LightFair 2012 – Has LED lighting supplanted everything else?
May 10, 2012 | 
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Lightfair 2009 was the coming out party for LED lighting. Lightfair 2010 turned into LEDfair, and by Lightfair 2011 LEDs had gone mainstream. As Bob, Fritz and I headed into Lightfair 2012′s exhibit hall we speculated on what we would see – and how over-the-top LED lighting might have become.
We were not disappointed – and it was a bit overwhelming.
Last year’s Lightfair had broken records (474 exhibitors, 200,000 square feet, 23,709 attendees from 75 countries) and this year’s exhibit hall had been sold out since last November, with over 500 vendors pre-registered. At previous Lightfairs we’ve prided ourselves on our detective work (finding hot new LED products within the massive convention center) but the sheer volume of LED products at Lightfair 2012 made this so much harder. LED lighting is fully penetrated. Where last year we quickly passed by any booth prominently displaying HID, fluorescent or induction based lighting, these old fashioned technologies are now virtually nowhere to be seen.
With that as a caveat, this year we were collectively struck by the following:
The Old Big Guys (Sylvania, Philips, Cooper, Acuity, GE) – all on board, all products LED, technical representatives that know the speeds/feeds performance data off the top of their head. Products are still high priced relative to smaller newer LED players, but Big Guys are not as defensive, know more about rebates and are more focused on the energy savings-oriented retrofit market, not just spec/new building lighting designers.
The New Big Guys (Toshiba, Sharp, Samsung) – making a stronger push into the US market, not yet with complete LED product lines, but based on their current marketing investment, let’s assume they will be there by next year.
The Chip turned Chip & Fixture Guy (CREE) – post the acquisition of Ruud/Beta, CREE now has a full line of products and interestingly assembled two booths instead of one, located at opposite ends of the convention floor – one for chips, one for fixtures.
Glare - Earlier LED fixtures struggled to produce enough light, and designs rarely tried to reduce glare as any additional diffusers (plastic lenses covering the LED chip) had the side-effect of reducing light output. With the benefit of another year of price/performance growth, this year more fixtures had LEDs inside – but you couldn’t tell. No more wearing sunglasses.
Lighting Controls – a number of newer wireless companies/products hidden amongst the older traditional wired products (think grey metal boxes with LCD displays and buttons, mounted at the breaker panel ). Lighting controls used to be about physically connecting to lighting fixtures – but now its about a software interface which wirelessly connects and makes the control magic possible.
And in software, these older controls players just cannot keep up. Ever seen a back-office PC with a dusty keyboard running a Windows 2003 based program with hard to understand icons? That’s this world. These companies are not proficient at developing and releasing new software products. At one demo the product manager told us “this control software isn’t released yet” and then whispered that he had given this same demo at LAST year’s Lightfair. His partner interrupted saying, ”it should be out in six months…”
Contrast this with the newer wireless control players (Adura, Daintree, Enlighted, Redwood) who have slick, easy-to-understand software with graphical interfaces – they talk about cloud, hosted, multi-user support and open standards. We should expect these guys to get rolled up by the New and Old Big Guys within the next few years.
Office - While LED office fixtures debuted by CREE last year, this year CREE has broadened this line of fixtures, lowered prices and is claiming that adoption is early, but happening. Other players are now showing their own versions of the classic dropped ceiling 2×2, 2×4 and pendant mount office style fixtures, all of which is goodness for customers.
Quality - Customers are now seeing so many fixtures from so many manufacturers and the market is moving to the next level of differentiation – fixture quality. As you pass a booth you now hear “we used with the highest performance chip” or “our company has been in business for X years”, etc. It’s no longer about the chip, but about the fixture design. This is why our friends at CREE have come up with a novel way to help certify a particular fixture design – it’s called TEMPO and it gives fixture manufacturers another good housekeeping type seal of approval. 80 companies using CREE chips have already gone through the testing and more are in process.
As we fly back from the city of sex & sin we’ll be busy trying to capture these observations and more of the last year’s developments within our soon to be re-released 2012 Enterprise LED Lighting Research report, which we’ll shortly be publishing again with our friends at Greentech Media.
