Lighting as a Service (LaaS) is getting lots of play in lighting circles, with consultants predicting all sorts of massive growth. Navigant Research pegs the market at $35.2 million and says it will grow to $2.6 billion by 2025.
But as with the performance contracts energy service companies (ESCOs) sell, the big question is where distributors fit in. As with other new market opportunities, the answer depends on how much value-add distributors bring to the equation.
With LaaS, a lighting provider installs a lighting a system for a building owner and maintains ownership of that system. Building owners don’t pay for the installation costs, and basically rent the system, only paying a set monthly fee. The lighting provider foots the bill for all maintenance and upgrades.
Many lighting manufacturers and ESCOs now promote LaaS contracts. One ESCO, Every Watt Matters (EWS), Vancouver, Wash., has engineered LaaS projects for quite a few large customers, including Boeing and Tennessee Valley Authority. EWS outlined its LaaS offering on its website (www.everywattmatters.com): “Lighting as a Service requires zero capital investment. EWS will install new energy-efficient lights and smart controls and enter into a monthly Lighting Services Agreement (LSA) with your organization.”
Philips Lighting has also been promoting its Pay-per-Lux version of a LaaS agreement for several years. In 2014, the company inked a deal with the Washington Metropolitan Area Transit Authority (WMATA) to retrofit more than 13,000 lighting fixtures in all its parking garages at no upfront cost to the city and provide a 10-year maintenance contract. According to a report at www.sustainablebusiness.com, Philips will get paid from the $2 million in savings the LEDs are expected to provide each year.
And a profile currently posted on www.philips.com describes its Pay-per-Lux arrangement with Thomas Rau, founder of Rau, Architects, Amsterdam. Says Rau in the post, “I told Philips, ‘Listen, I need so many hours of light in my premises every year. You figure out how to do it. If you think you need a lamp, or electricity, or whatever — that’s fine. But I want nothing to do with it. I’m not interested in the product, just the performance. I want to buy light, and nothing else.”
Philips says the system gave Rau exactly what he wanted: the exact amount of office illumination he needs at a set price. “It’s also very flexible lighting that can be personalized, changing in intensity — or from cool to warm white light — depending on the way the space is used and the preferences of the person using it,” says the post. “Nor was Rau burdened with the hassle of having to choose, decide or figure out how to achieve all this: Philips did it for him. Maintenance, of course, is included in the ‘Pay per Lux’ concept.”
How might distributors fit into the LaaS equation? As you will learn in this month’s lighting package, “Rethinking Lighting,” (page 14), they will have to do more than just provide local inventory of lighting products and jobsite delivery. That local touch would be of benefit in many LaaS contracts, but distributors will also have to understand the intricacies of the financial model being used and be conversant with CFOs, accountants and other C-suite executives on the return on investment the lighting system would provide.
In reality, this package of local service, financing and project knowledge isn’t much different than what the best lighting distributors have been providing for years. LaaS seems to be attracting the attention of more lighting manufacturers and ESCOs, and as in the past many of them intend to handle the deals direct. The longer life of the LED systems and quicker payback are definitely factors, but they wouldn’t seem to be too much for a savvy lighting distributor to handle.
Bottom line: No need to get freaked out by LaaS if you already invest in the lighting market by training your sales staff on the latest lighting technologies and the sales skills necessary to talk ROI, and are already doing on-site energy audits for lighting retrofits.