Lighting as a service on the rise in facilities worldwide, for good reason
Tuesday, March 27, 2018
Lighting as a service (LaaS) solutions in commercial buildings might not be a new development, but the market is growing. Revenue forecasts are expected to rise exponentially throughout a good portion of the next decade as the landscape matures and competition heats up.
LaaS is a service delivery model that allows lighting services to be charged on a subscription basis rather than via a one-time payment or the traditional manner of a facility or organization manually keeping up with equipment and paying the monthly bill. The business model has become more common in commercial installations of LED lights, with the aim of reducing installation costs.
Such an agreement usually operates under third-party management of a lighting system, including additional maintenance, financial, technical or operational services. As more lighting products and controls come to market, LaaS is expected to experience a boost from customers who need assistance in choosing and maintaining up-to-date technologies that can provide cost savings to their businesses.
According to a new report published by Navigant Research, global LaaS revenue is expected to grow from an estimated $662.6 million market in 2017 to $2.6 billion by 2026, experiencing a compound annual growth rate of 16.6 percent.
"We are seeing a shift in the LaaS market from a traditional financing model to an increased number of turnkey services, which provide the customer with a full-scale offering from audit and design to installation to management and maintenance of the system," Krystal Maxwell, research analyst at Navigant Research, said in a statement.
"The as-a-service business model, which shifts business spending ... allows companies to focus on their core business areas and ensures the outsourced business (LaaS) is being kept up to date with market developments by the service provider, especially through the growing number of turnkey services."
Per reporting by MakeUseOf, lighting accounts for as much as one quarter of the world's total electricity use. Smart lighting is designed to decrease power costs by combining high-efficiency fixtures with automated controls that make adjustments based on various factors, such as occupancy and sunlight availability.
The premise here is simple: Why keep the lights on in a room that's empty or already sufficiently lit by the sun?
Smart lighting systems use motion sensors to detect when people enter or leave a particular area, dimming or shutting off the lights when no one is around. A 2009 study concluded that automatic lighting systems with occupancy sensors can reduce energy consumption by as much as 30 percent over conventional systems, even when the automatic system's lighting power density is 50 percent higher than that of the conventional system.
Some smart lighting systems also use sunlight detection technology, which helps to cut down on unnecessary power usage by dimming or turning off the lights when there's plenty of sunlight to light the room.
As technology for LED lighting improves, LED lighting — which is more energy efficient, lasts longer and has a significantly lower cost of operation — ultimately will replace all traditional fluorescent technologies. The LED lighting market is anticipated to grow 45 percent per year through 2020, and is expected to reach a market size of over $60 billion.
One downside might be the length of a LaaS agreement. Chain Store Age points out that the lighting company invests in the relationship by buying the equipment upfront, and only earns a reasonable return over long periods of time: "It is not uncommon to see 10-year or even 15-year deals when it comes to LaaS. These companies are taking the risk on ensuring their customers will continue to pay them for the length of the agreement, and customers benefit by being assured that they will be around for a long time."
A payoff, however, is that in many cases, LaaS agreements often lead to a lighting retrofit to the facilities that enter into an agreement with a LaaS firm. For example, retrofits likely will lead to a redesign of a lighting layout from scratch to ensure that the proper technology is in place to establish a LaaS user agreement . LEDs have the ability to place light in very specific directions, and dim or turn off lights easily with control systems.
"Photometric analysis should be performed so you can see the actual lighting levels that are projected after the system is installed," the magazine notes. "If the firm you are talking to sounds more like a mortgage broker operation than an advisory firm, find a new partner."
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