Post our Enterprise Smart Grid Research release: What did we learn?
Like study-period before final exams, the days preceding the release of a new Groom Energy report can be wearying, filled with Dropbox editing, graphics tweaking, re-reading text for the fourth time and a little Red Bull. The period leading up to the release of our Enterprise Smart Grid Research Report was no different.
And as usual, the flurry of activity just afterwards required lots of patience, as we replayed our conclusions for industry consultants, Groom Energy customers and the press or calmed irritated vendors who we had positioned less dramatically than they had hoped.
It’s during this post-launch process that we always learn a ton: new customer anecdotes, challenging questions about how we came up with our views or market sizing and new vendors who we have yet to interview. And through these interactions we’re better able to assess (1) did people understand our conclusions, (2) did we characterize things correctly and (3) the report card question – did we missed anything important.
So, from our ESG launch these are our observations:
1. The ESG Management Framework was a hit.
Sometimes a single picture can convey a whole market – in this regard our graphic got an overwhelmingly positive response. New pieces will be added over time, but suffice it to say that a link to this image has been emailed to a lot of people in the last several weeks.
2. The term “energy management” will remain universally confusing.
We identified this confusion during our research, but even after we named “energy management” as a sub-category within the ESG framework, people we talked with continue to have a wide variety of opinions about its precise meaning and what it encompasses.
3. We missed some vendors.
While we interviewed over 50 and compiled and categorized a list of over 200, releasing a new report always brings out a whole new set of players – we’re now busy catching up. Apologies to those missed on the first go-around.
4. We need to develop more formal research on each ESG sub-category.
Although the ESG report was meant to frame the overall enterprise opportunity, its clear that each ESG sub-category can justify its own report (especially if you ask to the vendors in that sub-category). So we’re already in process with this project – and hoping this one requires a little less Red Bull 
Enterprise Smart Grid Research published
Today we released our Enterprise Smart Grid research report.
Since starting this research effort 18 months ago it’s stunning to look back at how things have changed, even since we hosted our first ESG conference last fall.
While customers interviews taught us the real business drivers and benefits learned from corporate early adopters, the vendor interviews gave us a different set of opinions and vision on where the market is headed.
Neither was wrong, but the conflict presented a challenge to capture within one report – the reality today versus a vision of where we’re headed.
Interestingly, even as we were conducting vendor interviews, market consolidation was occuring. Ameresco, Constellation Energy, Ecova, EnerNOC, IBM, Johnson Controls, Schneider Electric, Siemens have all made acquisitions during this period.
But we’re now tracking over 200+ vendors who offer solutions which contain the phase “energy management.”
Which explains why customers are confused.
So we’re hoping first that our ESG Management Framework will help folks divide the world down a bit into eleven big buckets of functionality. And we know that the vendor list will likely grow a lot in the coming months.
On-Bill Repayment (OBR) for Energy Efficiency Upgrades – Will California Lead the Way?
I spent last Wednesday at the California PUC in San Francisco participating in a workshop debating the merits of California’s newly proposed policy for utility on-bill repayment (OBR). (Although being at the workshop necessitated my taking the Boston redeye that night (ugh) my spirits were lifted as I waited at SFO and watched Duke hoop’s last minute upset at UNC – but I digress…)
My friend Brad Copithorne from the Environmental Defense Fund has been in the midst of developing this new OBR program and he had invited me to join these proceedings. Take a look at some of Brad’s thoughts here.
OBR makes a ton of sense. It’s a better version of the existing utility OBF program currently provided by PG&E, SoCal and SDG&E and several other leading utilities around the country. While last year Groom Energy started talking to folks about how the DOE could spur the market by funding OBF, OBR looks like an even better solution.
With the current OBF model utilities loan capital to customers at low or no interest, funding their energy efficiency projects while gaining repayment through their existing billing relationship. Monthly loan charges show up just as another line item on the customer’s regular invoice. As most projects are fast payback, these three to five year OBF loans are cash flow positive from day one.
