Smart Lighting 2012
 

Smart Lighting 2012

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This report provides an analysis of the worldwide smart lighting market and builds on NanoMarkets’ extensive six-year experience of analyzing the solid-state lighting industry. The report shows how ...

This report provides an analysis of the worldwide smart lighting market and builds on NanoMarkets’ extensive six-year experience of analyzing the solid-state lighting industry. The report shows how new value is being created in the lighting market by adding enhanced electronics and intelligent luminaires and how such product strategies will be able to build on the massive trend towards introducing CFLs, LEDs, OLEDs and other forms of energy efficient lighting.

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    Smart Lighting 2012 Smart Lighting 2012 Document Transcript

    • www.nanomarkets.net Smart Lighting 2012 Nano-455 Published February 2012 © NanoMarkets, LCNanoMarkets, LCPO Box 3840Glen Allen, VA 23058Tel: 804-270-1718Web: www.nanomarkets.net NanoMarkets, LC | PO Box 3840 | Glen Allen, VA 23058 | TEL: 804-270-1718 | FAX: 804-360-7259
    • www.nanomarkets.netEntire contents copyright NanoMarkets, LC. The information contained in this report is basedon the best information available to us, but accuracy and completeness cannot be guaranteed.NanoMarkets, LC and its author(s) shall not stand liable for possible errors of fact or judgment.The information in this report is for the exclusive use of representative purchasing companiesand may be used only by personnel at the purchasing site per sales agreement terms.Reproduction in whole or in any part is prohibited, except with the express written permissionof NanoMarkets, LC. NanoMarkets, LC | PO Box 3840 | Glen Allen, VA 23058 | TEL: 804-270-1718 | FAX: 804-360-7259
    • www.nanomarkets.netTable of ContentsExecutive Summary ............................................................................................................... 1 E.1 Opportunities and Strategies for Smart Lighting Systems/Luminaire Manufacturers ...... 1 Page | i E.1.1 The Shifting Meaning of Smart Lighting .......................................................................................................1 E.1.2 Prospects for Immediate Opportunities: Why Its Time to Treat Smart Lighting Seriously ........................2 E.1.3 How (and Where) New Markets and New Value are Being Created by Smart Lighting ..............................3 E.1.4 Some Risks to Consider for Smart Lighting Manufacturers .........................................................................6 E.1.5 Smart Lighting Systems Marketing Strategies ..............................................................................................7 E.2 The Making of the Smart Lighting Industry: Firms and Sectors to Watch ....................... 9 E.2.1 Smart Lighting Start-Up Strategies ...............................................................................................................9 E.3 Summary of Eight-Year Forecast of Smart Lighting Systems ......................................... 10Chapter One: Introduction ................................................................................................... 12 1.1 Background to this Report .......................................................................................... 12 1.1.1 Some Embarrassing Questions for Smart Lighting Vendors ......................................................................12 1.1.2 How Smart Lighting Will Overcome the Burden of its History ...................................................................13 1.1.3 Smart Lighting in Search of a Champion ....................................................................................................15 1.2 Objective and Scope of this Report ............................................................................. 16 1.3 Methodology of this Report ........................................................................................ 17 1.4 Plan of this Report ...................................................................................................... 17Chapter Two: Smart Lighting Systems .................................................................................. 18 2.1 Marketable Features and Functions of Smart Lighting Systems: Now and in the Future ........................................................................................................................................ 18 2.1.1 Energy Efficiency ........................................................................................................................................18 2.1.2 Smart Lighting, Communications and Smart Metering: ZigBee, DALI and Demand Response .................19 2.2 Smart Lighting Software ............................................................................................. 22 2.3 Smart Lighting Device Evolution, Strategies and Companies ....................................... 23 2.3.1 Acuity Brands Controls ...............................................................................................................................24 2.3.2 Adura Systems ...........................................................................................................................................26 2.3.3 Cavet Technologies ....................................................................................................................................26 2.3.4 Daintree Networks .....................................................................................................................................27 NanoMarkets, LC | PO Box 3840 | Glen Allen, VA 23058 | TEL: 804-270-1718 | FAX: 804-360-7259
    • www.nanomarkets.net 2.3.5 Digital Lumens ............................................................................................................................................27 2.3.6 Easylite .......................................................................................................................................................28 2.3.7 Eaton ..........................................................................................................................................................28 2.3.8 Encelium Technologies/Osram ..................................................................................................................29 2.3.9 Energy Automation Systems (EASI) ............................................................................................................30 2.3.10 Echoflex Solutions ....................................................................................................................................31 Page | ii 2.3.11 Enlighted ..................................................................................................................................................31 2.3.12 ETC/Electronic Theatre Controls ..............................................................................................................32 2.3.13 Fifth Light Technologies ...........................................................................................................................33 2.3.14 GE Total Lighting Control .........................................................................................................................33 2.3.15 Honeywell Lighting Controls and Ex-Or ...................................................................................................34 2.3.16 Hubbell Building Automation ...................................................................................................................35 2.3.17 Leviton .....................................................................................................................................................35 2.3.18 Lumenergi ................................................................................................................................................36 2.3.19 Lumetric ...................................................................................................................................................37 2.3.20 Lutron .......................................................................................................................................................37 2.3.21 OSRAM Lighting Controls .........................................................................................................................38 2.3.22 Philips/Dynalite/Lightolier .......................................................................................................................39 2.3.23 Redwood Systems ....................................................................................................................................40 2.3.24 Schneider Electric .....................................................................................................................................41 2.3.25 Starfield Controls .....................................................................................................................................42 2.3.26 Universal Lighting Technologies/Panasonic .............................................................................................42 2.3.27 WattStopper/Legrand ..............................................................................................................................43 2.4 Component Level Developments ................................................................................ 43 2.4.1 Smart Lighting Sensors ...............................................................................................................................43 2.4.2 Smart Lighting Chips ..................................................................................................................................45 2.5 Key Points from this Chapter ...................................................................................... 47Chapter Three: Markets for Smart Lighting .......................................................................... 49 3.1 Key Drivers for Smart Lighting Markets ....................................................................... 49 3.1.1 Energy Efficiency ........................................................................................................................................49 3.1.2 Health and Mood .......................................................................................................................................50 3.2 Addressable Markets for Smart Lighting Systems ........................................................ 51 3.2.1 Commercial and Industrial Markets ...........................................................................................................51 3.2.2 Public and Government Buildings ..............................................................................................................52 3.2.3 Residential Markets ...................................................................................................................................52 3.2.4 Outdoor Lighting ........................................................................................................................................53 3.2.5 Smart Lighting Systems for Automobiles and Other Forms of Transportation ..........................................53 3.3 The Importance of the Retrofit Market for Smart Lighting ........................................... 54 NanoMarkets, LC | PO Box 3840 | Glen Allen, VA 23058 | TEL: 804-270-1718 | FAX: 804-360-7259
    • www.nanomarkets.net 3.4 United States Markets for Energy Efficient Lighting Systems ....................................... 55 3.4.1 Uncertainties about the Phasing Out of Incandescent Bulbs ....................................................................55 3.4.2 Leadership in Energy and Environmental Design (LEED) ...........................................................................55 3.4.3 Energy Policy Act of 2005...........................................................................................................................55 3.4.4 Energy Independence and Security Act (EISA) of 2007 ..............................................................................56 3.4.5 Other Factors .............................................................................................................................................56 Page | iii 3.5 Japanese Markets for Energy Efficient Lighting Systems .............................................. 57 3.5.1 Regulatory and Legal Environment ............................................................................................................57 3.6 Chinese Markets for Energy Efficient Lighting Systems ................................................ 58 3.6.1 Impact of Environmental and Energy Legislation and Regulation .............................................................58 3.6.2 Phasing out of Traditional Light Bulbs in China ..........................................................................................59 3.7 Korea Markets for Energy Efficient Lighting Systems ................................................... 59 3.7.1 Energy Legislation and the Phasing out of Traditional Light Bulbs ............................................................60 3.7.2 Impact of Environmental Legislation and Regulation ................................................................................60 3.8 Taiwanese Markets for Energy Efficient Lighting Systems ............................................ 60 3.9 Energy-Efficient Lighting Other Asian Countries .......................................................... 60 3.9.1 India ...........................................................................................................................................................60 3.9.2 Other Nations.............................................................................................................................................61 3.10 European Markets for Energy-Efficient Lighting ......................................................... 61 3.10.1 Rules for Phasing Out Incandescent Bulbs in the EU ...............................................................................62 3.10.2 A Note on the U.K. Markets .....................................................................................................................62 3.11 Key Points from this Chapter .................................................................................... 63Chapter Four: Eight-Year Forecast of Smart Lighting Systems .............................................. 67 4.1 Methodology of this Forecast ..................................................................................... 67 4.1.1 Definitions ..................................................................................................................................................67 4.1.2 Data Sources and Assumptions about Market Size and Penetration ........................................................68 4.2 Eight-Year Market Forecast of Smart Lighting System Type of End User ....................... 68 4.3 Eight-Year Market Forecast of Smart Lighting System Sensor Modules by End User ..... 69 4.4 Eight-Year Forecast of Smart Lighting System Central Controllers by End User ............. 71 4.5 Summary of Eight-Year Market Forecast of Smart Lighting Systems Revenue by End User and Type of Product ......................................................................................................... 72 4.6 Eight-Year Market Forecast of Smart Lighting Systems Revenues by Generation of System ............................................................................................................................. 73 NanoMarkets, LC | PO Box 3840 | Glen Allen, VA 23058 | TEL: 804-270-1718 | FAX: 804-360-7259
