Navigant Research Blog

LEDs Experience Growth but Commercial Lighting Market Revenue Declines

— April 7, 2017

According to the US Energy Information Administration (EIA), lighting in the commercial sector (which includes commercial and institutional buildings) and public street and highway lighting consumed 11% of total commercial sector electricity in 2016. LEDs provide more efficient lighting alternatives to traditional lighting options–such as incandescent, fluorescent, halogen, and even compact fluorescent lamps in the commercial market. The increased efficiency, decreasing prices, and longer lifespan of LEDs have spurred their growth in the lighting market. Lighting is considered low hanging fruit for efficiency upgrades in commercial buildings, as these technologies are cheaper than other building upgrades focused on efficiency.

Decline of the Commercial Lighting Market

According to Navigant Research’s recent report, Market Data: Energy Efficient Lighting for Commercial Markets, global lamp revenue is expected to decline at a 0.8% compound annual growth rate (CAGR) between 2017 and 2026. The decline is modest due largely to the expected number of replacement lamps needed for burnouts during the forecast period. While total global market revenue is expected to decline, LED revenue is the only lighting technology revenue expected to experience growth during this time. The total global number of lamp shipments is expected to decline at a quicker pace than revenue due in large to part higher priced LEDs.

Lamp Revenue by Lamp Type, World Markets: 2017-2026

(Source: Navigant Research)

The Implications 

When we think of a thriving market, we think of an ever expanding market where there is room for all interested parties to get a piece of the pie. However, due to LEDs’ increased efficacy, long lifespan, and continued market penetration, the overall lighting market is declining. This means there is an oversaturation of lighting manufacturers that will experience revenue declines.

The declining market is experiencing fierce competition. Smaller companies are suffering because they have less resources and might not be equipped to compete against the largest lighting incumbents. In order to stay competitive, lighting companies must shift how they generate revenue. Today, lighting companies are finding alternative ways to generate revenue that are changing the lighting industry. Some companies have been successful with new technologies, such as visible light communications for indoor positioning, some are expanding their lighting controls offerings, and others are experimenting with new business models, such as lighting as a service. Lighting companies will need to define their offerings and demonstrate their competitive edge to solidify their place in the changing lighting landscape.

 

Lighting-Based Indoor Positioning Gains Momentum

— March 22, 2017

Advances in technology are changing the consumer experience. Online shopping and omnichannel retailing are becoming increasingly important for consumers because of easily available product knowledge, price comparisons, coupons, and quick access to products. Another technological advancement changing the consumer experience and shifting the retail market is indoor positioning. In brick-and-mortar retailing, indoor positioning has gained traction in recent years as retailers adapt to the changing retail landscape and align their online and physical store shopping experiences. Lighting companies have taken notice of the changing retail landscape and are staking their claim to retail indoor positioning through visible light communication (VLC) and other indoor positioning technologies, such as Bluetooth Low Energy (BLE). The ability to combine these technologies for enhanced indoor positioning solutions is progressing the retail experience for consumers.

Partnerships and Acquisitions

The most recent partnership to advance light-based indoor positioning was announced by Philips on February 27, 2017. The company announced the creation of its Location Lab partner program, which brings together companies working to develop applications for Philips’ indoor positioning system utilizing VLC for “the power of GPS indoors,” as described by Philips. The new partnerships will enhance and customize indoor positioning across multiple industries, including retail spaces, offices, and malls. Philips’ location-based service partners with Aisle411, Favendo, Adactive, and other international companies. The IT and systems integration partners include SAP, Microsoft, and Capgemini, and the in-store technology partners include SES-imagotag and Zebra. Philips Lighting has also teamed with Blue Jay to improve operational processes.

Another lighting incumbent, Acuity Brands, has recently furthered its indoor positioning offerings. Acuity’s advancement of indoor positioning occurred through internal advancements as well as several acquisitions. In April 2015, Acuity Brands acquired ByteLight—a company developing indoor positioning technology—by combining VLC and BLE. In January 2016, Acuity acquired GeoMetri, which is a software and services platform provider for mapping, navigation, and analytics. These strategic acquisitions enable Acuity and Philips Lighting to be leaders in this space. On March 28, 2017, Acuity will host a webinar in conjunction with Navigant Research on adding value to a shifting retail market through indoor positioning.

