LEDs to Get Bigger Share of Market Even as Revenue Drops, Navigant Says

November 26, 2014 By Karen Henry

Navigant Lamp Revs Energy ManageIndustry-wide transformation to LED lighting is picking up steam and is expected to accelerate in the coming years, according to a new report from Navigant Research, “Energy Efficient Lighting for Commercial Markets.”

Among other things, the speed at which LEDs will replace other types of lighting will be driven by price and policy. While LED lamps available in 2014 can reduce electricity consumption compared to competing technologies, the payback periods are still too long for many commercial customers. In the coming years, however, both falling prices and rising efficacy will begin to generate savings that offer payback periods of less than two years. This will create a tipping point for the large-scale adoption of LED lighting.

Incandescent lamps are being phased out in much of the United States, Europe and China by legislation that either bans the sale of these lamps or requires minimum efficacies that incandescent lamps cannot achieve. Initially, these laws are driving up the market share of compact fluorescent lamps (CFLs) and, in some cases, halogen lights that have been redesigned to meet the new standards. Eventually, however, the laws will be one more factor pushing consumers toward LEDs, Navigant predicts.

The shift to LEDs will be most dramatic in the share of luminaires sold for retrofit projects, where older lighting is often replaced to improve efficiency. Although Navigant forecasts that only 15 percent of lamps sold to retrofit projects worldwide in 2014 will be LED-based, that share is expected to grow to nearly 74 percent by 2023. Such growth will largely eliminate technologies like incandescent and halogen. LEDs will also take a significant portion of the market from the previously leading T8 and T5 fluorescent lamps as well as CFLs.

Due to the much longer lifespan of LED lamps, however, global lamp revenue is expected to decline from $18.5 billion in 2014 to $12.8 billion in 2023, Navigant reports. To avoid this decline, companies are broadening their offerings to include lighting controls and lighting services. Today’s lighting giants are becoming providers of complete lighting solutions rather than just the physical elements that emit light.

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