The market share of LEDs continues to grow, both in the commercial and residential sectors. According to the DOE, in 2015 the installed base of LEDs in the United States was 6.1%, up from 2.9% in 2014. While the initial steep cost deterred and prevented many residential customers from purchasing the technology, significant price declines have enabled a greater segment of the market to purchase LED lights. The adoption rate for LEDs in the residential market has been slower than that of the commercial market. A contributing factor to this is that lights are not used as many hours in the residential segment. The residential lighting market is now poised for a further shift toward the growth of LED adoption and an increase in lighting control deployment.
In large part due to declining prices, customers have increasing options for both LED lamps, the mechanism that produces the light (commonly known as a bulb), and luminaires, the object that houses the lamp and connects to the power source. The overall growth rate for residential lighting revenue is expected to decrease due to these declining LED prices and the longer lamp life offered by these technologies. According to Navigant Research’s Residential Energy Efficient Lighting and Lighting Controls report, while LED luminaire prices are expected to continue to decline, they will still be double the price of fluorescents by 2025. However, while LED luminaires will be significantly more expensive than other luminaires, the price gap for LED lamps compared with incandescents or fluorescents is expected to shrink drastically between 2016 and 2025. While LEDs still remain more expensive than incandescent or compact fluorescent lamps (CFLs), the energy savings over incandescent and health concerns from mercury in CLFs have made LEDs a leading contender for residential customers. The declining costs mean a quicker payback period for consumers, which has helped drive sales.
Beyond the Lamp and Luminaire
As residential customers increase their use of long life LEDs, there will be a shift in the residential lighting value chain due to the extended lifespan and declining prices. In order to maintain a competitive edge and continue to provide added value to customers, lighting companies in the residential lighting market are turning toward lighting controls and connected lighting for residential customers, similar to the commercial and industrial lighting markets. Just as LEDs experienced a slower adoption rate in the residential market, so too has this market experienced a slower adoption rate for lighting controls.
Though the demand for advanced lighting controls in the residential market has been low, some consumers have embraced lighting controls and more are likely to see the value add in the coming years. Navigant Research projects that total revenue associated with the installation of residential lighting controls (including occupancy sensors, photosensors, timers, dimmers, and lighting-only networks) will grow at a compound annual grow rate (CAGR) of 4.6% between 2016 and 2025.
In recent years, the number of connected devices has grown with a desire to automate and personalize homes. Smart phones and tablets make it easy to wirelessly control smart devices in the home, letting users easily adjust the temperature, set an alarm system, and turn lights on or off, among other uses. Smart LEDs can be remotely controlled via a wireless radio embedded in a lamp that communicates to a smart phone or tablet or through a gateway device plugged into a router at home. Philips Hue, a popular residential smart lighting system, allows users to remotely control lights throughout their homes and yards. The Hue product line includes a variety of options to allow users a customized experience with the ability to schedule their lights and an optional dimmer switch. The next possible addition to the Philips Hue product line is likely to be might be motion sensors. While other companies offer motion sensors that can be connected to Philips Hue lights, such as SmartThings and Belkin, this functionality is currently not integrated into the lights themselves.
Despite the success of Philips Hue lights and the interest in adding a motion sensor to the product line, there is still limited demand for these products. . Many companies provide smart home offerings, including those with wireless lighting control capabilities. A major hindrance to residential lighting control systems is a general lack of awareness on the part of consumers and the cost of these systems. As consumers become more aware of LEDs, their awareness of the associated lighting controls will also increase. However, even with an increased awareness for LEDs and lighting controls, the cost for wirelessly connected lights is substantially more expensive than standard LEDs and does not offer increased energy savings. Consumers must realize the other benefits—such as integrating lighting with other smart home devices—in order to justify the higher price tag of a lighting control system. Customers understanding the added value of lighting controls will help drive sales in this market.