My prior post, "Saving the Planet with the Flick of a Switch," was getting a bit long-winded so I thought it would be best to split my thoughts into two pieces to make the concept a bit more digestible (I think only my mother and employees at our LED lighting portfolio company Relume Technologies) would have made it all the way through the original-length story). So, for those of you brave enough to follow the link to this story or who may be as equally curious and geeked up about LED lighting as I am, this is for you.
As a venture capital investor who has spent recent years analyzing and subsequently investing into the outdoor LED lighting sector, I wanted to share my enthusiasm and prediction that the outdoor LED lighting market is set to explode. The market is rather non-existent at this point in time, but over the past two years, there has been significant technological advance, cost reductions and increased market awareness of LED lighting. The forces of progress, innovation and buyer motivation are on the lighting industry's horizon and the winds of change are in the air... I am not in the business of predicting weather, but I am paid to predict markets -- and I see a very bright future for outdoor LEDs lighting...
In my view, the following six forces are driving the outdoor LED lighting revolution in the lighting industry:
1. LED technology/product quality -- LED lamps are finally good enough to replace existing lamps (in terms of light output in the desired area). However, not all LED lamps are equal. A lot of cheap Chinese-made LED products are coming into the market that will leave buyers disappointed - like with anything, you get what you pay for.
2. Cost-Competitive/Strong Return on Investment (ROI) metrics -- LED lamp costs have come down to a level that, when factoring in energy savings, longer product life and reduced maintenance offers a compelling investment for municipalities, corporations, utilities and institutions.
3. Stimulus funding and "green" subsidies -- The famed "Stimulus Program" provided hundreds of millions of dollars to cities for energy efficiency programs and this cash is just now hitting city coffers. Utilities are offering rebates to customers for LED purchases as well. These subsidies make LED purchases more attractive and are helping the industry get down the cost curve with accelerated scale.
4. Municipalities are getting up the learning curve -- LED lighting products are highly technical and there is a substantial difference in product quality between cheap knock-offs and market leading products. Over the past two years, many municipal and utility purchasing departments have been educating themselves on LED technology (e.g., the importance of thermal management for LEDs) and conducting evaluations of various LED lamps. The Department of Energy has been particularly helpful with this and has sponsored a consortium involving more than 120 U.S. cities that "shares technical information and experiences related to LED" product demonstrations. This market-wide educational effort will enable the majority of the market to rapidly follow early adopter cities such as Ann Arbor and Los Angeles. In short, the market should move pretty quickly, even taking into account that most of the buyers are governments and utilities -- neither entity is oft mentioned in a sentence with the adverb "quickly," but the planets seem aligned...
5. Public embrace of "green" technology/concern about reducing carbon footprint - the public has raised its expectations for "green" behavior and action from cities, companies and institutions.
6. Incumbent politicians scoring political points -- The installation of LED lights is a quick and highly visible action for local politicians to demonstrate that they are proactive in "greening" their communities.
The confluence of the aforementioned elements has set the stage for an accelerated adoption of LED lighting technology, and for this I am encouraged, because LED lighting is an excellent and meaningful first step we can take on the long road of becoming a clean energy/cleantech society.
While I am a big proponent of long term clean energy solutions like wind and solar power, we need some short term wins to satisfy society's short-term gratification and to sustain the momentum to drive the cleantech revolution forward. LED lighting offers us a highly visible, readily-available technology, with benefits all Americans can understand and it couldn't be much easier ... we all can do our part to help save the planet with the flick of a switch.
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