The energy bill passed by Congress last summer included authorization for up to $50 million in research funding for the technology over each of the next seven years. But whether Congress will actually appropriate the funds is anybody’s guess.

Nevertheless, Simmons is excited about the possibilities. The real test, he emphasizes, will be whether or not consumers warm to a new type of lighting. “What we’re waiting for – the next big impact – is to start seeing use in the home,” Simmons says.