David Hill, Distributed Resources Director - February 27, 2019

Efficient lighting has been an extremely successful and high-performing measure for utility efficiency programs. As a result of advances in lighting technology and a market transformation to efficient lighting, program savings for lighting measures are declining, creating a transitional time for efficiency programs. Although the lighting transition is unequivocal good news for consumers, the economy, and the environment, it poses a “What’s next?” challenge for efficiency programs.

Nationwide, the U.S. Department of Energy (DOE) forecasts that efficient solid-state lighting (LEDs) will account for 84 percent of general illumination by 2030, resulting in savings of $30 billion and 300 terawatt hours of electricity. Based on the success of efficient lighting initiatives, much (though not all) of this projected change is now part of the anticipated market baseline. 

What do these changes mean for efficiency program administrators? Consider, for example, that New England utilities with efficiency programs have historically spent just over half their budgets on lighting and achieved almost 70 percent of their savings from lighting measures. As the baseline for lighting efficiency increases, programs will claim lower savings from prevailing uses of lighting. This in turn will enable efficiency programs to shift to still-untapped lighting measures in the non-residential markets. These can be lighting controls, certain types of linear fixtures, and directional lighting. It also means efficiency programs will diversify their initiatives to help bring the success that has been achieved in the lighting markets to a broader range of technologies and end uses. As these changes take place, the unit costs for energy savings from efficiency are expected to increase, but overall efficiency will likely remain one of the least-cost energy resources. It will also continue to be a foundational element of sound utility planning.

The VEIC approach

VEIC is embracing the lighting transition by challenging itself to design and deploy more diversified portfolios that remain cost effective. In lighting, we see ongoing opportunities to promote savings with connected and smart products. In the next three years, we will continue to see significant opportunity to identify and claim savings in the commercial and industrial markets, which are not as far along in the lighting transition as residential lighting applications. Savings in both the residential and commercial markets will decline over time, but they will still be meaningful contributors to portfolio savings through at least 2030.

More broadly, we see increased opportunities to expand savings from non-lighting technologies. The use of smart and connected technologies, and the ability to introduce midstream and upstream strategies across more applications are promising tactics. They can benefit from our now longstanding experience with the lighting market. We also see many opportunities to engage customers who have already benefited from lighting upgrades by offering new savings from non-lighting applications.

These considerations have resulted in several recommendations for efficiency programs that are concerned about the coming decline in savings from the transformed lighting market:

1. Be proactive in monitoring lighting market trends and anticipate lower claimed savings.
2. Expect that unit costs for saved energy will increase as the lighting transition progresses, and as portfolios become more diverse. 
3. Use success from lighting market transformations and apply the resulting best practices to other markets and technologies.
4. Identify and highlight program delivery techniques that help to reduce unit costs, such as midstream and upstream incentives. 
5. Continue to work with regulators, customers, and other stakeholders to help them understand the economic, environmental, health, and equity-related benefits from past and proposed energy efficiency initiatives.

Transforming the portfolio

Lighting has contributed significantly to the success of energy efficiency initiatives. As the victories of the lighting transition become embedded in markets, energy efficiency program designers and implementers will need to adjust and diversify their portfolios. As this occurs, unit costs for saved energy may increase, but there is every indication that efficiency will remain very cost effective and continue to be an important portfolio asset.

Proactively diversifying an energy efficiency portfolio that maintains some level of lighting in it is a best practice. It allows for future cost-effective energy efficiency potential. Far from being a “cliff,” as some industry watchers have characterized the coming decline in savings, the lighting transition and transformation of the markets is an opportunity. Or perhaps even an invitation for energy efficiency programs to map out market transformation strategies in other parts of their portfolios.

Read the full white paper for our detailed recommendations and sample actions.