Application

In Europe, other retailers are deploying indoor positioning, working with a variety of lighting manufacturers for new systems. Zumtobel has deployed indoor positioning at E.Leclerc, which is a hypermarket in Langon, France. However, unlike Philips, Zumtobel used Bluetooth without VLC for indoor positioning because it prefers Bluetooth over newer VLC technology. OSRAM took a similar approach by using Bluetooth and not VLC for indoor positioning in Switzerland. A fashion retailer purchased the Bluetooth chipsets to install existing lights in 23 stores throughout Switzerland for indoor positioning. While OSRAM does sell luminaires with a built-in Bluetooth transmitter, these were not used for this project. In collaboration with Favendo, Philips has installed the company’s first indoor positioning system in the supermarket EDEKA Paschmann in Dusseldorf, Germany. The system will allow shoppers access to the location-based services, as well as allow employees to more quickly search for items.

Going Forward

While the deployment of indoor positioning systems utilizes the combined technologies of VLC and BLE, these systems are still limited. One of the major barriers to the quick adoption of these solutions is the privacy concerns of consumers. Educating consumers about these technologies and the benefits enabled through indoor positioning will allow for greater adoption by retailers, and it is clear these solutions will be more commonplace in the future. Retailers are already capitalizing on the benefits these solutions provide to customers, employees, and retailers. This trend should continue as more companies realize the potential of lighting-based indoor positioning.

 

Carbon Tax Plan Proposed by Climate Leadership Council

— February 15, 2017

Climate change is a big area of political strife. It was during the election and remains so during the opening weeks of the new administration. While the major political parties generally disagree on the issue and the measures necessary for addressing it, climate change is not a partisan topic. On February 8, a group of Republicans proposed a tax on CO2 emissions in exchange for the repeal of other regulations on the industry. The proposal is led by James Baker III, former Secretary of State under President George H.W. Bush, and other members of the Climate Leadership Council. Founded by Ted Halstead, the Climate Leadership Council is an international research and advocacy organization with aims to organize global leaders around new climate solutions based on carbon dividends modified for each of the largest greenhouse gas (GHG) emitting regions.

The Proposal

The Carbon Dividends Plan is based on four main areas:

  • Gradually Increasing Carbon Tax: A $40 tax on every metric ton of CO2 would be imposed and increased steadily over time.
  • Carbon Dividends for All Americans: The estimated revenue of $200 to $300 billion per year generated from this carbon tax would be paid out to Americans through dividend checks, administered by the Social Security Administration. On average, a family of four would receive $2,000 under the plan.
  • Border Carbon Adjustments: The plan proposes border adjustments that would increase the costs of exports and imports to/from countries that do not have a comparable carbon tax.
  • Significant Regulatory Rollback: The majority of the Environmental Protection Agency’s (EPA’s) regulatory authority over CO2 emissions would be phased out, including an outright appeal of the Clean Power Plan (CPP).

The Importance

Many Republicans, including President Trump, are publicly opposed to actions on climate change. The Climate Leadership Council is made up of a number of prominent Republicans who are not only publicly in favor of action supporting the climate, but also have created a proposal to do so. Besides Baker and Halstead, authors of the proposal include Henry Paulson, Secretary of the Treasury under President George W. Bush; Martin Feldstein, Chairman of the President’s Council of Economic Advisers under President Ronald Reagan; George Shultz, Secretary of State under President Reagan; and N. Gregory Mankiw, Chairman of the President’s Council of Economic Advisers under President George W. Bush.

The Impacts

The plan would repeal the CPP put in place by President Obama to reduce carbon pollution and reduce the EPA’s influence on GHG emissions, and will likely see opposition. However, President Trump already plans to repeal the CPP, and while it is unclear if he will be successful, the Carbon Dividends Plan is not needed to assist in that repeal. While the dividends paid back to consumers help with the increased cost of energy, many can argue this would be better if used for increasing renewable energy. If the proposal is rejected and the CPP repealed without an alternative plan in place, it is unlikely actions on climate change will be taken at a federal level.

