After an extensive 10-year renovation, the Rijksmuseum in Amsterdam reopened its doors earlier this month to visitors coming to see the work of Dutch masters such as Rembrandt and Vermeer.  In addition to the 17^th century masterpieces, those visitors will also be treated to a marvel of the 21^st century: LED lighting.  Three-quarters of a million LEDs from Philips now light the museum’s 7,500 works of art and over 100,000 square feet of space.   The Rijksmuseum is joining a rapidly growing number of art museums that have already switched to this light source, including the Louvre in Paris, France, the Kunstkammer Wien in Vienna, Austria, the De An Art Gallery in Zhongshan City, China, and the Museum of Fine Arts in Houston, Texas.  There is even a newly created LinkedIn group focused on LED lighting for art and museums.

When choosing a light source, the two primary considerations for any art museum are the visitor experience and the preservation of artwork.  For both of these considerations, LED lighting is the clear frontrunner.  Light quality and color rendering from LEDs have advanced to a point where Tim Zeedijk, the head of exhibitions at the Rijksmuseum, said that the recent lighting upgrade “allows the art to be viewed in the best light possible to bring out all the colors and details that the artist intended us to see.”

Applications Expand

Regarding artwork preservation, reducing the exposure to ultraviolet light is a key strategy.  Fluorescent, halogen, and high-intensity discharge lighting all emit UV light, forcing art museums to use filters and limit the amount of time that any individual piece is on display.  LED lighting, on the other hand, emits no UV light, relieving a significant concern for curators and giving them new flexibility.  All of the other benefits of LED lighting also apply to museums, including reduced electricity consumption and longer-lived lamps.

Art museums provide another example of a specific application where LED lighting is already the best choice.  Others include cold storage facilities, where the efficiency benefits of LEDs are doubled by the savings in cooling energy, and high-ceiling atriums where the cost of replacing burned out lamps is exorbitant.  As the quality of LEDs continues to improve and the price of LEDs continues to fall, the list of applications where LED lighting is the best choice will continue to grow.  This combination of factors has led Navigant Research to forecast that unit sales of LED lamps will increase worldwide at a compound annual growth rate (CAGR) of 44%, as reported in our recently released study, Energy Efficient Lighting for Commercial Markets.

For years, the compact fluorescent light bulb (CFL) has stood as an icon of the modern sustainability movement.  Simply replacing an incandescent bulb with a CFL can reduce energy consumption by 75%.  That impressive saving has led college sustainability groups across the United States to hold light bulb swaps in an effort to get more CFLs into use.  It has even led countries around the world to ban or begin phasing out incandescent bulbs, driving the adoption of CFLs.   The tell-tale swirl of this favored bulb has worked its way deep into our popular culture, standing as a symbol of efficiency.

Though widely admired, the CFL has never been perfect.  The bulbs can be slow to start, they do not dim well, and they operate poorly in low temperatures.  For the environmentalist, a more significant problem is the tradeoff these bulbs pose between toxicity and global climate change.  CFLs contain between 1 mg and 5 mg of mercury, which can be released when the bulbs are broken or disposed.  Many have argued that the mercury in CFLs is more than offset by a reduction in mercury emissions from coal-fired power plants.  Few would deny, however, that it would be preferable to avoid this compromise altogether.

Mercury Rising

Enter the light emitting diode (LED).  Years of falling prices for LED lighting are finally making LED lamps a reasonable alternative to both incandescents and CFLs.  LEDs are more efficient, avoid the problems of dimmability and low temperatures, and, of course, contain no mercury.  While the combined effects of price and performance will drive consumers toward this type of lighting, there are also new signs that the issue of mercury will begin driving consumers away from CFLs.  In January, the governments of 147 countries approved the Minimata Convention on Mercury, which limits mercury from multiple sources including CFLs.  The current limits will still allow for the manufacture of CFLs, though the writing may be on the wall for stricter limits in the future.

A new report from Navigant Research, Energy Efficient Lighting for Commercial Buildings, forecasts that revenue from CFL sales will experience a steady -9%  compound annual growth rate (CAGR) between 2013 and 2021.  During the same time period, revenue from LED lamp sales will increase at a 23% CAGR.  While CFLs will surely remain a widely used light source for years to come, their tenure as an icon for sustainability will quickly come to an end.

