Lighting Controls Long Term Future Depends Upon its Success in Opening Up the Retrofit Market

Allan McHale, Director, Memoori

“LED Lighting may be the major driver for new growth in the world lighting controls business but unless the retrofit market can be opened up through an innovative awareness campaign and wireless technology the business will stagnate yet again in five years time.”

For the last 20 years the market for bus based lighting controls in non-domestic buildings has been dominated by new build & major refurbishment projects. In 2013 new construct buildings took some 90% by value and 80% by number of projects. Retrofit projects take the balance of 10%. This is despite the fact that new construction in developed countries adds no more than 2 / 3% to the existing floor space each year whilst the potential to exploit the latent market in existing buildings, which is almost two orders of magnitude larger, goes relatively untouched.

The failure to grow the retrofit business share despite significant increase in energy costs over the last 20 years and the fact that installing intelligent lighting is the most cost efficient means of reducing electrical consumption (which on average accounts for 25% of a buildings electricity use) can be attributed to a number of causes.

Our research has shown that most building owners believe that it will take more than five years to get a full return on their investment (ROI) and would not consider anything more than three years. Three years is a realistic time for ROI on large buildings not taking into account any rebates or benefits derived from participating in demand response programmes through the lighting software. This could be significantly reduced further if wireless controls rather than wired controls were used. The inconvenience and cost caused by running controls wires is a serious barrier for retrofit applications.

Wireless technology in buildings is still viewed skeptically by potential buyers and often specifiers despite the fact that there are now many well respected lighting controls manufactures that have developed robust wireless controls that have proven themselves over the last few years with the majority installed in hybrid installations. All the LED Lighting street controls that are now being installed in Europe use wireless, so why can’t this be replicated in existing buildings. 

These findings from our latest report on lighting controls – “Smart Buildings: The Lighting Controls Business 2013 to 2017”, has prompted us to investigate why wireless controls have so far failed to open up the retrofit market and what action needs to be taken by the lighting controls manufacturers and the energy conservation industry in general to open up this massive business opportunity.  This opportunity is not just available to Lighting controls but also BEMS (Building Energy Management Systems) in value terms we estimate would open up an even larger market demand.

Opening up this Vast Latent Demand

In new construct buildings wireless in most cases offers very little tangible advantage to wired systems but there are applications when Hybrid Systems offers a better and cheaper solution. These opportunities are quite well defined and recognized.

In the retrofit sector of the market the latest wireless controls have the capability to reduce the considerable cost of installation and achieve an ROI in many cases within two years which is a significant improvement on wired controls. This is the driving force for the utililisation of wireless control systems.

The barriers to its acceptance are;

• Reliability - The supply side can now deliver fully reliable systems which has been a major barrier to its acceptance. They believe that it is now generally accepted by specifiers and end user that communication can be relied upon. We believe that this likely to be true for the large prestige building market but may not have got through to the owner / occupiers of small and medium sized buildings which are the bulk of the market.
  

• Routes to Market – The routes to market for wired Bus Based Lighting controls needs an infusion of more trained system integrators / installers and this is particularly true if the wireless retrofit market is to be opened up. It is up to the manufacturers to develop the routes to market for if they don’t they will restrict themselves to only supplying systems which is neither cost effective for a product manufacturer or appropriate to open up this fragmented market.
  

• Power limitations – Battery power has its limitations but with improvements in battery technology and Energy Harvesting technology now a viable commercial proposition this does not need to hold back wireless controls and low power consumption could offer a further selling advantage.
  

What is needed now is an enlightened awareness campaign backed by government agencies to target building owners on the benefits of LED Lighting and its control. They are the ones that will have to make the investment decision and therefore the case for doing so has to be centered on what’s in it for them.

The UK’s largest retailer Tesco, according to their Director of Climate Change Helen Fleming said in 2012, “We benefit because we are becoming more energy efficient, and we’re saving money on our energy bills – we estimate that the actions we have taken since 2006 have saved us £200 million pounds in energy bills on an annual basis.” This would have probably required an increase in annual sales of around £4 Billion to have achieved the same number on the bottom line.

Interestingly this month a unique programme was announced by Tesco and the Carbon Trust that they have teamed up with environmental business community 2Degrees to launch a buying club that will encourage Tesco’s suppliers to invest in energy efficient lighting. The scheme aims to deliver savings to suppliers by taking advantage of collective purchasing power to buy energy efficient lighting equipment. Tesco came up with the idea for the scheme after it noticed there was interest among its suppliers in buying LEDs. Few companies around the world know more about how to buy at a competitive price so it’s good to know that that they are passing on this expertise and an excellent example of thinking outside the box.

Can government agencies come up with some innovative ideas on how to get owners and operators of buildings to invest in energy conservation? Would it be too avant-garde for them to say bulk buy advertising space for all those investing in conservation measures? Not to advertise their conservation exploits but the products and services they supply endorsed by some green credential. Could they measure this? Well they happily pay out billions to the media every year and many companies refuse to cut their budgets even during adverse trading conditions.

[an error occurred while processing this directive] The timing looks just right for conservation to take a bigger share of the government’s budget to promote and assist the reduction of CO2 emissions. Capital intensive renewable power projects have taken the lion’s share of government’s time and budgets over the last five years; but in 2014 right, around the world, they are delaying their commitment to spend because of economic austerity and fear of political suicide if they allow electricity charges to go up.

We expect that in 2014 they will turn their attention again to how they can promote, assist and encourage energy conservation in order to achieve a low carbon economy in the 21st century. LED lighting and its control will be a major beneficiary as governments around the world are banning older, inefficient lighting technologies, and subsidising the retail price of LED lighting. By 2014, sales of incandescent bulbs will be restricted in virtually the entire developed world. But unless we can get wireless controls into the retrofit market place building owners will not invest because the ROI for a wired system will not be acceptable for the bulk of the potential demand.

But all of this will come to nothing unless the supply side strengthens the channels of distribution and trains system integrators in wireless technology. In most developed countries there are no shortages of electrical contractors that can take on the system integrator role but they will need training in wireless lighting technologies and have a tactical sales strategy to identify, engage and convert potential customers to the benefits of wireless controls.

See more at: http://www.memoori.com/lighting-controls-long-term-future-depends-upon-its-success-in-opening-up-the-retrofit-market/

Any readers that are suppliers of Wireless Controls for Lighting or BEMS who would like to be involved in the study by completing a short questionnaire would receive a 20% discount of these reports or any reports that are already published.  For more information email Jim McHale at jim@memoori.com

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