In June 2016, the House approved a non-binding resolution condemning the idea of a carbon tax. The measure passed 237-163 and was intended to make it more difficult for those that voted against a carbon tax to do so again. President Trump also opposes a carbon tax, believing that President Obama’s CPP was a regulatory overreach of power. It seems unlikely that the current administration and Republication-controlled Congress would vote in favor of such a proposal, although there is hope that some type of alternative could be offered in its place. No matter what the outcome of the Carbon Dividends Plan, there will be many arguing both for and against it.

 

DOE Announces Recipients of SBIR-STTR Phase I Grants for 2017

— January 31, 2017

BulbsThe Department of Energy’s (DOE’s) Office of Science recently awarded four Small Business Innovation Research (SBIR) grants and one Small Business Technology Transfer (STTR) grant for innovation in solid-state lighting (SSL) technology. The grants are aimed at helping the lighting industry reach performance and cost goals, as specified in the DOE’s SSL R&D Plan. First published in 2015, the SSL R&D Plan combined the DOE’s previously published Multi-Year Program Plan (MYPP) and SSL Manufacturing Roadmap. The SSL R&D Plan provides direction and goals for LEDs and OLEDs through 2030, with the aim of increasing energy savings.

What Are the SBIR-STTR Programs?

The DOE is one of eleven federal agencies that offer SBIR-STTR programs enacted under the Small Business Innovation Development Act of 1982. The programs work to increase technology innovation to address specific scientific and engineering challenges. The DOE’s SBIR Program aims to stimulate technological innovation, use small businesses to help meet federal R&D needs, and increase the participation of groups traditionally less represented, such as women and the socially and economically underprivileged. The STTR Program focuses on stimulating scientific and technological innovation and to nurture technology cooperation between small businesses and research institutions.

The SBIR-STTR programs supply funding for Phase I and Phase II projects twice each fiscal year, and for-profit US businesses with 500 or fewer employees are eligible to apply for the grants. Phase I recipients are awarded up to $150,000 for 6 months, and Phase II recipients are awarded funding based on Phase I results and generally do not exceed $1,000,000 for 2 years.

Grant Recipients

The FY2017 Phase I grants were awarded to Pixelligent Technology, Lumisyn, OLEDWorks, SC Solutions, and MicroLink Devices. The lone STTR grant, awarded to MicroLink Devices, is for a joint project between the company and the National Renewable Energy Laboratory to improve the performance of phosphide-based red and amber LEDs. This project aims to improve adoption of red and amber LEDs by allowing for integration with existing device designs and manufacturing processes.

Two of the SBIR grants, awarded to Lumisyn and SC Solutions, focus on LEDs. Lumisyn is working to increase the performance of nanocrystal-based silicones; the project will focus on properties of blue LEDs to produce white light. SC Solutions is poised to work on new heating techniques in metal-organic chemical-vapor deposition. The technique will reduce the need for binning in LED manufacturing and decrease the technology’s cost.

The remaining two SBIR grants, awarded to Pixelligent Technology and OLEDWroks, are for OLED technology. Pixelligent’s grant project will focus on improving the light extraction of OLED products by integrating a high refractive index extraction layer in the OLED material stack. This layer will provide enhanced light output, increase efficacy, and extend the lifetime of the product. OLEDWorks will work to reduce manufacturing costs in the hopes of making OLEDs more attractive for general lighting applications through its grant project. Based on the success of these projects in Phase I, companies could be awarded additional funding for further work on their projects.

Incorporating the R&D efforts of private organizations to help meet federal goals, as the DOE does through the SBIR-STTR programs, can further the overall success of SSL and increase market adoption of these products. Navigant Research projects increased adoption of LED and OLED technologies, and grants such as these will assist with growing the market of SSL products within the lighting industry.

 

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