Like children in the back seat on a road trip, many LED enthusiasts keep asking: “Are we there yet?”  The promise of LED lighting has been clear for a number of years, with high expectations that at some point LEDs will take over a significant share of the lighting market.  But when, exactly, will that point come?

The primary barrier is cost.  LED prices have fallen dramatically in recent years, but the cost premium over traditional lighting technologies can still be significant.  A 14W, standard type A screw-in LED bulb retails for around $20.  That is a huge drop from previous years but still far more than an equivalent incandescent or compact fluorescent bulb.  The comparison is even worse for 4-foot linear tubes, the dominant form of lighting in commercial buildings.  An LED product can sell for $65 or more, while the equivalent fluorescent product is less than $2.

Fortunately for the LED industry, it will not be necessary for LED prices to match those of traditional technologies before wide-scale adoption can take place.  Increasing efficiency and a host of other benefits will make LEDs the clear choice in many applications, as long as the upfront cost can be paid back through electricity savings in a reasonable time.  The real question is not when an LED tube will cost less than $2, but rather when will the payback period fall under 2 years?

The answer, needless to say, is not simple.  Subsidies and rebates in countries around the world are already reducing LED payback periods to a point where the economics are favorable.  The wide range of electricity prices between and within countries also affects the value of electricity savings.  Furthermore, some end uses will become attractive targets for LEDs before others.  Cold storage facilities, for example, are already adopting LED lighting en masse.  In those spaces, low temperatures negatively affect fluorescent performance and other lighting types generate far too much heat, leaving LEDs the clear winner.

Navigant Research has synthesized all of the factors affecting LED adoption in a newly updated report titled Energy Efficient Lighting in Commercial Spaces.  The chart below shows the share of LED lamps used in commercial lighting retrofit projects increasing from only 5% in 2013 to 63% by 2013, while fluorescent and other lighting types quickly fall off.

Share of Lamps in Retrofit Projects by Lamp Type, World Markets: 2013-2021

(Source: Navigant Research)

Two recent acquisitions by lighting company giants reveal an important trend in the broader lighting industry.  In late November, General Electric acquired Colorado-based Albeo Technologies, a manufacturer of LED lighting with a focus on integrated wireless controls.  In early January, Acuity Brands purchased California-based Adura Technologies, a startup company specializing in wireless lighting control.  As detailed in Pike Research’s 2012 report on Intelligent Lighting Controls, all of the major lighting companies have made one or more acquisitions in the last few years that give them access to new and innovative means of controlling the lighting products that they already offer.

It’s no secret that the rapidly dropping cost of LED lighting is proving to be a major disrupter in the lighting industry.  While actual adoption rates are still modest, the promise of a lamp type that will be more efficient as well as fully dimmable, easily controllable, and mercury-free has resulted in a focus on the technology that far exceeds current sales.  R&D dollars are shifting and product lines are quickly expanding, as no big lighting company can afford to ignore the light source that is broadly acknowledged to represent the future.

The Larger Threat

The acquisition of companies that are focused on controls, however, exposes a larger and much more challenging threat to big lighting companies: the overall pie is shrinking.  As Pike Research forecast in our 2011 report, Energy Efficient Lighting for Commercial Markets (update coming in March 2013), global revenue from the sales of lamps and luminaires in commercial buildings is expected to drop significantly in the coming decade, from a peak $54 billion in 2012 down to $30 billion by 2021.  This decline will be primarily driven by the much longer life of newer fluorescents and LEDs.  While revenue from LED sales will increase, those sales will not even come close to offsetting the inexorable contraction of the market.  So, for big lighting companies, updating their product lines with new LED lights will not be enough.

Seen in this light, the frequent acquisitions over the past couple years of startups that focus on lighting controls is an indicator of a long-term shift in strategy.  General Electric and Acuity have traditionally been known for lamps and luminaires, not for lighting controls.  But these big players can no longer afford to simply maintain their traditional roles in a changing industry.  Expanding to new types of products and revenue streams has become a necessity, and lighting controls are the logical choice.

This promises to be a boon to the wide range of new and innovative methods for controlling lights, from the local strategies of providing just the right amount of light based on current occupancy and daylight levels, to the networked strategies of providing detailed analysis and complex control to building managers in remote offices.  The shift will surely be challenging for the big lighting companies; but it’s an exciting signal for the broader adoption of smart lighting control strategies that can be expected to ensue.