    • www.nanomarkets.net Abbreviations and Acronyms Used In this Report ............................................................. 78 About the Author ............................................................................................................. 79 Page | iv List of ExhibitsExhibit E-1: Forecast of Smart Lighting Systems by End User Market ($ Millions) ........ Error! Bookmark not defined.Exhibit 2-1: Lutron Lighting Control Systems ..............................................................................................................38Exhibit 4-1: Forecast of Lights Controlled by Smart Lighting Systems by End-User Market Type ..............................69Exhibit 4-2: Forecast of Local Intelligence in Smart Lighting Systems (Sensors and Intelligent Ballast) by End User Type ....................................................................................................................................................................70Exhibit 4-3: Forecast of Intelligent Switches for Smart Lighting Systems by End User Type ......................................71Exhibit 4-4: Forecast of Central Controllers for Smart Lighting Systems by End User Type .......................................73Exhibit 4-5: Forecast of Smart Lighting System Revenues by Product Type and End User ($ Million) .......................74 NanoMarkets, LC | PO Box 3840 | Glen Allen, VA 23058 | TEL: 804-270-1718 | FAX: 804-360-7259
    • www.nanomarkets.netExecutive SummaryE.1 Opportunities and Strategies for Smart Lighting Systems/Luminaire Manufacturers E.1.1 The Shifting Meaning of Smart Lighting Page | 1The term "smart lighting" is widely used but vague in meaning. This vagueness rests in theword "smart," but as used in "smart lighting" (and in similar phrases) this seems to mean addinga level of functionality to lighting systems in a manner that increases its responsiveness tooutside stimuli of various kinds.At the most basic physical level what we are talking about then when we talk about smartlighting is lighting equipped with a range of sensors, control electronics and communicationsinterfaces. The reasons for adding these enhancements are discussed below, but we note herethat energy efficiency, enhanced comfort and health are the top reasons currently given foradding "smartness" to lighting.The word "currently" is important here, because the meaning of "smartness" in "smart lighting"is history dependent. Yesterdays smart lighting—exemplified by rest-room lighting attachedto, and switched on and off by, a motion sensor—should probably no longer be consideredsmart lighting. At the very least this kind of lighting represents a relatively mature market; notwhere one would go looking for smart lighting opportunities.These opportunities—the focus of this report—become available when adding "smarts" tolighting grows addressable markets, distinguishes products in existing markets, or adds value toproducts in some way. How this occurs—or, in other words, where the opportunities are likelyto be found—will change in significant ways over the period considered in this report.Other terminology: By way of a footnote to these definitional comments, we note that a greatdeal of what it is reasonable to call "smart lighting," is now included under the much moremundane terminology "lighting control systems," so that the discussion in this report coversmuch that might be covered as "control systems" in another report. Again, for the purposes ofour analysis here, we are really only interested in the leading edge "lighting control systems."That said, an interesting question whose answer may be suggestive of areas where there areadditional opportunities is the relationship between smart lighting and centralized energymanagement systems of various kinds. Such energy management systems are not in any sense"leading edge." In one form or another they have been around since the 1970s and have beenquite common since the 1980s. They are now quite common for controlling HVAC, but they are NanoMarkets, LC | PO Box 3840 | Glen Allen, VA 23058 | TEL: 804-270-1718 | FAX: 804-360-7259
    • www.nanomarkets.netfar less common for controlling lighting. Since lighting accounts for a relatively high percentageof energy consumption, this would seem to be a "missed" opportunity. Perhaps new businessrevenues will be generated by interfacing new smart lighting to this kind of establishedtechnology. But there do not seem to be many firms interested in this possibility at the presenttime. Page | 2Finally, another term that comes up from time to time, is "intelligent lighting," which (based onhow the terms "smart" and "intelligent" tend to be used in the computer community) has moreor less the same meaning as "smart lighting." However, we also note that in the recent past—and perhaps still to some extent—"intelligent lighting" referred to advanced stage lighting forthe theater. This is not a topic that is covered at all in this report. E.1.2 Prospects for Immediate Opportunities: Why Its Time to Treat Smart Lighting SeriouslySome of the above suggests that one might be a little skeptical about the potential for smartlighting. For starters, it suggests that under different names, smart lighting has been around awhile and that it doesnt exactly have a glorious past. Perhaps the current interest in smartlighting is no more than bringing up and old idea under a different name? This may, in fact, bethe case, but sometimes a reframing of an idea can lead to success in the marketplace.However, there can be no denying that in the past smart lighting-like systems have not hadbuilding owners and managers jumping up and down with excitement. Many potentialpurchasers of such systems have made their economic calculations with regard to lightingcontrol systems and found them not worth the price of entry. Nonetheless, in the past fewyears there have been important marketplace and (to a lesser extent) technology changes thatmay have revived the prospects for so-called "smart lighting." It is for these reasons thatNanoMarkets believes that a report of this kind is due.The rising price of energy: The most important of these recent changes is the growingperception that energy will continue to rise in price—in real terms—for the foreseeable future.This increases the value of any system that claims to save energy in the eyes of consumers; thisincludes "smart lighting."As a result, an expanded addressable market has been created for smart lighting systems. It isimportant to understand this as a long-term trend. Global consumption of energy is increasingbecause of rapidly growing industrialization in Asia and this is something separate and morepowerful than short-term fluctuations caused by world crises and supply chain interruptions. NanoMarkets, LC | PO Box 3840 | Glen Allen, VA 23058 | TEL: 804-270-1718 | FAX: 804-360-7259
