For an upcoming article for tED Magazine, I recently had the opportunity to interview Erik Milz, VP Product Strategy, Cree Lighting, on the topic of continuing opportunity with commercial lighting upgrades as the LED installed base grows. Transcript follows.
DiLouie: I’ve been hearing a narrative developing in the lighting industry that the low-hanging fruit has been plucked regarding traditional-to-lighting retrofits, slowing sales. How would you respond?
Milz: The runway in terms of the number of legacy products available to convert is certainly getting shorter by the day, but there is still opportunity here. We’ve also made a point over the past couple of years to begin educating the industry on the need for LED-to-LED lighting conversions. Much of the LED installed base that may be approaching 10 years in service or longer, is likely no longer meeting the illumination performance they were set out to deliver. Just like earlier LED systems provided value to displace legacy technology, today’s LED systems can provide real value to displace their predecessors.
DiLouie: Where are the biggest opportunities for retrofits of traditional lighting to LED today?
Milz: Value generation, beyond product category, is becoming increasingly important. Things like price, availability, and product performance will never go out of style, but today’s customers are looking for partners that can provide additional value. That could include things like lighting design and luminaire recommendations, energy audits and project management services. Opportunities may vary somewhat by region and based on local market conditions, but access to great products and the ability to execute around these solutions to deliver an exceptional and valued customer experience is a difference maker.
DiLouie: What opportunities exist for going back to first-generation LED adopters and upgrading to new LED lighting? What would be a few examples? Where are the biggest opportunities?
Milz: There’s real opportunity here. Age of installation and hours of operation are both important factors. For example, a parking garage installation that’s 10 years old and runs 24 hours a day is likely a better opportunity than a 5-year-old troffer installation that runs 12 hours per day. Today’s products can save significantly more energy than early LED solutions, and the control story is so much better today than it was a decade ago – allowing for even more energy savings. In addition, you may need to look for them, but you can certainly find products today that can provide a much better lit experience. The cost of energy can also be important – the higher your energy costs the greater the savings and the shorter the paybacks. Lastly, this is another area where rebates should be explored.
DiLouie: Several states have announced severe restrictions on the sale of fluorescent lamps. How do you see this affecting the LED retrofit market?
Milz: Bans or restrictions around legacy light sources, such as fluorescent lamps, have certainly accelerated conversion towards LED products. Displacing such technologies, including the fixture itself, allows customers to realize the full benefits an optimized systems around a LED source can deliver.
DiLouie: A challenge with lighting upgrades is they boil down to numbers, typically cost versus energy savings, and don’t account for benefits that are more difficult to value, such as occupant satisfaction, beautification, health, and so on. What advice would you give to distributor salespeople to sell lighting that accounts for these benefits?
Milz: Price is easily understood – that’s part of the problem. Benefits beyond price can be more difficult to understand and appreciate. One thing customers sometimes need to be reminded of is that their goal should be to maximize value, not to minimize cost. An example would be glare. Nobody wants to look at a glary fixture in their parking lot or on their street, but if glare isn’t included or considered in the product evaluation process – you’ll likely end up with a glary fixture. Implementing inferior systems can come at a price, and a poor LED installation unfortunately could last a decade or longer. That’s a long time to suffer.
DiLouie: Lighting controls are left out of some retrofits due to cost relative to solid energy savings but for a smaller load. What opportunities exist for incorporating lighting controls, and how should distributors sell them? What statutory requirements may apply, such as energy codes?
Milz: From a costing standpoint, we would encourage everyone to investigate what rebate opportunities might be available in their market around controls. It’s common for utilities to offer incentives for controls, and this certainly can help offset some of the cost concerns. Partly due to energy codes, controls in the indoor space are fairly common, less so outdoors. We believe momentum is building in the outdoor space as these systems become more common and valued. In addition, today there is a much greater awareness and desire to reduce light pollution, which is in part influenced by the amount of light a luminaire produces. Dimming our outdoor luminaires, perhaps after businesses close or post-curfew, is a reasonable way to help while increasing energy savings.
DiLouie: As with non-energy benefits of good lighting design, lighting controls offer non-energy benefits such as color tuning and data collection. What upsell opportunities exist for distributors here, and what advice would you give salespeople to sell these solutions?
Milz: My advice to salespeople is to become as educated as you can about the solutions you sell. Understand the problems they solve and the value they deliver, as well as what customers can most benefit from them. Some of the examples in your question have a broad appeal – hard to argue where good lighting design can’t add value, or where controls shouldn’t at least be considered. Other examples, like color tuning and data collection, today at least, likely have a narrower appeal. Those require a more “fish where the fish are” approach, targeting customers that are already sold on the benefits of such systems and that are less financially constrained to prevent these systems from being implemented.
DiLouie: Do you see an aftermarket developing for installed LED lighting, whether it be driver replacement or new linear replacement lamps? How substantial is this market, and what is the best way to service it?
Milz: Serviceability requirements to meet warranty claims has made things like driver replacements more common. As far as an aftermarket, this seems less viable. Legacy light sources failed over much shorter timeframes and the systems were much more constrained and universal in terms of design requirements to accommodate very common industry light sources. LED systems can be much more varied, and this variation allows product design to optimize solutions around what the market values at any given time. At least in the foreseeable future, I suspect an aftermarket like we saw in the HID days will not be repeated. Near-term, likely greater emphasis on building products that are environmentally responsible, both at the beginning and end of their designed lives.
DiLouie: Some jurisdictions are looking at implementing energy codes addressing existing building energy consumption or rules regarding carbon emission reporting and penalties. Meanwhile, electrification of transportation means more buildings will install electric-vehicle charging stations, imposing a high potential cost for new electrical infrastructure. Do you see these peripheral market forces impacting the economics of energy efficiency such as lighting upgrades?
Milz: More demanding energy codes, combined with expanded on-site EV charging stations, likely makes energy efficient lighting and the value of controls even more desirable as these systems free up more capacity to be utilized elsewhere.
DiLouie: Overall, what can distributors do right now to ensure they take full advantage of the existing building lighting market and generate sales?
Milz: Similar to my earlier answer. Look for ways to differentiate yourself from your competition in areas customers will appreciate. Partner with reputable manufacturers that give you access to great products customers value, and then execute and outwork your competitors.
DiLouie: If you could tell the entire electrical industry just one thing about selling LED retrofits, what would it be?
Milz: Choose your partners wisely. Your partners’ products and service are an extension of you and your brand.