Navigant Research Blog

Smart Street Lights Shine on Further Advancements in Lighting Innovation

— June 9, 2017

Smart street lighting is growing as a platform for smart city applications, and cities are increasingly seeing the benefits of smart street lighting deployment. The rise of LEDs, in large part due to their increased energy savings, longer life, and declining prices, has launched the connected street lighting market. Companies are working together to help drive innovation and continue the momentum of smart street lighting and smart city adoption.

Driving Innovation

Even with the benefits of LEDs and increased control and data available through a smart street lighting system, there are still hurdles to overcome for widespread adoption. The Smart Cities Council, a global consortium of smart city experts and companies, is working to promote sustainable smart cities that provide clean and healthy living conditions and high quality jobs. The Smart Cities Council has more than 120 members and is continually expanding its presence. In May, Telensa, a specialist in connected street lighting, joined the Smart Cities Council as a North America Lead Partner. The company will work toward the goals of the organization of advancing the development of smart cities. Lead Partners, along with Global Lead Partners, provide financial support and help guide the Smart Cities Council’s actions either regionally or globally, based on partnership level. Global Lead Partners include Cisco, Hitachi, IBM, Microsoft, Schneider Electric, Current, powered by GE, Itron, Sensus, Qualcomm, and SAS Institute, among others.

Providing a Smart City through Lighting

Several cities have started to invest in smart street lighting, which are further advanced than LEDs and have the benefits of increased control and artificial intelligence. The city of Spokane, Washington is one of the latest cities to deploy smart street lights. It is using vision control traffic-adaptive LED street lights with artificial intelligence from Echelon—a developer of open standards control networking platform for lighting and building management. Echelon’s lighting platform transmits traffic information to help reduce response time and improve reliability. Each unit, deployed on traffic intersection street lights, will determine light levels based on traffic volume and reduce or increase light levels accordingly.

Lighting and technology vendors are working to advance their offerings to create a smart street lighting platform that can be utilized as the foundation for a smart city. Though many offerings are currently available on the market, further advancement and price declines will help with continued adoption of smart street lighting systems. Partnerships between lighting and technology providers and utilities, as well as organizations such as the Smart Cities Council, are continuing to advance smart street lighting. This relatively young industry is worth monitoring as it continues to experience growth.

 

Who Will Lead the Lighting as a Service Charge?

— April 25, 2017

The rapidly evolving lighting industry has recently given birth to a new and exciting development—lighting as a service (LaaS). The manifestation of lighting controls services to optimize lighting use is helping customers save energy and money. The emergence of the LED system as a major technological player in the lighting world has opened the doors to countless opportunities for efficiency and cost reduction by tapping into the Internet of Things (IoT) world. These two stories have led to the development of a new industry: third-party management of lighting systems, otherwise known as LaaS. Management services include technical, maintenance, financial, and many other lighting services.

LaaS Revenue Is Expected to Triple by 2025

The underlying technological advancement that has made the new industry possible is connected or smart lighting. The ability to communicate with a lighting network allows users to control and optimize their lighting use on the fly. Opportunistic companies and startups have caught on to this trend and have begun to offer third-party lighting management services. The LaaS industry is just starting to make waves in the industry. However, it’s expected to become a booming business over the next decade. LaaS generated $35.2 million in revenue in 2016. By 2025, it’s expected reach $1.6 billion.

As the LaaS industry is still in its infancy and a clear market strategy has yet to be established, there haven’t been any companies that have emerged as LaaS-focused companies. Most projects to date have been pilots and test cases. Thus, it has mostly been the larger incumbents that have paved the way in this fledgling industry:

  • Current, a startup within lighting heavyweight GE, is wrapping data and digital solutions around lighting upgrades with optional financing to provide a full suite of LaaS possibilities. It recently partnered with AT&T on a massive smart cities venture.
  • Enlighted, a Sunnyvale, California-based startup, has developed a LaaS platform that combines sensors, analytics, and controls. Unlike other LaaS competitors, Enlighted does not use this platform to sell lighting hardware. Instead, the company partners with luminaire manufacturers, facilities management companies, and electrical contractors to create an ecosystem of lighting systems.
  • Several other companies are exploring the LaaS space, including Philips, Siemens spinoff OSRAM, and Acuity. Acuity has made a number of acquisitions in the last few years in order to facilitate its expansion into the IoT market. These companies are still just testing the LaaS waters at this point.

The Race for the Best Marketing Strategy Is On

It appears that the trail for LaaS will be set and guided by the larger lighting incumbents. The window for small startups to emerge as leaders in the growing industry is shrinking, but opportunities are still available. Lighting giants such as GE and Philips sell through the facilities department of a company. If a solution is found that goes beyond building operations and is sold directly to the IT department, that could certainly cause a large enough shakeup in the market to influence decision makers and unseat the incumbents.

This is more easily said than done. There are no signs that this is being taken on by any new or established companies. LaaS is a new and exciting industry that is still very much in flux. The first company able to hone in on an effective market strategy will have the chance to grab the LaaS industry by the reins and lead it in exciting new directions.

 

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.

 

Wireless Bulbs Offer Connected Light Controls

— October 20, 2014

Homeowners around the world have begun to transition from incandescent and compact fluorescent bulbs (CFLs) to more efficient and higher quality light-emitting diodes (LEDs).  Navigant Research’s report, Residential Energy Efficient Lighting and Lighting Controls, forecasts that LED sales for residential applications will increase at a compound annual growth rate of 17.6% through 2023.  Within this wholesale shift of lamp types, however, is another trend with far-reaching implications.

More and more  LED light bulbs are being sold with integrated wireless connectivity.  Instead of being controlled with simple switches, or even physical dimmers, these bulbs connect to the Internet, often through the homeowner’s Wi-Fi network, and can then be controlled through applications on a computer or smartphone.

This capability may seem extravagant, but the trend is picking up steam surprisingly quickly.  One of the first entrants to the category of wireless light bulbs was the Philips Hue, launched in October 2012.  Since then, nearly all of the large lighting companies have launched products in this category, including OSRAM, GE, Samsung, and LG.  In total, 18 different wireless light bulb products are available from 16 different manufacturers, including Greenwave Systems, Leedarson, LIFX Labs, Belkin, Fujikom, Whirlpool, and others.

Mood Lighting

These products come with a large range of features.  All are capable of dimming, while only some are able to change color (Philips, LIFX Labs, OSRAM, Tabu, Fujikom, and Environmental Lights).  Through various software applications, the lighting can be modified based on the time of day, weather conditions, or any other user preferences.  Lighting can also be tied into other home systems, such as the Philips Hue’s ability to connect with the Nest Protect smoke detector and flash red lights when either smoke or carbon monoxide are detected.  The Hue even allows lighting to be modified based on programmed sequences as an audio book is being read to provide a fully immersive scene for the listener.

Wireless bulbs come with a significant price premium over their non-connected counterparts.  While outlets such as The Home Depot have begun selling standard A-type LED bulbs for under $10, wireless bulbs are priced between $30 and $60 apiece.  As this premium comes down, and as more users become interested in the range of possibilities made available through connected lighting, adoption is expected to increase rapidly.

 

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