But the funding pool supporting OBF loans comes only from ratepayers. As this capital gets allocated during slugfest utility/PUC negotiations (which have a lot more at stake) utilities are not positively biased toward OBF. More fundamentally, as utilities are not chartered banks, lending is already outside their corporate charter.
Using the existing OBF model, CA utilities provided @ $32 million through 1,200 loans during 2011.
But CA policy makers know this amount is noise compared to the famous McKinsey 2008 estimate of $500+ billion needed to fund energy efficiency projects across the US.
So the new CA OBR framework proposes that outside bank/finance companies can enter the market, providing what could be unlimited loan capital for customer projects. These bank/finance companies would fund projects upon their completion and have their loans repaid through the existing utility bill, like in OBF. But here the utility operates just as the loan administrator, forwarding the customer’s monthly debt service payments back to the bank/finance companies (whose core business is making loans.)
While the debate on the details is still taking place (what happens if the utility itself goes bankrupt? are credit enhancements necessary for these loans? do the energy savings need to be guaranteed? etc.) it’s clear this model is already profoundly positive for two reasons:
- People pay their utility bills - even during the current recession utilities experienced less than a 1 percent default rate for their billings, versus @ 5% rate for more traditional small business lending. Which means that although OBR is still new and “unproven”, long-term these types of loans are very bankable (meaning low cost and packageable.)
- Capital comes from professional sources. These folks have a day job of assessing risk and loaning money to willing and bankable customers. And this means that the loan terms can be longer, leading to “deeper” retrofit projects with longer, but still attractive and certain returns. It also accommodates energy savings service contracts like our CESA.
So we’ll cross our fingers that the policy review goes well and California kicks off this new model, even if its not perfect. And like other innovative, new energy related programs coming from the Golden State, we can expect to see it rolling out to other states across the US in the next couple of years.
Posted in On-Bill Finance, PACE | 
Tags: CESA, Energy Savings Agreement, OBF, OBR, On Bill Finance, On Bill Repayment | 
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2012 – From Smart Meters to Submeters?
While 2011 held the promise and controversy of continued utility smart meter rollouts, 2012 may end up becoming the year of submeter.
Coming on strong as part of the emerging Enterprise Smart Grid market, these devices, which provide visibility to energy consumption at a granular and trackable level of detail, are set to see faster adoption in the coming year. As government, utilities, vendors and end-users have slowly shifted toward a “prove it to me” mindset, the submeter becomes the weapon of choice to document energy related performance.
While the devices themselves are not new, their use will expand as a result of growth applications which require their capability. We’ll see them used more by:
- Companies looking to gain visibility into the current energy consumption of their largest systems and into nighttime and weekend or “off shift” load
- ESCOs providing measurement in their performance contract guarantees
- Demand Response providers confirming for ISO/RTOs that demand has been reduced during events
- Solar installers needing production detail to be eligible for solar RECs payments and
- Commercial and industrial customers producing measurement and verification for their utility rebates
- Industrial firms trying to allocate energy costs to specific product lines, cost centers or government contracts
In the past submeters have brought with them the challenge of data management and reporting. We’ve seen Groom Energy customers who previously installed them across their facilities, but have no easy way to access the volume of information these meters continuously produce. With 2011′s recent flurry of newly introduced multi-user, Internet accessible, database-friendly energy software management solutions, this burden of gathering, managing and providing easy reporting from these distributed submeters will now be reduced.
And once a manager sees the fabled “energy dashboard” showing submeter energy consumption data, you can bet that manager will be ordering a few more of them…
2012 – The Year Renewable Energy Funds Get Raided?
We’ve seen it happen in the past when times get tough – politicians, desperate to keep funding for critical government programs, consider raiding existing set-asides for renewable energy.
Thus far programs have generally been protected – but how much longer will it last?
In early 2009 Connecticut almost did it. Facing a significant shortfall post the 2008 economic collapse then-Governor Rell was rebuffed in her attempt to grab an additional $26 million by raiding the state’s existing energy efficiency and renewable funding. But the message was loud and clear. We need money – how green do we need to be?
