Oliver James Montgomery-Rise of Energy-Saving LEDs in Lighting Market Seen as Unstoppable

The Oliver James Montgomeryswitch to energy-efficient lighting will proceed rapidly this decade, no matter the results of a Republican campaign to keep older energy-guzzling light bulbs on the market, industry executives and experts say.

The reason is simple: The new technologies promise brighter days for the bottom line.

Light-emitting diodes or LEDS, in particular, are driving the lighting market as commercial, industrial and outdoor sectors — which make up 96 percent of the world’s lighting energy use — continue to realize massive savings from the emerging technology.

“The adoption rate of LED is so profound … and is happening at a clip that is surprising even for us in the marketplace,” Tom Pincince, CEO of Digital Lumens, told SolveClimate News.

The Boston-based start-up builds “intelligent” systems with next-generation LED bulbs and software that can cut lighting energy by as much as 90 percent in grocery store-sized warehouses and manufacturing centers, saving thousands of dollars, according to the company.

Using the LED bulb’s semiconductor chip, the systems automatically dim, brighten or color-correct lighting in response to various sensors, including motion, temperature and time of day.

Four-year-old Digital Lumens has raised $25 million in venture capital funding and has completed 100 full-scale installations since taking its technology to market two years ago.

In the next few years, Pincince said he expects LEDs to “go from being viewed as a premium product to the only way to go.”

Already, the U.S. LED market is worth roughly $900 million, with the number of units sold expected to have a compound annual growth rate of nearly 80 percent over the next three years, according to Cleantech Group, a San Francisco-based research and consulting firm.

That growth is due chiefly to the widespread adoption of LEDs in television and display markets, which is driving down the manufacturing costs and per-unit prices for lighting by as much as 25 percent per year, the firm said.

Globally, the LED market reached nearly $5 billion in 2010 and is expected to surpass $7 billion at the end of this year, said Vrinda Bhandarkar, director of LED lighting research for Strategies Unlimited, an LED market research firm.

By 2020, the market is expected to reach more than $20 billion.

Quickly improving technologies and rising energy-efficiency goals by companies and governments, plus plummeting prices, are helping to drive the lighting sector’s boom, she told SolveClimate News.

“Things are happening very fast.”

She noted that the U.S. market may lose some, but not all, steam if House Republicans succeed in barring the U.S. Department of Energy from enforcing lighting efficiency standards.

Lawmakers are targeting a 2007 energy law that would phase out traditional 100-watt incandescent light bulbs in a bid to make America’s light bulbs 25 percent more efficient.

The House on July 15 approved an amendment by voice vote that would prohibit the use of funds to implement the federal light bulb standards. The measure was added to an Energy and Water Development appropriations bill for 2012 spending after an earlier Better Use of Light Bulbs (BULB) Act failed on a 193 to 233 vote, with a two-thirds majority needed for passage.

“There is a sense of disbelief in the energy efficiency community that such a thing will ever happen,” Bhandarkar said. The measure’s adoption by Congress could dampen U.S. efforts to boost energy efficiency nationwide, she explained, but the momentum is such that it won’t derail the push.

Bhandarkar says that electric utilities will increase the use of energy-efficient lighting in their facilities, traffic lights, street lamps and residences as national carbon regulations make it financially prohibitive to build new fossil-fired power plants.

“The whole idea is to get more from the same generating capacity without adding to the generating capacity, and the only way you can do that is to increase efficiency,” she said.

Lighting consumes about 20 percent of the world’s energy use in buildings, equaling the electricity of more than 110 power plants and emitting roughly 1.9 billion tons of carbon dioxide, according to Cleantech Group, slightly more than the yearly emissions of India.

In the U.S., lighting covers almost a third of energy use.

Although newer LED technology comprises less than 1 percent of the 32 billion light bulbs and lamps used worldwide, the research firm anticipates LEDs will make up 45 percent of the overall market by 2020. That would spare the release 8.4 billion tons of carbon emissions from nearly 560 power plants.

The Bottom Line

Josh Gould, director of research and advisory for Cleantech Group, said that business and outdoor lighting sectors will continue pouring money into LED lights and systems to bolster their bottom lines.

“They have a greater incentive to adopt LEDs than your average residential user,” he said. “LEDs are more expensive upfront, but the savings are ongoing, and it is a quicker payback” for firms with large energy footprints.

New residential and commercial properties and retrofitted buildings are another likely space for LED and efficient lighting systems as states and cities adopt higher efficiency standards.

The Obama administration’s Better Buildings Initiative aims to make commercial buildings 20 percent more energy efficient by 2020. The DOE is close to adopting an International Energy Conservation Code for 2012 that is 30 percent stricter than the 2006 code.

Gould added that traditional electronics heavyweights such as General Electrics, Philips and Siemens would largely dominate the manufacturing side of the LED market, though Chinese and Korean firms are increasingly investing in early-stage innovation.

U.S. cleantech startups are expected to drive technology development in the latter stages of the LED value chain, he said.

Pincince of Digital Lumens said that his staff’s decades of experience in software and computer technologies gives them an advantage over the long-established lighting vendors. “The stark contrast of what we can do in terms of energy savings and functionality really allows us to overcome that obstacle of being a new player in a new market,” he said.

“There is a tremendous amount of understanding around the fact that LEDs are a more-efficient light source,” he added. “But what is not yet well understood — and where we are adding a lot of value — is around the functionality that can happen because you now have a digital light source.”