The market for energy efficiency products is massive. The Electrical Power Research Institute (EPRI) estimates only seven percent of the U.S. commercial and industrial lighting market have installed lighting control systems of any kind, including retrofitted light fixtures, various dimming systems and building automation products; most market participants spoken to for this report1 feel the global penetration is actually much lower, around three to five percent.
The lighting control market, then, is a growing sector, and one that’s dominated by smaller players currently. Aside from established firms in the building controls and engineering sector, Trane, for instance, many lighting control-specific firms are less than three years old. These new technology players have sprung up in an economic environment when lighting control customers are incented to find ways of cutting operating costs, and when public policy at the state and federal level supports energy efficiency efforts.
All lighting controllers claim aggressive return on investment (ROI) timelines for typical installations, making it hard on the surface to distinguish between vendors at first glance. But on closer examination, the advantage may belong to those firms with the lowest upfront capital costs and the least disruption of end-user business activities in installation and operation.
Based on 35 interviews and the review of dozens of secondary documents (see Methodology and Bibliography), Kachan & Co. has concluded technologies targeting retrofits of existing commercial and industrial lighting systems is potentially disruptive.
Many singers…: Kachan and Co. identified several participants in the retrofit lighting control market. Most of them recently started and are narrowly focused on lighting control. The exception is Lutron, which offers a wider selection of lighting products.
…with a similar tune: ROI, for most surveyed systems, was expressed as a range that varied depending on the built environment where it was being installed. All claimed an ROI of under 36 months, but in our research, speaking with select competing vendors and review of vendors’ published information, none appeared to be as low as Cavet’s LumiSmart ILC. This potentially makes that firm’s technology economically compelling.
Two competing technologies: Two basic technological approaches were found among lighting control firms looking to work the retrofit market: system voltage reduction or reliance on dimmable ballasts. There are fewer viable options of the former category, which takes less installation time and lower upfront hardware costs.
Bigger firms looking?: None of the corporate giants in the building automation/control systems markets appear publicly to be developing their own systems. More likely, they will acquire their way into this sector. Lighting control customers should understand this and anticipate the vendor they chose to do business with today has a chance of being subsumed by a larger company.
In general, the strengths of lighting control firms, detailed further in this document, include:
- Underserved market: Key controls market participants have been selling into the public sector. This has left the private sector underserved. Emphasis on international markets has been weak.
- Capital-effectiveness: Advantage appears to belong to firms with the lowest upfront costs, in terms of equipment, installation and labor and lost revenue due to disruption.
- Least intrusive installation: Unlike installations in public sector buildings, the tenants of which are more of a “captive audience” and can therefore better serve as laboratories, ease of installation is expected to resonate with private corporations and real estate owners, for whom employee/client disruption is highly undesirable.
- Team: With fragmented competition composed mainly of small vendors, assembling a sales-savvy team that is no stranger to selling technology can provide a key advantage over larger players that may see lighting controls as one part of a larger offering.
Lighting control firms’ challenges, as identified in our analysis, include:
- New market entrant: Despite claims of significant unit volume commitments from prospective customers and a handful of test installations, most market participants have few large-scale lighting control installations “in the wild” at this point.
- Tough “apples-to-apples” comparisons: While product-specific metrics can be seen as self-serving for prospective clients, “neutral” metrics, like dollarcost per square foot, are difficult across lighting controller technologies.
- Environmental attributes less important: Some firms emphasize LEED certification points and carbon credit generation, but should really focus on the costs savings propositions so important to the built environment.
Kachan & Co. believes the lighting control market has significant potential to grow exponentially and become a key driver to the building automation market segment, so long as it lives up to its claims of lower total cost, ease of installation, scalability and architecture for the future. The prospects, market watchers and others we engaged with for this research were very interested in seeing these technologies operate in a real client operational environment — a reaction we believe will be indicative of similar interest from the broader market.