Nowadays, almost everybody is talking about implementing light-emitting diodes (LEDs) in the indoor lighting sector. The US Department of Energy (DOE) has been at the forefront of the solid-state lighting revolution. DOE has supported a market study predicting the market penetration of LED in general illumination applications ever since 2002. The forecast offered a comprehensive overview of the probable LED adoption path within the US, estimating energy savings from LED products out to 2030. Approximately 50% of the general indoor lighting industry is said to have been engulfed by the LED fever as per various lighting expert sources. The report showed that the LED implementation awareness has grown steadily. But, what are the reasons for the much hype about this LED lighting? Let us check out the main factors for the adoption of the most sought-after LED technology in this article.

Evolution of light and LED lighting

Source: White Papers, Expert Interviews, Industry Journals, and MarketsandMarkets Analysis

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Key Benefits of Using LED Light Sources in Indoor Environment

  • Competitive Advantages: Most of the lighting professionals rely on LED as it provides them competitive advantages. Most of the lighting companies have already implemented LED solutions. LED is an efficient solution, boosting the productivity of workers, and enabling better quality control, easier operation (instant on/off), safety, and cost-efficacy. LED enhances light levels and quality of illumination, reduces light energy consumption significantly, requires less maintenance, and offers rebates (60% of the project). The LED is also eligible for tax savings (according to the Energy Policy Act). LED saves time, which leads to the timely construction of projects. By 2030, LED lighting is estimated to reach 84% market share of lumen-hour sales in the general illumination market. This will reduce lighting energy consumption by 40%, for 3.0 quads (261 terawatt-hours) savings, worth over USD 26 billion (as per the current energy price) and equivalent to the total energy consumed by ~24 million US homes.
    • Huge Cost Saving: In accordance with the US Energy Information Administration (EIA), a 60-watt incandescent lamp on an average produces 16 lumens per watt and has a lifetime of 1,000 hours; a CFL produces 67 lumens per watt and lasts for 10,000 hours; and an LED produces 83 lumens per watt with 30,000 hours lifetime. The long-term energy and financial savings from the shift in lighting technology are consequently huge. In addition, the cost of LED lamps is estimated to drop, and their competence and lifetime are expected to improve. EIA forecasts that if the LED light usage predominates by 2027, the lamps can reduce the energy consumption of 44 1,000-megawatt electric power plants annually.
    • Great Opportunities: LED provides great opportunities to the commercial, residential, industrial, and other indoor lighting applications. Lighting solution providers can build highly effective LED systems for a building digitally. Even if energy savings from LED are quite impressive (as cited by MarketsandMarkets), there is a huge opportunity for further savings by accelerating investment in cost and efficiency improvements.
    • Growing Market: According to MarketsandMarkets, the global indoor LED lighting market will grow from USD 29.41 billion in 2015 to USD 74.31 billion by 2022, at a CAGR of 13.75% during the forecast period (2016–2022). To take advantage of incredible cost and energy savings from the use of LED lights, government organisations, restaurants, and hospitals are retrofitting buildings and switching to LEDs from conventional lighting. To cater to the growing market for LED illumination and ease installation and conversion costs, software companies and manufacturers introduced lighting as a service (LaaS) model as a new approach for installing and controlling LED lights. Illumination is now powered, connected, and controlled digitally through LaaS. The innovation encompasses short- and long-term gains, such as reduced energy costs, improved energy efficiency, and the ability to harness and inspect a wide array of digital analytics. LaaS can lead to major cost savings for restaurants and hospitals. Significant cost savings can also be harnessed by retrofitting conventional hospital lighting systems with LED lights and using LaaS system.
    • Low Maintenance Cost: Usually, LED illuminations have 6–10 years of life span when continuously operated, whereas fluorescent illumination needs to be changed every year, adding up maintenance fees. Facility administrators can include day lighting controls in patient rooms with enlarged window space, saving energy consumption and costs. In accordance with the US DOE, natural lighting exposure can lead to 12% increase in patient recovery time, 2.5% lower staff absenteeism, improved productivity and job satisfaction, and psychological well-being. Unoccupied space, such as restrooms, stairwells, mechanical rooms, and service areas, can be controlled and dimmed through LaaS to reduce energy consumption and costs.

