The U.S. Department of Energy has recently released a pair of reports that sheds light in the market for LED (light emitting diode) lighting. It’s a market that shows great promise, one that consumers in residential and commercial markets are taking notice of—and one whose market longevity may be limited.
The DOE’s US Lighting Market Characterization (LMC) clearly indicates that investment in energy-efficient technologies, federal and state lighting regulations, as well as public awareness campaigns, have enabled a considerable momentum shift toward energy-efficient lighting.
The report indicates that solid-state LED lighting adoption has grown 30-fold to some 50 million lamps, but still represents only 1 percent of the total lighting infrastructure footprint. See some potential here?
More interesting is the DOE’s report on Energy Savings Potential of Solid State Lighting in General Illumination Applications. This is worth a look if you plan on selling LEDs as a part of your business.
Some highlights:
- Across the entire residential sector LEDs are expected to represent over 25 percent of the installed base of lumen-hours by 2020 and 62 percent by 2030.
- LED luminaire products generally offer higher efficacies than LED lamp products. This is likely because LED luminaire products, with optimized form factors, are able to better utilize the inherent benefits of LED technology and better manage thermal and optical losses.
- LED lamps will begin to rapidly gain market share in the residential GSL–MSB submarket after 2014 as the retail prices approach those of halogen and CFL products, which will cost between $2.50 and $3.30 per kilolumen in the same year. LED lamps will remain slow until prices fall low enough to compete with other technologies after 2014, but will subsequently ramp up to 26 percent market share by 2020 and 69 percent in 2030.
- Market research shows that LED lamps and indoor luminaires on today’s market typically have a lifetime of approximately 25,000 hours. Luminaires for outdoor use typically have longer lifetimes (50,000 hours in 2011), such that their improvement in parallel with indoor luminaires should result in an average lifetime of 75,000 years by 2030.
- Using industry, DOE, and manufacturer pricing data, it was determined that the average cost of LED luminaires was about $181 per kilolumen in 2010. Thereafter, this analysis predicts that LED luminaire price will decrease at the same rate as the MYPP LED lamp forecast. Due to the comparative adolescence of the LED technology and marketplace, the LED price projection decreases exponentially between now and 2030 and then is projected to plateau at about $3 per kilolumen for LED lamps and $13 per kilolumen for luminaires.
- Two types of lighting consumers include those who prefer low retail price and put less importance on annual cost savings; and those whose purchasing decisions are based primarily on the life-cycle or annual cost of a lighting product. Homeowners tend to place more emphasis on the upfront cost, while commercial consumers look at annual or lifetime cost benefits.
Commercial Market Set to Gain
- In the commercial market, Morgan Stanley, McKinsey, and Sterne Agee predict that LED lighting will obtain market shares of 15 percent by lumen-hours, 13 percent by units, and 19 percent by units by 2015, respectively. Other studies predict larger growth, with Cree reporting that the industry consensus on LED lighting market value is approximately $50 billion with a 33 percent share by value of the overall lighting market by 2015. By value, Philips foresees a 50 percent market share, and IMS Research expects LED lighting to have a 46 percent market share by 2015.
- By 2020, this analysis predicts that LED lighting products will contribute 36 percent of lumen-hours sold, with large growth seen in all sectors. It is then predicted that the rapid growth of the LED lighting market will slow because the long life of LED lighting will reduce the need for replacements, thereby limiting new opportunities for growth. Therefore, it is estimated that LEDs will comprise 74 percent of the overall lighting market by 2030.
- In order for the energy savings forecast to be realized, LED lighting products will need to achieve substantial improvements in price, efficacy, and operating life.
Our Conclusions
If you want to get in on the LED wave—commercially or residentially—don’t wait until 2014. Start now, especially if you’re doing custom work in the residential market. After 2014 the market will become rapidly commoditized, and consumers will have more knowledge about buying LEDs to do it themselves. The commercial wave, too, should be well underway by then.
Margins on LEDs aren’t great, but they can be an excellent way to show ROI and get into a business or home repeatedly, as you replace lights in budgeted stages.
Also see:
Must-Dos to Grow Your Energy Management Business
The Promise and Peril of Big Box Hardware Stores Going Green
Case Study: Building a Green Electronics Installation Business
5 Steps to Staring a Green Electronic Business