    • www.nanomarkets.netFor the most part, however, further discussion of this topic lies well beyond the scope of thisreport. However, it informs most of the discussions and arguments throughout the report.The solid-state lighting (SSL) revolution: The beginnings of a wholesale conversion to moreefficient lighting in the form of compact fluorescent lights (CFLs) and light-emitting diodes Page | 3(LEDs) has begun worldwide. The use of efficient OLED lighting may not be far behind. In muchof the world there are mandates requiring the phase out of incandescent bulbs. All this hasimplications for smart lighting systems manufacturers.This changeover has made the market more open to energy efficiency message: a fact that canbe exploited by smart systems manufacturers. But, the energy efficiency that resides in thecurrent thrust of lighting replacement is focused entirely on the "bulbs" themselves, whichrepresent just 20 percent of the total value in a lighting system.Smart lighting systems can reposition much of the rest of the value to be more in tune with theenergy efficiency meme. That is, they can make luminaires and electronics "smart," therebyadding value and (perhaps) attracting new customers. It should be noted that the luminairesand electronics account for almost 70 percent of the value of a lighting system.Progress in sensor and microelectronics technology: The progress of Moores Law and thelatest developments in nanomaterials mean that more sophisticated smart lighting systems canbe built. This means that while the potential market for smart lighting is currently beingexpanded, systems can now be manufactured that better meet the needs of the new markets. E.1.3 How (and Where) New Markets and New Value are Being Created by Smart LightingNanoMarkets believes that the opportunities available to manufacturers of smart lightingsystems, components and materials can and should be analyzed at three levels, with each partof this analysis including a discussion of how the opportunities are likely to evolve over time.The three levels of the analysis to which we refer are (1) functionality, (2) the physical layer,and (3) end-user segment. All three of these areas are important considerations in all parts ofthe lighting industry but take on new meaning in the context of "smart lighting."Functionality: Almost all discussions of smart lighting today focus on adding greater energyefficiency to lighting. NanoMarkets concurs that is where almost all the immediateopportunities for smart lighting are likely to appear driven by (1) likely short- and long-termenergy cost increase expectations and (2) consumer and government concerns regardingenvironmental issues. NanoMarkets, LC | PO Box 3840 | Glen Allen, VA 23058 | TEL: 804-270-1718 | FAX: 804-360-7259
    • www.nanomarkets.netWhile energy efficiency may be the prime functionality required from smart lighting systemstoday, it is important to remember that it is not the only way that smart lighting can createvalue. Lighting can be enhanced to provide more convenience, better aesthetics, and improvedmood—or even improved health—of the people exposed to the lighting. All of these factorscould be increased using "smart" lighting technology and we think that such opportunities Page | 4outside of todays mainstream energy efficiency meme will start to emerge in the next fewyears.Physical layer: The opportunities in the smart lighting space can also be defined in terms of thephysical components/infrastructure associated with the system. Only about one fourth of thevalue of a lighting system is actually found in the "lamp" itself, with most of the rest comingfrom the electronics and luminaire.Currently the technology development emphasis in the lighting industry is on lampreplacement, with an efficiency-driven trend towards compact fluorescent lamps and solid-state lighting. Lamp technology—in its current incarnation—is inherently "dumb," so theopportunities for smart lighting development reside primarily in the electronics and luminairesectors.As such, NanoMarkets believes that smart lighting represents an opportunity for luminaire andelectronics components firms to capitalize on the latest requirements for energy efficientlighting. It also seems that to the extent that smart lighting is able to catch on it will serve as adriver for the energy-efficient lighting technology business as a whole, so the makers of CFLs,LEDs and OLED lighting have an interest in promoting smart lighting in some way.Their direct participation in smart lighting might also make sense as a way to pump up the valueadded for "lamp" suppliers, but, of course, only some of these suppliers have the resources toparticipate in the smart lighting market. Finally, it is possible that—through the use of smartermaterials—the LED and OLED industry may be able to participate more directly in the smartlighting business.Of course, all the opportunities set out above are likely to shift over time. For one thing, firmsin the luminaire and lighting electronics business will have to shift from a strategic focus onenergy efficiency to other kinds of functionality or to certain kinds of aesthetics.There are also, NanoMarkets believes, likely to be more opportunities in the future fornetworking lighting both as a way of enhancing the cost of managing lighting and as a way offitting lighting systems more appropriately into the much ballyhooed Internet-of things. Morespecifically, over time we anticipate there will be opportunities to create communications NanoMarkets, LC | PO Box 3840 | Glen Allen, VA 23058 | TEL: 804-270-1718 | FAX: 804-360-7259
    • www.nanomarkets.netinterfaces both for local communications (among local sensors and local sensors and a localcontrol box) and for connections to the Internet.End user segment: Different kinds of end users have different requirements for "smartness" inlighting. Our sense of the market is that the first large segments that will seriously buy into Page | 5smart lighting will be the commercial and industrial segment and the street lighting segment.This is because in these areas energy efficiency can be easily translated into dollar savings andthis in turn creates an immediately realizable opportunity; that is, smart lighting can be shownto be worth or not worth the price of entry.This is less of an issue in some of the other end-user segments in which smart lighting willgenerate revenues. Thus, in individual residential units, it seems unlikely that energy savingsare usually going to be enough to change consumer behavior. So, some of the other factors—impact of mood, health, aesthetics or even an ideological propensity towards "green lighting"are likely to play a major role in shaping the residential market.Since NanoMarkets believes that such factors—or at least some of them—are likely to becomea much bigger part of smart lighting capabilities in the future, this suggests to us that residentialmarkets for smart lighting are likely to evolve after the commercial, residential and streetlighting segments have evolved.Something similar can be said about lighting in transportation as well. Here, efficiency may besomething worth having. But does it really matter that much in a car or a bus? Again, otherfactors that coincide with future capabilities of smart lighting are likely to be more powerfuladoption factors.Finally, there are large public and government buildings. These would seem to open to thesame kind of rational argument involving efficiency as other large buildings whether they areindustrial, commercial or residential multi-tenant buildings. However, there is also an addeddimension. It is not unusual in the case of such buildings for the owners to make some claim onposterity by including unique architectural features and smart lighting could in some sensefacilitate that. Smart lighting could achieve that goal by enabling the building owner ormanagement to claim that the building is especially energy efficient; a selling feature forpossible tenants/users. Or moving to the next stage of development of smart lighting, advancedlighting may add mood lighting, or something; which would also be a selling feature. NanoMarkets, LC | PO Box 3840 | Glen Allen, VA 23058 | TEL: 804-270-1718 | FAX: 804-360-7259