And California (the state with a long standing lead in renewable and efficiency incentives) last year watched as Proposition AB23 got considered and defeated – a bill attempting to repeal the state’s existing AB32 legislation (the Global Warming Act of 2006) which AB23 supporters said was costing too much money.
Like California, existing RPS funding in 30+ other states may be reconsidered as belts are tightened and voters choose between unemployment and healthcare benefits versus previously voter supported clean energy funding programs.
Specific green technology programs are susceptible as well. Yesterday a $1 billion multi-year carbon capture and storage program in the UK came under attack.
So in 2012, when government austerity programs become the norm, will less-green states have the intestinal fortitude to continue to protect their green energy programs?
Cleantech Incentives Will Expire Dec. 31st – Have We Been To This Movie?
As we watch Europe’s financial system teeter on the brink, many are preparing for the US’s own unwelcomed, but necessary austerity effort. Yet with yesterday’s deadlock by the Super Committee, we’re all left wondering if our elected leaders have been watching too much ESPN, detailing the NBA’s own failure to come to an agreement, after over two years of negotiations.
With this latest partisan gridlock in the face of a financial storm, its a fait accompli that we will see a December 31st expiration of the Section 1603 cleantech cash grant incentives. Solyndra alone has put cleantech supporting Democrats on their heels and become a “reckless government spending” lapel button on Republican sport coats. Rightly or not, large bookable losses from the DOE’s attempt to stimulate jobs make it harder for politicians to put Section 1603 in a cleantech jobs creation wrapper.
Which means the cleantech markets will need to rely only on tax credits, as opposed to grants, in order to weather the looming US austerity period, whenever our politicians decide its important enough to address.
Posted in Clean Energy grants, Federal Grants | Tags: DOE Loan Guarantee, Investment Tax Credit | No Comments »
Sub-metering Your Main Meter – Thanks To An Assist From Your Demand Response Provider
Sub-metering your main meter is a fundamental start to developing a comprehensive corporate energy management strategy. But since this takes time, money or one of the few utilities that offer this as a free service, many companies don’t yet have this visibility.
Unless by chance they’ve signed up for Demand Response.
One of the main compliance hurdles faced by Demand Response providers is proving to the utilities that they’ve reduced demand during DR events. The ISOs need to confirm that the load reductions have been reached or exceeded and without that confirmation the DR providers don’t get paid. So to track their reductions, DR providers typically install their own sub-meters at their customers’ main meters. These sub-meters are connected back to the provider’s network operation, either through the customer’s internet or a cell phone, and enable the aggregation of performance data for the ISO across all of the providers customers.
Sub-metering doesn’t come cheaply, but the good news for DR providers is that they need only front the initial capital cost, as they can deduct these costs from future monthly customer payments. (Not surprisingly, many prospective DR customers learn about their sub-metering costs only as they are signing their contract.)
Ironically, the technical infrastructure DR providers use to initiate customer load reductions (the ultimate reason they’re getting paid) is a little less sophisticated. It’s called outbound calling. ”Hello, this is your DR provider calling, we’re having a demand event, can you please turn stuff off or turn on your generator?” While there is a current effort to make this more automated (called the OpenADR initiative) the phone remains today’s technology of choice.
But the bonus for DR customers, on top of the their monthly DR payments, is new visibility to main meter 15-minute interval data. Rarely before have corporate managers had easy on-line access to this intra-day, intra-week and intra-month graphical display of their consumption. And guess what happens when they see it?
They ask lots of questions.
Which is a good thing.
A thesis for Enterprise Smart Grid is that this type of engagement is only the beginning of the process. Main meter visibility leaves the management team asking for finer granularity on where consumption may be happening – which can be gained through additional sub-metering. And finer grained visibility leads to the need for finer grained control, in order to manage down the consumption where it can be avoided. And this visibility and control ultimately becomes integrated into the organization’s objectives, with on-going measurement, more intelligent procurement based on newly reduced consumption and proactive energy efficiency upgrades for assets that warrant an upgrade.
