Traditionally, the lighting industry has been focused on quick paybacks, simple installation, and iterative improvements that allow a new retrofit to be conducted every 5-10 years. The market has now reached a point where that needs to change. Networked lighting controls are set to be a critical component of that change. However, differences between simple lighting retrofits and networked lighting controls will require additional tools to meet increasingly stringent financial requirements from customers. As the market for networked lighting controls steadily increases, there is a significant opportunity for C-PACE financing to help alleviate the financial burden. C-PACE is a rapidly expanding public/private financial partnership that allows the vast majority of Energy Efficiency and Renewable projects to be cash flow positive on day 1.
In 2018, Design Lights Consortium released a report detailing the significant market opportunity for networked lighting controls. While this report highlights many great opportunities for organizations invested in delivering commercial energy efficiency, much of the data points to a great need to innovate within traditional lighting energy efficiency contractor organizations. First and foremost, adoption of LED technology is happening quickly and accelerating. LED Lighting will have over 50% market penetration of all major commercial use types by 2025.
This penetration will undoubtedly be skewed towards high energy cost markets with mature incentive programs. It is in these regions where most energy efficiency providers are based and strongly illustrates the need for innovation within those organizations.
This necessity is buoyed by the relative price erosion of these products as well. The cost of LED chips is just one metric to track in illustrating this point.
This erosion of price places significant pressure on the profits of organizations that focus much of their business on the sale and installation of LED lighting.
Price erosion, combined with market saturation, leads to an imperative to innovate. Fortunately, Networked Lighting Controls provide the ability to both extend the life of the LED market, and preserve the margin of implementation for organizations by adding additional value to their services. Networked LED lighting controls can raise the overall lighting systems savings of a project from 40-50% for simple LED lighting retrofits, to 60-70% for controlled lighting solutions. One report from Lawrence Berkley National Laboratories found use cases where that savings was as high as 85%. The impact of an aggressive implementation of these types of solutions will greatly increase the near and long-term savings achieved, the profitability of the market, and extend the adoption period of LED lighting by several years.
Furthermore, networked lighting control systems provide a logical transition point for Energy Services Companies to pivot their operations from building hardware retrofitters to building intelligence providers. The exact portfolio of technologies that will be most prevalent in 10, 15, or 20 years is not entirely clear, but what is clear is that those solutions will include significant building system integration. The next phase of energy savings will involve the integration of building systems and power sources that lead to the greatest economic benefit for the buildings. Networked Lighting Control systems is the easiest and most profitable way to begin an organizational transition today to prepare for a new reality.
This transition will however not be without struggle. The sales process will need to transform from one focused on simple payback to one focused on metrics like net present value, internal rate of return, and total lifecycle cost.
In this way, PACE financing can play a huge role in delivering on immediate cash flow goals while allowing building owners to take a longer-term approach.
Carbone, J. (2017, September 27). LED Market Growth will Rebound Despite Continued Price Erosion. Retrieved from Electronivs Sourcing: http://www.electronics-sourcing.com/2017/09/27/led-market-growth-will-rebound-despite-continued-price-erosion/
Mellinger, D. (2018). Energy Savings Potential of DLC Commercial Lighting and Networked Lighting Controls. Medford: DesignLights Consortium. Retrieved from http://www.designlights.org