    • www.nanomarkets.net E.1.4 Some Risks to Consider for Smart Lighting ManufacturersObviously, the smart lighting business is subject to risks, some of which will probably beunexpected. However, a few risks stand out as being something for smart lighting firms tospecifically look for. Page | 6Smart lightings future may be like its past: As we discuss above, and throughout this report,there are powerful reasons to suppose that smart lightings time has come round at last.However, one can, of course, never be quite certain of this, and, as discussed above, the historyof smart lighting—under different name—has not been one of unqualified success.With this in mind, therefore, one cannot rule out the possibility that another promising way ofreducing the cost of energy consumed by lighting systems will not ultimately fail in themarketplace. Perhaps the additional complexities and costs that smart lighting systems willinevitably bring to the market will simply not be enough to convince potential end users of theirefficacy. In other words, in a sense, smart lighting may turn out to not be smart enough!But this risk is mitigated somewhat by the fact that more advanced technology should permitsmart lighting systems to offer more sophisticated and nuanced responses than older systems.Technology risks: Another "hidden" assumption of this report is that there is not major changein the technology environment in which smart lighting is immersed:  One part of this assumption is that computer/semiconductor technology is up to providing the kind of functionality that our analysis suggests will generate most of the revenues that we predict for the smart lighting sector. This seems pretty certain to be the case most of the time. However, there is a lot of technological uncertainty about the Internet-of-things concept that we see as playing a role in the growth of smart lighting  There is also the possibility of some major breakthrough that would propel the smart lighting business forward at a much higher rate than suggested in this report. Since high-speed processing doesnt seem to be a major requirement for smart lighting systems, the most likely point where such a breakthrough could occur would be in sensors that would enable smart lighting systems to take on entirely new functionality.  One obvious risk is that technological changes occur in the energy industry that significantly reduce the cost of energy; this would reduce the value of any smart lighting system and probably kill off the smart lighting market as a whole. Such developments within the period considered in this report seem highly unlikely however and, again, a detailed discussion of such issues seems well beyond the scope of this report. NanoMarkets, LC | PO Box 3840 | Glen Allen, VA 23058 | TEL: 804-270-1718 | FAX: 804-360-7259
    • www.nanomarkets.net  The changeover to CFLs and LEDs is largely occurring as the result of government mandates. It is far from clear how fast these markets would appear without such mandates and the argument of those who favor mandates are precisely that the markets for energy-efficient lighting would grow slowly if action favoring them was not taken by the government; that is, there is claimed to be a market externality. Page | 7 This immediately raises the question of what would happen if the lighting mandates went away or werent effective and the likelihood of this being the case. We note that there has already been some effective resistance to lighting mandates in the U.S. and we expect that rules will be widely disobeyed in other geographies; so penetration of the lighting place by CFLs and LEDs may proceed at a slower pace than some observers currently expect. This penetration is a necessary—but not sufficient—condition for substantial sales of smart lighting to occur. E.1.5 Smart Lighting Systems Marketing StrategiesWhile smart lighting systems can trace their conceptual history back decades, todays systemsare obviously a new breed; bringing together the latest sensing, control, communications andillumination technology. NanoMarkets believes that this implies the need for a product/marketstrategy that focuses on market creation. This is especially important in that buildingautomation in the past has been viewed by users with such skepticism, and this is especiallytrue of residential end users. In other words, the fact that something like "smart lighting"systems existed in the past, might actually be regarded as a disadvantage.This suggests to us that some specific marketing tactics will be required. It also suggests thatthe smart lighting market is one that is crying out for leadership for a firm that has theresources to create credibility for the current generation of smart lighting. Such a firm wouldprobably have to be a large firm with an established role in the building automation—or muchbetter—the lighting industry.Messaging to end users: The trends toward the spread of CFLs, LEDs and OLEDs and energyconscious lighting sector lie well beyond the control of smart lighting systems makers.However, we believe that these manufacturers can most effectively serve or expand existingaddressable markets for smart lighting systems by messaging (1) how their systems can lead toreduced energy costs and (2) work especially effectively with the new lighting technologies.Some of this development work will be aimed at the final consumer and will be designed toovercome reluctance to buy such systems that may have been created by the poor NanoMarkets, LC | PO Box 3840 | Glen Allen, VA 23058 | TEL: 804-270-1718 | FAX: 804-360-7259
    • www.nanomarkets.netperformance of the industry in the past and especially by bad experiences that potential endusers of smart lighting systems may have had with similar systems.Building an industry: The smart lighting systems business at the present time finds itself insomething of a "Wild West" situation and is in need of an industry leader to tame it and give it Page | 8credibility.This will take one or more firms taking upon themselves the role of sheriff in this Wild Westsituation for this to happen. The specifics go beyond the scope of this report, but what we aretalking about here is firms pushing the concept of smart lighting both to the lighting industryand to the ultimate consumer; in other words, a firm that is willing to create a buzz around thesmart lighting concept.Several kinds of firm could play a role here. A pure-play smart lighting firm has a strongincentive to take this path, but they seldom have the financial ability to adopt this strategy.However, this may not be true of all smart lighting start-ups and if the availability of risk capitalwere to increase during the period under consideration here, this situation may change.Under current circumstances, the "sheriff" that we are calling for here is much more likely toemerge from the ranks of the large lighting firms or the large control/building automationfirms. The arrival of a large firm of this sort would go a long way to establish smart lighting as acredible product and not just a