So perhaps by signing up for DR customers gained something much more valuable than their monthly DR payments?
How Soon Until We See Energy Efficiency Backed Securities?
Three years ago, as we were developing our own energy efficiency finance program, I was struck by how few people had yet recognized the market opportunity for financing energy efficient building upgrades through a shared savings approach. Large ESCO performance contract firms continued to rely solely on their customers using tax-exempt bonds to pay for their projects and solar PPA firms focused, surprise, on solar. Only a handful of us were hustling after this emerging market.
Things have really picked up since then.
Last week I attended Citi Group’s conference entitled “Innovations in Energy Efficiency Finance” in NYC – a day long event, just on this topic. Co-produced by our friends at EDF, it was the actually the third time they’ve held the event – the first having 20 attendees, then 50, then this year almost 100. The agenda covered Federal and State government initiatives, things happening around the world and the commercial and industrial market (Groom Energy’s interest area.) The full agenda and some good observations can be found here.
It was reassuring to hear panel discussions confirm the view on the large market opportunity, where even early “competitors” aren’t yet running into each other in their customer negotations. But you coudn’t miss an older gentleman, with an entire career in energy efficiency, commenting from the crowd that “when they were considering this approach 20 years ago” it made a lot of sense then too…It alerted even the most optimistic folks that the shared savings financing approach is not new, but remains a market of the future. The collective hope is that this time adoption will be driven by larger potential energy cost savings and a more willing set of buyers and sellers.
Like any new financing model, buyers will have to trust that they’re getting a good deal in exchange for the perceived risk of signing a multi-year energy savings contract. Unlike banking institutions, new companies like Metrus Energy, Serious Energy, Transcend Equity, Green Campus Partners and Groom Energy have not been around for decades. To address the perceived risk, Transcend says that they perform their projects “open book” – allowing the customer to see actual retrofit costs and returns, so they know what’s behind the curtain. Metrus often works through ESCO partners who presumably have long solid customer relationships. Everyone on the panel claimed they were working through a large funnels of potential projects.
The most significant players yet to enter the market are the utilities. As Groom Energy has learned, when utilities offer on-bill financing in order to accelerate energy efficiency projects, customers move fast to sign these deals. It makes sense – customers are obviously less concerned signing finance contracts with someone who they trust, who bills them every month and who is likely to be around for a long time. But thus far utilities seem not too excited to go beyond limited use of on-bill financing. Although NY recently passed an on-bill financing initiative in their August Power Act of NY bill, it will likely be implemented only for multi-unit housing and residential retrofits and does not include shared savings.
Of course the bankers in the room are crossing their fingers this turns into a more mainstream market, where they can package and resell the energy efficiency obligations as blind pooled bonds. Although this looks a lot like a mortgage backed security, we’ll expect it to have a better outcome.
via How Soon Until We See Energy Efficiency Backed Securities? | Enterprise Smart Grid
Post-Solyndra, Do We Like Being A Limited Partner in DOE Cleantech Fund I?
In late 2008 George Bush’s $700 billion TARP investment put the US Federal Government into the private equity business.
With only one Limited Partner (i.e. the US Federal Government) the fund raising process was fast, accelerated by the fact that we thought the US financial system was about to collapse. Applying a unique investment approach, Bank and Automotive company CEOs were called, told how much money they would be receiving (whether they liked it or not) and to draw up the investment docs. Not surprisingly, within a few months the fund was fully invested and it’s portfolio complete.
Now in 2011, with a forecast of only $652 billion likely to be recovered, LPs (taxpayers) are left debating was actually the investing goal?
Six months after TARP, President Obama funded his own, smaller but sexier $13 billion DOE Fund I (let’s call it DOEF ) through a $100 million Cleantech carve-out within the intergalactic $825 billion Federal economic stimulus program. The remaining $87 million was delivered through job creating DOE contracts implementing everything from utility smart grid rollouts to nuclear waste cleanup to low income home weatherization.
