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LED Lighting Offers Dual Opportunity: Energy Savings, a Fast-Growing Cleantech Market

Data: 2013-04-29 Back to List

 

LED Lighting Offers Dual Opportunity: Energy Savings, a Fast-Growing Cleantech Market

Courtesy of Cree Inc.

Courtesy of Cree Inc.

The accelerating growth rate in the production of LED (light-emitting diode) lighting means that manufacturers face dual opportunities: on the one hand, to get into the cleantech growth market for LEDs and components; and on the other hand, to save energy with a technology that is dropping quickly in cost.

I spoke recently with Alejandra Lozano, industry analyst for environmental and building technologies at research firm Frost & Sullivan, who has led some of the group’s recent research about the North American lighting equipment market. In reality, she told me, “the industrial vertical is not a big portion of the LED market.” In fact, she said, “the industrial segment is the smallest segment in the market” and is growing at a slower rate than the overall LED market. But probing further, what I found out is that the industrial segment is growing at “only” a 23 percent compound annual growth rate (CAGR) compared to the red-hot 26 percent rate of the overall market. Lozano said that Frost has seen LEDs “grow from a very small market a few years back to about $3.6 billion expected by 2017,” driven by energy savings, declining prices, technology improvements and supportive legislation.

A study by Lozano earlier this year found that the LED market in North America generated revenues of $1.15 billion in 2012, up from only $0.73 billion in 2009. The market consumed 23.7 million units in 2012, expected to rise to 142.6 million in 2017. Frost’s research puts the industrial segment at $33.3 million for 2012, only about 3 percent of total demand. Because the overall market is growing so fast, the industrial segment is expected to reach $94.3 million by 2017. LED lighting technology got its original boost in the outdoor segment, particularly in street lighting. The outdoor segment is just over half of the total market, trailed by hospitality, institutional, and retail, each hovering at about 12 percent.

A 17W LED tube equivalent to a 45W fluorescent tube. Credit: Wikimedia Commons.

A 17W LED tube equivalent to a 45W fluorescent tube. Credit: Wikimedia Commons.

I asked Lozano why the industrial sector seems to have gotten such a slow start adopting LED technology. “Currently the key lighting technologies in this sector are linear fluorescent and high-intensity discharge [HID] lighting,” she explained to me. “But we’re seeing that LEDs are going to be adopted increasingly in this vertical because of the energy savings and the longer life of the LED, which means you don’t have to replace the lamps as often. They tend to be difficult to access in industrial plants and manufacturing facilities.” She also said that until more recently, energy savings were just less of a priority in the industrial vertical. “When you are looking at a manufacturing process, energy usage has just not been the most important issue you deal with. But that is beginning to change, because overall that vertical is very energy intensive, so they are starting to look at these more energy-efficient options. Lighting is one of the key areas where you are using a lot of energy.”

Lozano also notes that manufacturing took a big hit in the economic downturn and that a great deal of manufacturing has moved out of North America. This has inhibited investment in new technologies and energy savings. “So we do expect this particular vertical to take a little longer to recover than the others. We are seeing automotive picking up and some manufacturing coming back to North America, but those trends will have more of a long-term effect.”

A 60-LED 3W spotlight equivalent to a 25W halogen lamp. Credit: Wikimedia Commons.

A 60-LED 3W spotlight equivalent to a 25W halogen lamp. Credit: Wikimedia Commons.

LED lamps yield energy savings, according to LED-maker Philips Electronics, because they deliver high levels of brightness, high efficiency, high reliability, and long life. They emit little radiated heat and, because they are constructed with semiconductor components, they can be easily programmed and controlled. The U.S. Department of Energy (DoE) says LED lamps can last 25 times longer than incandescents and can use 75 percent less energy. Rather than radiate light in all directions, they operate directionally, so light can be focused efficiently. DoE says that by 2027 “widespread use of LEDs could save about 348 TWh (compared to no LED use) of electricity,” equivalent to the “annual electrical output of 44 large electric power plants (1,000 MW each), and a total savings of more than $30 billion at today’s electricity prices.” LEDs emit very little heat; incandescents release 90 percent of their energy as heat and compact fluorescents (CFLs) 80 percent.

Cleantech Manufacturing: The LED Opportunity

Cleantech manufacturers face a significant opportunity in the growing market for LED lighting. Whereas Frost’s North America research projects a $3.63 billion opportunity in that market by 2017, its global prediction for that same time frame is $17.23 billion, with Asia-Pacific as the largest market at 40 percent of the total. LED penetration is only 7 percent of the global market, compared to 57 percent for incandescent technology and 21 percent for CFL. Penetration is expected to soar to 32 percent by 2018 as incandescent lighting gets phased out.

Philips says an LED lamp is composed of three basic groups of components: optical, electrical, and mechanical/thermal components. Lozano told me the market for complete lamp assemblies is competitive and dominated by big players like GE, Philips, Sylvania, and Toshiba, but added, “We’re seeing a lot of new entrants because it’s a growing market, and a lot of people are coming in to try to take advantage of that.” However, she warns that “some of these new entrants are not as successful as others because they’re not focusing on the quality. End users are becoming more educated about what to expect. Price is number one. But quality is definitely number two. If you’re not known for quality, the end user is not going to go with your product.”

Opportunities abound in a growth market such as this, especially for manufacturers who can supply the underlying components and materials for LEDs. “Some of the big manufacturers have their own divisions to make the components,” says Lozano, “but not all of them do, so there is a big opportunity for other manufacturers to sell to those who are buying their components from outside.”

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