fad. There are some signs that this could happen in that severalof the lighting firms have smart lighting R&D programs, but there is no company one can pointto as an early industry leader as yet.Standards: There are quite a number of efforts directed towards creating standards for solid-state lighting. There are also other relevant standards efforts such as BACnet in the buildingautomation world, and the ZigBee wireless protocol. But in the not-so-distant future these andother protocols will have to be brought together and become more directed towards smartlighting. The key aspect of smart lighting that is likely to be in need of standardizing is localcommunications so that customers can mix and match central controllers, specialized sensors,dimmers, ballasts and drivers.This is yet another area where a firm that becomes an industry champion can help to shapewhat happens in the future.NanoMarkets believes that without smart lighting standards, future growth in the smart lightingindustry will be seriously impaired. This is—once again—because of the rather difficult historythat lighting automation has exhibited. Among other factors that future smart lighting NanoMarkets, LC | PO Box 3840 | Glen Allen, VA 23058 | TEL: 804-270-1718 | FAX: 804-360-7259
    • www.nanomarkets.netstandards seem to imply for customers are (1) the ability to mix and match products fromdifferent smart lighting system manufacturers and also (2) a sense that the system beingacquired is to some extent future proof.Until standards of the sort mentioned above are mature, customers are most likely to buy Page | 9everything in their smart lighting system from one vendor. Where this happens it is good newsfor the supplier chosen, but in many cases we expect that potential customers will be put offbuying any smart lighting systems.E.2 The Making of the Smart Lighting Industry: Firms and Sectors to WatchThe smart lighting sector cannot yet be said to have evolved into an industry. However, at thepresent time, it can reasonably be said to have four segments: traditional building automationmanufacturers, traditional lighting manufacturers, chip makers and start-ups.The traditional building automation firms are long-established automation firms that canincorporate lighting into their general scheme of things. These firms include Johnson Controls,Honeywell and Trane. None of these firms have been especially proactive in smart lighting, butthey obviously all have the capability to be the industry champion that we talked aboutpreviously. Both Johnson Controls and Trane have been expanding into new markets in therecent past.As to the large lighting manufacturers—Philips, GE, Osram, etc.—these firms would be evenbetter positioned to promote smart lighting as a "champion. However, for the time being thesefirms seem more interested in development issues around smart lighting rather than promotingthe concept more generally. This is also true of the chip makers, but we note again that giventhe huge number of devices that could be demanded if smart lighting really takes off, thissector should be of considerable interest to traditional manufacturers of analog control chipsand communications interface chips; especially the makers of Wi-Fi and ZigBee chips. E.2.1 Smart Lighting Start-Up StrategiesThe big question mark is really over the start-ups. There are now about 20 small lightingcontrol systems firms out there with some reasonably well funded. These include AduraSystems, Cavet Technologies, Daintree Networks, Easylite, Ecoflex Solutions, EnergyAutomation Systems (EASI), Enlighted, Fifth Light Technologies, Lumenergi, Lutron, RedwoodSystems, Starfield Controls and Universal Lighting Technologies. This is unlikely to be acomplete list. NanoMarkets, LC | PO Box 3840 | Glen Allen, VA 23058 | TEL: 804-270-1718 | FAX: 804-360-7259
    • www.nanomarkets.netAll of these firms offer similar products and it is far from clear how they will all compete andwhether there will be sufficient market demand to keep all these firms going. A review of thesefirms strategies suggest that they hope to thrive—or at least survive—in the marketplacethrough design and other strategies that include: Page | 10  Superior user interface including Web-based control. The problem with this strategy is that it is easily copied. More generally, there is clearly competitive advantage in making the system easy to use and install, with at least one vendor promoting its system as plug and play.  Advanced communications interfaces. Who will be first to integrate its smart lighting system with Smart Grid/smart metering solutions and with the Internet-of things and will potential customers care?  Number of lights that can be controlled. This obviously translates into which markets can be addressed. Not all systems will be able to control all the lights in a large commercial building.  Value added features such as "daylight harvesting," where ambient light is sensed throughout the day and the lighting is then raised or dimmed to a preset level. Another possible feature is to provide separate control to different zones in the building or even control of individual lighting fixtures.  Combine product with some kind of energy management/billing analysis service. The service aspect of the marketing strategy of a smart lighting manufacturer may well include installation or systems integration of some kind.In addition to these specific factors, obviously all systems compete on generic economicfactors; price and ROI. Based on what these firms have said so far, 18 months to two years isabout the current ROI, which seems reasonable enough. NanoMarkets is, however, concernedthat there is really not yet enough to distinguish these firms in a way that will be trulymeaningful to customers. In other technology markets this has tended to lead to firms havingto fall back on hype in promoting their products.E.3 Summary of Eight-Year Forecast of Smart Lighting SystemsExhibit E-1 summarizes our forecasts of smart lighting systems by end user market. Theseforecasts are taken from Chapter Four of this report, which shows how they are derived. NanoMarkets, LC | PO Box 3840 | Glen Allen, VA 23058 | TEL: 804-270-1718 | FAX: 804-360-7259
    • www.nanomarkets.net Forecast of Smart Lighting Systems by End User Market 10,000 9,000 Page | 11 8,000 7,000 Streetlights and other outdoor 6,000 $ Millions 5,000 Residential buildings 4,000 Government and public 3,000 buildings 2,000 Commercial and industrial buildings 1,000 0 2012 2013 2014 2015 2016 2017 2018 2019 © NanoMarkets, LC Total Smart Lighting System Revenues 10,000 9,000 8,000 7,000 $ Millions 6,000 5,000 4,000 3,000 2,000 1,000 0 2012 2013 2014 2015 2016 2017 2018 2019 © NanoMarkets, LCTo obtain a full copy of this report please contact NanoMarkets at sales@nanomarket.net orvia telephone at (804) 938-0030 or visit us at www.nanomarkets.net. NanoMarkets, LC | PO Box 3840 | Glen Allen, VA 23058 | TEL: 804-270-1718 | FAX: 804-360-7259