DOEF made it’s goal to drive “US Cleantech leadership” by investing capital in the most promising organizations. The presumption was that, like venture capital, grants could help spur R&D in strong market areas and, like private equity, loans could help later-stage companies to ramp their commercialization efforts.
But unlike TARP’s “call the CEO” approach, DOEF had to first issue broad RFPs, then consider a diverse set of responses, each with their own business, technical and investment merits. And the applicant pool included for-profit venture capital backed start-ups and even large publicly traded companies, in addition to the DOE’s more typical grantee targets (DOE’s own labs and research universities.)
Like a newly announced business plan competition, DOEF’s launch spurred any company with “cleantech” in it’s vocabulary to stop in it’s tracks, study the RFPs, and begin completing the numbingly exhaustive grant and loan applications. And if an applicant had existing capital or a VC on it’s board it immediately hired a DC-based lobbyist to increase it’s DOEF lottery ticket selection odds.
While the RFPs were intended to flush out the most promising technical ideas, their practical effect was to overwhelm the DOEF investment team (i.e. DOE technical staff) with sheer response volume. I can remember being at the DOE’s offices in late 2009 and having a conversation with a senior official who commented that Steven Chu was pushing his organization to “figure out where it should all go, but $10 billion must be out the door by year-end.” (It turns out today that the money didn’t get out as fast as they had hoped.)
Once they figured it out, DOEF handed out awards with much fanfare, marketing each of the hottest Cleantech categories where they wrote the biggest checks, including $250 million for A123 battery jobs in Michigan, Wind farms in Texas and the now infamous $500 million loan guarantee to venture-backed Silicon Valley based solar PV poster child, Solyndra. DOEF historical funding amounts and their locations can be tracked here.
And while the selections were purely merit based, its remarkable how evenly the recipient’s were located across the US, allowing politicians to confirm for LPs (voters) that their regions each got their fair share. How convenient that the best Cleantech researchers, companies and entrepreneurial ideas were perfectly distributed around the country.
As a first-time fund DOEF was funded on the promise. Now two years later the strategy has moved to execution and the initial portfolio provides an early measuring stick. There are obviously some big question marks.
Some of the biggest DOEF private equity type checks were written to fund building battery and solar manufacturing plants, with Solyndra already having gone bankrupt. If a private equity firm had lost its $500 million investment within a year of funding the entire investment team would already be looking for their next job. But the big miss highlights that the DOE is not in the best to position to identify and fund the winners, which mean more losses like this are likely.
For DOEF venture capital investments, you have to ask why companies like General Electric and Dow Chemical need additional R&D funding to accelerate their investment in cleantech? And do VC backed cleantech start-ups really need DOEFs money to do what they’re doing already? And if DOEF is the “first money in” is it likely they’ll pick the best team and technology ahead of the cleantech venture capitalists?
Last week’s SunShot program awards, a program intended to “reduce the cost of solar by 75%“, made grants to both large multinational and VC backed companies, in addition to a bunch of DOE labs and research universities. But should the DOE really be trying to directly bring down the cost of solar by backing new solar R&D? Last I checked there were a fair number of VCs who have a business investing in this sort of technology.
If it’s ”cleantech leadership” the DOE seeks, let’s start with customer adoption, which drives R&D value, and therefore spurs R&D investment by all companies. Instead of DOEF trying to quickly pick the technical winners now, why not instead implement a 10-year $100 billion Federal incentive program which supports customer investments and drives revenue for the winning companies.
The US Federal Government has changed position on the incentive model enough that investors and companies discount the chances that the latest incentives are really around for the long term. As we’ve commented previously, Federal incentives for both renewable and energy efficiency investments must be continuous, predictable and bankable for the market to really invest. Unlike DOEF, which needed to push money out as fast as possible, companies and managers take a little longer to make strategic investment decisions.
So before fund-raising for DOEF II begins, let’s change direction and shift the DOE out of venture capital and private equity and into defining long term strategic incentives which drive adoption and put the US in a more competitive position in the next decade. The free market will respond, cleantech growth will follow and it will cost the LPs a lot less money.
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