Indoor LED lighting market offers lucrative opportunities OWING to rapid rise of new solutions/SYSTEMS sector

Source: White Papers, Expert Interviews, Industry Journals, and MarketsandMarkets Analysis

Key industry insights

Source: Industry Experts and Primary Interviews

Indoor LED Lighting Market: Key Global Trends

  • Lighting Controlto gain a pivotal role with LED due to long-term increase in functionality. LED will lead to a more complex control system, offering comfort, security, and flexibility to end users. The average price of a control system will rise especially in Europe and North America by 2019 besides the increase in units globally.
    • 2013 and 2014—the breakthrough years for LED in the professional market in Europe, North America, and China. 2014 has seen important inroads for LED in the large residential market, which let LED to pass 40% penetration of entire lighting sales in 2015.
    • LED replacement bulbs made considerable progress in residential application globally.
    • Europe and North Americato mature first—higher growth rates during the forecast period in younger markets.
    • Europe — Implemented EU ban on incandescent and prospective ban on halogen, driving LED adoption in the region.
    • North America: Incandescent ban stimulated demand; utility rebates making solid-state lighting (SSL) affordable.
    • Latin America: Price is a key barrier to the adoption outside of high-end projects. LED will increasingly be able to challenge CFL.
    • Asia Pacific: China and India embracing indoor LED and leading change for the region.
    • Middle East and Africa: Growth expected in the second half of the forecast period—sharp price decline.
    • Revenue Forecast Globally—2013–2022 (North America, Europe, Asia Pacific, Middle East and Africa, and Latin America) — APAC is the largest market.
    • Revenue Forecast by Application: Commercial (retail, office, and hospitality) and industrial lighting will have higher growth rates, and residential lighting will have the largest market (in terms of revenue) by 2022.
    • Asia Pacific — The largest market for indoor LED lighting in the globe. The market scenario in this region features aggressive expansion of production facilities by manufacturers, anticipating a positive outlook. Key companies such as Samsung (South Korea) and Philips Lighting (Netherlands) are investing considerably on advanced OLED display technology development. Residential and commercial applications will boost the market for indoor general lighting. Nevertheless, residential users are projected to drive the market with slower adoption than commercial applications in offices, hotels, hospitals, and other areas.
    • India is forecasted to be one of the most profitable markets, largely supplemented by favorable government initiatives and growth of the smartphone and automotive market. The Government of India’s LED program is expected to emerge as a win-win from the consumer point of view. The government has changed the contours of procuring and distributing LED bulbs across India, putting the project on the fast track. With the improvement in economies of scale and number of producers, LED bulbs will become more affordable.
    • Smart buildings, on behalf of convergence of green and smart technology trends, will become progressively important and a driver for consultancy-based services.
    • Performance contracting is progressively becoming a market mainstay—end users are enthusiastic about maximising cost savings and enhancing competence.
    • Lighting-as-a-service (leasing-type models and ‘pay-as-you-use’ services) gaining a grip in the industry for enabling businesses to reduce upfront capital expenditure.
    • Cloud-based services with strong data interpretation focus will be key enablers for new-generation intelligent buildings.
    Companies such as Philips Lighting Holding B.V. (Netherlands), Cree, Inc. (US), OSRAM Licht AG (Germany), GE Lighting (US), Eaton Corporation plc (Ireland), Dialight plc (UK), and Zumtobel Group AG (Austria) are identified as the key players in the indoor LED lighting ecosystem.
    Companies such as Digital Lumens (US), Fulham Co., Ltd. (US), LED Engin, Inc. (US), Lumenpulse Group (Canada), and LED Lighting Systems, LLC (US) are identified as key innovators owing to their contribution to the indoor LED lighting market in the form of innovative solutions.