    • www.nanomarkets.netChapter One: Introduction1.1 Background to this ReportThe "smart lighting" concept means different things to different people, but distilling its Page | 12essence, what seems to be intended is lighting with an additional layer of intelligence thatprovides enhanced functionality; creating opportunities over and above the simple provision oflight where it is needed:  Smart lighting systems today, generally consist of sensors located at light fixtures, which are networked back to a central controller. They distinguish themselves in the marketplace by the nature of the sensor, how the networking is provided and the degree to which they provide management information.  For the immediate future, smart lighting opportunities are strongly focused on improving energy efficiency, but NanoMarkets believes that the addressable markets for smart lighting will expand to include environments where the benefits being sold will include improved aesthetics, comfort and even improved health. 1.1.1 Some Embarrassing Questions for Smart Lighting VendorsAll of the above hints that a lot of money is going to be made in the smart lighting space andNanoMarkets believes that this will ultimately be the case. Nonetheless, NanoMarkets notesthat manufacturers of smart lighting systems must—as part of their business case—answersome questions about what is new and different about their systems:  Although presented as something new under the sun, smart lighting is clearly related to the residential and commercial building automation systems that have been touted by various firms since the oil crisis of the 1970s. These systems cannot be said to have been abject failures; they are certainly used in commercial and industrial buildings to some extent. But building automation is not the huge industry it was supposed to be. And for one reason or another, building automation systems have not often been used to control lighting systems. They are more likely to control HVAC. This raises the issue of whether there is now enough incentive for automated lighting systems to be widely used and what that incentive is. What do todays smart lighting systems have that the old building automation systems lacked? NanoMarkets, LC | PO Box 3840 | Glen Allen, VA 23058 | TEL: 804-270-1718 | FAX: 804-360-7259
    • www.nanomarkets.net  One can also see something of the smart lighting system concept in the simple sensor that switches on and off lights in rooms. These are especially common in rest rooms in relatively low occupancy buildings where these rest rooms are not used all the frequently. These systems are clearly useful, but can hardly be considered an opportunity. There do not seem to be large addressable markets for this kind of simple Page | 13 sensor plus light system that remain untapped. But given that, does the market need a more complex system, such as implied by the smart lighting concept? 1.1.2 How Smart Lighting Will Overcome the Burden of its HistoryWe think that there are several key trends that change the economics of smart lighting in waysthat get over the issues raised above.Rising cost of energy: NanoMarkets believes that the rapid industrialization of China and Indiawill push up the real cost of energy dramatically in the next decade. In addition, currentmonetary policies in major countries suggest energy prices in money terms will be subject togeneral inflation.These trends are likely to increase the value of any energy savings systems and create agrowing need by lighting consumers of all kinds to find cost efficient ways of cutting down ontheir lighting bills. If smart lighting can be shown to be one of these ways, then the rising costof energy in real terms will be good news for the lighting community. Automation of lightingthat could not be cost justified in the past may now make economic sense.The question that still needs to be answered, however, is whether the customer will see thesavings produced by the smart lighting system as worth it, given the systems upfront costs.This is hard to determine at this point; in financial terms we dont really know what discountrate customers (especially residential customers) will apply to future benefits from smartlighting systems.New lighting technology: Lighting is currently undergoing a transition from the incandescentbulbs and fluorescent lighting that has been around for decades to more energy efficientlighting. Most visibly, we are seeing this in the change from incandescent lights to compactfluorescent lights and the steady emergence of solid-state lighting. SSL is already appearing inthe form of LED lighting and has been recognized as a major opportunity by all the leadinglighting industry players. And beyond the LED, lies even more potential in the form of OLEDs.The trend towards energy efficient lighting has two major implications for the smart lightingmarket. On the demand side, it creates a marketing environment in which energy efficient NanoMarkets, LC | PO Box 3840 | Glen Allen, VA 23058 | TEL: 804-270-1718 | FAX: 804-360-7259
    • www.nanomarkets.netlighting is highlighted, so the smart lighting seems more of a no-brainer than it did say, fiveyears ago. On the supply side, the 75 percent of the lighting market that is not made up ofbulbs and tubes—the part made up of luminaires and electronics—has a strong incentive to gowith the flow and embody "smartness" itself. This changed environment is one reason why themarket may well be finally able to embrace smart lighting, while it was not necessarily so Page | 14enthusiastic about smart lightings ancestors.Government mandates, subsidies and cultural influences: Any discussion of the evolutiontowards energy efficient lighting systems cannot be divorced from government policies favoringenergy efficiency in general and lighting efficiency in particular. As far as the latter is concernedthe main impact comes from the implementation of policies around the world to replaceincandescent bulbs with CFLs and LEDs.Also of some importance—although considerably less importance than incandescent bulbmandates—are other government policies designed to favor energy efficiency andenvironmentalism more generally. For example, many governments around the world arefunding smart electricity grids and some of the smart lighting systems of the not-too-distantfuture may derive many of their benefits by plugging into these Smart Grids.Beyond these specific government policies is a culture that is more concerned with waste andenvironmental issues and which bred some of the policies outlined above. This is all quitefriendly to the future of smart lighting. However, all this needs to be balanced against the factthat in the current worldwide economic environment, environmental concerns are not alwaysthe primary focus of energy, employment or industrial policy.Ongoing development of electronics and sensor technology: A number of ongoingtechnological developments seem to have important consequence for the future of smartlighting. Moores Law ensures that tomorrows smart lighting systems will have morefunctionality than todays system, or yesterdays. Similarly, developments in sensortechnology—especially those related to nanotechnology have similar consequences for smartlighting systems.NanoMarkets view on the market is that this means in the future smart lighting systems willbring with them a lot more functionality designed to address broader addressable markets. Thesituation is reminiscent of what happened to business telephone systems in the 1980s, whenmicroelectronics technology evolved to a point that old key systems could be replaced withelectronic small business telephone systems. Suddenly, it was possible to supply small business NanoMarkets, LC | PO Box 3840 | Glen Allen, VA 23058 | TEL: 804-270-1718 | FAX: 804-360-7259
