Lighting as a Service:A New Model for Energy Efficiency

Bill BrunetteVP, Sales and Marketing

Eco Engineering, Inc.This document is the exclusive property of Eco Engineering, Inc.

Not to be reproduced or distributed without the express written consent of Eco Engineering, Inc., ©2017

Learning Objectives

• Understand the Lighting as a Service (LaaS) concept and how it could help reduce energy expenses without a capital investment

• Discover the elements of a LaaS service model and how it emulates the outsourcing model used for other business functions

• Learn how LaaS can support the Internet of Things revolution

U.S. Advanced Energy Economy

• Advanced Energy Economy definition:

Broad range of technologies, products, and services that constitute the best available technologies for meeting energy needs today and tomorrow.

• Energy supply and energy demand

• $200Bn market

• 17% annual growth rate since 2011

Source: AEE Advanced Energy Now - 2016 Market Report

U.S. Advanced Energy Economy Segments

Segment 2015 Revenue (millions) 2011-2015 Growth

Transportation $22,546 +93%

Fuel Production $35,384 -18%

Fuel Delivery $195 -14%

Building Efficiency $63,550 +80%

Industry $7,703 +83%

Electricity Generation $52,343 +35%

Electricity Delivery & Mgmt $18,165 +126%

U.S. Total $199,886 +41%

Source: AEE Advanced Energy Now - 2016 Market Report

U.S. Building Efficiency Services Segments

Segment 2015 Revenue (millions) 2011-2015 Growth

Building Design $4,336 +54%

Building Envelope $14,127 +62%

HVAC / CCHP $15,065 +33%

Water Heating $1,639 +45%

Lighting $24,666 +170%

Appliance/Electronic Equip $472 +350%

Demand Response $3,245 +61%

U.S. Total $63,550 +80%

Source: AEE Advanced Energy Now - 2016 Market Report

U.S. Building Efficiency Services Market

MUSH C&I Federal

% Penetration

0

5

10

15

20

25

30

35

40

45

MUSH Federal C&I

Source: DOE / Berkeley Lab

Market Size

Why Are Energy Efficiency Upgrade Projects Rejected?

Reason for Rejection % Total

Awareness 7%

Technical Criteria 7%

Certainty of Savings 15%

Financial Criteria 20%

Unavailable Capital 51%

Source: Building Efficiency Institute, US/Canada

Why <10% Penetration in C&I Market?

• Decentralized decision making

• Facility-by-facility project approach

• Individual measure versus bundled project approach

• Typically customer financed model

• Conflicting demands on capital

U.S. Capital Spending Patterns

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Source: United States Census Bureau

What is “As a Service?”

Core components:

• Subscription based

• Centrally owned

• Centrally managed

• Ongoing support

• Analytics

10

Leading Example -- Software as a Service

11

0

20

40

60

80

100

120

140

2010 2015 2020

Global Market ($Bn)

As a Service Adoption

0 20 40 60 80 100

<$10Bn Revenue Enterprises

>$10Bn Revenue Enterprises

How Quickly Will Your Core Processes be Delivered “As a Service”?

Already There Within 2 Years Within 5 Years Within 10 Years NeverSource: HfS Research

Emerging As a Service Concepts

• Backup Power as a Service

• Compressed Air as a Service

• Water as a Service

• Lighting as a Service

What is Lighting as a Service (LaaS)?

“Third party management of a lighting system that may include additional technical, maintenance, financial, or other services.”

Navigant Research

LaaS

Design

Install

Manage

Upgrade

LaaS Global Market Forecast ($M)

$35.2

$1,600

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

52%CAGR

Source: Navigant Research

LaaS Value Proposition

• No upfront capital outlay

• Term payments funded through verified energy savings

• Transition of equipment at end of term

• Provider assumes risk (performance, financial)

• Accelerated energy savings

• Reduced maintenance costs

• Standardized equipment across facility portfolio

• Redeployed internal staffing

Lighting as a Service Framework

LaaSProvider

EndUser

DesignerProduct

ManufacturerInstaller

Maintenance Provider

Investors

PriorLighting Bill($100,000)

New Lighting Bill ($50,000)

Service “Saved Energy” Payment ($45,000)

Annual Net Customer Savings ($5,000)Long-Term Annual Savings ($50,000)

1 2 3 4 5Base Year

Current State Contract Period Post Contract

6 7 8 9 10

Example LaaS Project Economics

How Does LaaS Differ from an Operating Lease?

• Service provider owns and maintains equipment

• Service provider receives portion of economic benefits

• Contract payments are variable and based on actual performance (via M&V process)

• Contract term often aligned with kWh savings goal vs calendar

• No fixed equipment buy-out schedule

What is Fueling LaaS?

• Technology advancements

• Struggles with supporting complex systems

• Building codes (i.e., CA Title 24)

• Preemptive moves by lighting manufacturers

Lighting as a Service Providers

• Current

• Enlighted

• Lunera

• Philips

• And more to follow…

Current by GE / JPMorgan Chase Contract Highlights

Scope:

Current by GE to plan, install, finance, and manage upgrade of ~1.4mm LED lamps across 5,000 branch offices

Design highlights:

• LED lamps

• Sensors

• Software

• Cloud view of energy production, storage, and usage

Implications for the Future?

• Increased pace of lighting upgrades?

• Accelerated energy savings?

• Multi-site programs versus single site projects?

• Comprehensive designs?

• More intelligent buildings via IoT platforms?