Summarising Key Points

A good number of companies are employing smart LED solutions for cost-efficacy and completing construction within the specified time. The LED revolution is driven by Asia Pacific, Europe, and North America. Further growth will be less centralised and challenge leading global participants. LED replacement lamps are now at a price point that can effectively challenge conventional technologies and take over the market significantly by 2020. The challenge is to provide non-commoditised products, making the most of digital LED illumination advantages. LED drivers and lighting management solutions will be the key factors.

Reduction in LED prices

Source: US Department of Energy

LED Revolution across the Globe

  • Retrofitting bases with LED light:It is a boom time for US LED manufacturers under President Donald Trump for securing major lighting contracts.
    • IoT set up a standard for sensors in LED fixtures:Top LED producers, Internet of Things (IoT) technology companies, and industry groups established the IoT-Ready Alliance for the installation of IoT technology in luminaires. The alliance is setting industry standards to enable LED light fixtures to be IoT-ready, facilitating a swift and easy installation of superior IoT sensors—as simple as changing a light bulb.
    • Lighting now considered as a significant element in urban residential development: New government regulations supporting sustainability and the awareness of environmental issues are the prime growth drivers for indoor LED lighting. Rapid technological evolutions in this domain are driving the adoption of intelligent lighting in both residential and commercial space.
    • Strict energy compliance regulations from the European Commission: Using the energy efficiently, Europeans can lower energy bills, reduce reliance on external oil suppliers and gas, and protect the environment. Energy efficiency has increased at all stages of energy chain, starting from generation to final consumption. EU has planned 20% energy savings target by 2020, equivalent to turning off 400 power stations. In November 2016, the Commission proposed an update to the Energy Efficiency Directive, together with new 30% energy efficiency target for 2030, and actions for updating Directives to meet new targets. Policies for improving energy efficiency in Europe comprise an annual decline of 1.5% in national energy sales; EU countries making energy-efficient renovation to minimum 3% of buildings (central governments); minimum energy efficiency standards and labeling for products such as boilers, household appliances, lighting, and televisions; preparation of National Energy Efficiency Action Plans every 3 years by EU countries; and other measures.

LED Implementation Future – Roads Ahead 2017

LED replacement lamp is the winner in the medium-term for replacing conventional technologies across the world. LaaS on cloud-based networks for customised application management will pave the way for connected lighting, living, and enhanced energy and facility management. Capitalising, leasing, and maintenance are other service models expected to evolve around LaaS. LED lighting controls are a new-generation lighting management system to target verticals—offices focusing on energy saving aspects and residential focusing on ambience.

Residential

  • Low Energy Saving—A part of growing zero-emission concept
    • High Effect/Ambience—Mainstream due to falling price and increasing end-user awareness

Offices

  • High Energy Saving—Potential in retrofit and new smaller offices—still plenty
    § Low Effect/Ambience—Controlling the CT/RGB/CRI for enhancing the well-being and productivity of workers

Retail and Hospitality

  • Low Energy Saving—Strong demand from secondary facilities (corridors, staff rooms)
    § High Effect/Ambience—LED increasingly used in ambient lighting for influencing customer mood

Industrial

  • Low Energy Saving—Still low penetration and large potential (warehouses)
    § Very Low Effect/Ambience—Creating the best lighting environment for assembly and precision working

Gear Up for the Revolution

Market participants should work in association with building management system (BMS) companies and must work with indoor lighting and HVAC. With robust growth forecast, establishing market presence, network of connections, and customer relationships is essential for future success. With performance contracting becoming the preferred business model of customers, suppliers need to develop service capabilities or associate with facility management companies and energy service providers for partaking in the dynamic part of the market. The global adoption of innovative lighting solutions has been on an upswing with amazing success in the European and Japanese markets.

Even if LED solution has a high initial setup cost, it should not be ignored for getting the long-run benefits in the industry. The companies should not shy away from implementing LEDs; they should rather treat this as an investment to keep pace with technological growth. It would be better if the organisations can get rid of all skepticism about LED lighting services and move toward fast LED implementation. LED streamlines project operations in the commercial and industrial sectors.

Alarka Ghosh, Research Analyst, MarketsandMarkets 

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