    • www.nanomarkets.netcustomers—and eventually residential customers—with PBX-like features. And it seemed, thesenew customers were willing to pay for these new features.Could something like this happen in the smart lighting sector? And will this added functionalitytake smart lighting systems beyond being machines for producing higher levels of energy Page | 15efficiency to ones that provide enhanced mood and healthier lighting? The answers to thesequestions seem most likely to be, "Yes." But, it may also be worth bearing in mind that the smallbusiness "revolution" eventually delivered overkill, with so many features that it was difficult forconsumers to differentiate one from the other. 1.1.3 Smart Lighting in Search of a ChampionWhat the previous section indicates is that smart lighting can no longer be viewed as just anextension of early technology and product developments and that addressable markets for thistype of technology have expanded. However, NanoMarkets believes that for the smart lightingbusiness to evolve to full bloom, the nascent smart lighting industry will need a champion ofsome kind; a firm who makes it its business to create an industry by effectively messaging thesmart lighting story to both building owners and managers (end users) and the lighting andbuilding automation industries as well.The most effective champion of this kind would be a large lighting or control/automation firmwho could not only promote the smart lighting industry, but also add credibility and make itseem like it is not just another fad. So far no such firm is clearly identifiable although there areplenty of hints that some of the majors in the lighting space are beginning to be interested insmart lighting.There are also more than just a handful of smaller firms that usually bill themselves as sellingadvanced lighting control systems. These firms could certainly also take the initiative to buildthe smart lighting industry, but generally lack the financial and business development tools toaccomplish this task. In addition, their brand names are seldom powerful enough to effectivelygenerate credibility for smart lighting in the way that (say) a Philips or Honeywell could.NanoMarkets believes that the smart lighting opportunity, although not much discussed at thepresent time could ultimately lead to significant revenues for manufacturing of lighting fixturesand sensing and control equipment; perhaps even for firms that make the lights themselves.The fundamental difference between conventional lighting systems and smart lighting systemsalso suggests new supply channels and a careful attention to pricing strategies. None of theseaspects of smart lighting, it seems, have been well thought through as yet. NanoMarkets, LC | PO Box 3840 | Glen Allen, VA 23058 | TEL: 804-270-1718 | FAX: 804-360-7259
    • www.nanomarkets.netBeyond the lighting community proper, chip makers see in smart lighting a potentially highvolume market for control, sensing and wireless interface chips; exactly the kind of market thatthey actively seek to build substantial businesses from. This is all exciting news and—notunsurprisingly—considerable attention has been paid to smart lighting by industry journalistsand pundits. It is, however, high time to think through smart lighting opportunities from a Page | 16strategic perspective.1.2 Objective and Scope of this ReportThe objective of this report is to identify and quantify the opportunities for smart lightingsystems over the next eight years. With this in mind, the focus of the analysis in this report ison such opportunities rather than on markets that might be considered to be part of "smartlighting" but which are largely mature or about to be superseded technologically. This wouldinclude, for example, room lighting attached to a simple motion sensor, or the niche market for"home controllers;" which blossomed for a while in the 1980s, but never quite took off. Suchmarkets may actually be larger than the markets that we actually do consider in this report. Butthey are not really "opportunities" in the sense of being a source of significant profits at thepresent time.Instead, most of the focus of this report is on where we think such profits might be made. Inthe immediate future, this would seem to be in providing better control over the energyefficiency of lighting systems and we investigate this opportunity in depth throughout thisreport including the likelihood that smart lighting control systems will become increasinglynetworked. However, as we indicate throughout this report, the smart lighting opportunitygoes well beyond the energy efficiency issue to encompass other traditional functions oflighting including mood, health and convenience.As we also stress throughout this report, the smart lighting opportunity is primarily available toelectronics firms (including chip makers) and luminaire makers, and with this in mind, we donot focus to the same degree on the makers of LEDs and other energy efficient lamps, althoughthey certainly have a role to play in the smart lighting story.In addition to a broad coverage of technologies and functionality related to smart lighting, thisreport also covers all the major end-user segments of the market. We take these to becommercial and industrial, residential, government and public buildings. We have alsodiscussed the available markets for smart lighting in transportation and given special attentionto the market for smart lighting systems that control outdoor lighting. NanoMarkets, LC | PO Box 3840 | Glen Allen, VA 23058 | TEL: 804-270-1718 | FAX: 804-360-7259
    • www.nanomarkets.netFinally, this report—and the forecasts in Chapter Four—is intended to be international in scope,although we do comment at various points in the report on which countries and regions aremost likely to be open to the penetration of smart lighting technology.1.3 Methodology of this Report Page | 17The methodology used in this report is discussed more fully in Chapter Four. However, itfollows the general approach that NanoMarkets has used in most of its other published reports.More specifically, we have synthesized data from a wide variety of sources to paint a picture ofwhat is going on in the smart lighting industry and have then identified and analyzed the trendsin the industry with the goal of showing where the main opportunities going forward will befound.The information for this report has come from a wide variety of sources including otherNanoMarkets reports that cover related areas such as OLED lighting and photovoltaics. Inaddition, we have based our opinions expressed in this report on discussions with firms thatproduce lighting and related control systems.1.4 Plan of this ReportChapter Two of this report is focused on providing an assessment of the technology associatedwith smart lighting and a forecast of how it is likely to evolve. This includes a discussion of whatis currently on offer and is planned by innovative lighting control companies along with the R&Dactivities of the leading lighting companies and research centers.Chapter Three of the report deals with the markets that smart lighting systems will be sold intoand the functionality that will enable this penetration to take place. Both near-term and long-term considerations are given attention here. Thus, much of the chapter deals with smartlighting from the short-term perspective, which is to say energy efficiency in large buildings; thebuildings where the advantages of such energy efficiency can be quantified. However, thischapter also takes a look at emerging characteristics of smart lighting (smart mood lighting, forexample) and future markets (notably residential markets).Finally, in Chapter Four, we have made numerical projections of the smart lighting marketbased on the size of underlying addressable markets and NanoMarkets expectations ofpenetration. These forecasts cover both systems markets and components and both volumeand value projections are included in the Chapter. NanoMarkets, LC | PO Box 3840 | Glen Allen, VA 23058 | TEL: 804-270-1718 | FAX: 804-360-7259