Disassembled LED lamp showing the emitting material, dispersive cover, driver circuit board and Edison screw. [Image: Dmitry G./Wikimedia Commons]
A new report from the U.S. National Academies of Science, Engineering and Medicine (NAS) has suggested that the burgeoning market for LED lighting could be subject to a few near-term hiccups, with some manufacturers exiting the business as they’ve confronted narrowing profit margins. The report also makes specific recommendations to the U.S. Department of Energy (DOE) toward continued LED research and other actions, to support both the ongoing deployment of LED lighting and the development of new, higher-value applications to strengthen the market.
LED installations soaring
The new NAS report, Assessment of Solid-State Lighting, Phase Two, notes the stunning increase in installations of solid-state bulbs in the years since the Academy’s last such study, published in 2013. Between 2012 and 2014, residential installations of LED bulbs soared from 13 million to 78 million (versus fewer than 400,000 bulbs in 2009).
Even in the wake of the recent growth, according to the study, LED bulbs account for only 3 percent of installed indoor lighting. That leaves plenty of headroom—and a substantial opportunity for increased energy efficiency; “widespread adoption of LED products,” notes the NAS report, “has the potential to result in a 40 percent savings in the energy consumed by lighting by 2030.”
Market dislocations
Yet, perhaps paradoxically, prices and margins for LED lighting have shrunk even in the face of increasing consumer demand. The price and profitability reductions trace partly to the substantial efficiency gains in manufacturing and lighting capability in recent years, but also, the report notes, to some specific market dislocations. In particular, the NAS study cites the “massive subsidies” that China has provided to domestic producers, which have resulted in significant overcapacity and driven the prices of LED components down—sometimes pushing the industry toward below-cost pricing.
As a result, says the report, “few companies in the LED lamp business are growing,” despite the rapid public adoption of LED lighting. Indeed, the business now appears to be hip deep in a restructuring phase, with an increase in mergers of struggling companies and with the industry bifurcating into a low-value, high-volume commoditized basic-lighting business and a higher-margin, lower-volume specialty-applications business. Those specialty apps include emerging new uses for organic LEDs, as well as cutting-edge, information-driven applications such as “smart” lighting and light-driven wireless communication (“Li-Fi”).
Recommendations to DOE
The NAS study stresses that, despite near-term market dislocations, the solid-state-lighting train has left the station, and that LED installations will continue to displace older lighting approaches, driven in part by government regulations. But, particularly in light of the near-term economic dislocations that authors identify, the report makes some specific recommendations to DOE to help support the market and continue moving LED lighting into the mainstream.
Those recommendations include partnering with industry, states and utilities to develop public-outreach programs encouraging LED use, and continuing to invest in core technology improvements (and also in more speculative ventures that might be too risky for the private sector). The study also recommends that the Department deploy its resources toward increasing efficiency at the level of applications, rather than individual products as at present, to support the emerging demand for higher-value, feature-rich applications that could buttress the LED market as a whole.
In addition, the NAS report suggests that DOE continue to invest in efforts to make bulbs with luminous efficiencies on the order 200 lm/W, now emerging from research laboratories, practical and marketable in the proverbial real world. Such efforts, the report notes, will be necessary to achieve the 40-percent-plus energy savings implicit in widespread LED adoption—and will hinge both on improving the quality of light from such high-efficiency bulbs and on making them cost-effective to manufacture.