Lux Review’s full report on the Australian lighting industry reveals just how far LED adoption has come, and where China fits in to the picture.
Australia has traditionally taken its technology lead from the US and Europe, but the rise of China as an economic superpower has changed the way the country does business, especially when it comes to lighting.
Two-way trade between China and Australia is worth more than $130 billion and has been growing rapidly over the past decade. During this period there has been a flood of new LED products into Australia, which is helping the country move away from traditional sources.
‘Australia ranked seventh in the world as an export destination for LEDs last year, which is extraordinary considering our population is so small,’ says Bryan Douglas, chief executive of Lighting Council Australia, the industry peak body. ‘It shows that Australia is an important market. There isn’t a day goes by when I don’t get 20 emails from China trying to sell me product. There’s a lot of interest.
‘What’s called LEDification is an incredibly important mega-trend. There’s a lot of interest in LEDs, they are starting to become mainstream, where you are seeing them stocked by major hardware stores and supermarkets.’
Alongside a boom in the number of LED importers in Australia, there is plenty of work for businesses retrofitting buildings, car parks and warehouses.
‘We used to have tenders for work and half of them would be T5 fluorescent replacements,’ says Mark Rutherford, chief executive of Ilum-a-lite, which makes energy-saving lighting for industrial and government clients. ‘But in 2014 I’ve only seen three tenders that specified legacy lighting. Everyone else has decided that LED is the future. The market has made a shift to quality LED.’
Cost is the primary factor, with clients working on a basis of a two-year payback on LED replacements as a result of energy savings.
Extra features are creeping into the Australian market, such as lighting controls, which add another year or two to the return on investment. So there are relatively few takers – for now. But the improvement in LED quality is clear.
‘There’s increasing performance for reduced cost,’ says Rutherford. ‘You’re getting 100 lumens per watt whereas 18 months previously you’d be happy with 80 lumens. And 18 months before that you’d be happy with 65. And over those three years, prices would’ve halved.
‘I tend to compare it to the computer chip. The capacity on computer chips doubled every two years and that’s the same with LED. We’ll continue to see performance increasing and value improving.’
But the handy proximity to China hasn’t been the only factor in the growth of an Australian lighting market that’s now worth $2 billion, according to Lighting Council Australia.
Technological innovation may be lagging slightly compared with Europe and the US, but Australia’s regulatory regime has helped nudge the country towards more sophisticated, efficient light sources.
In 2007, the Australian government committed itself to phasing out cheap 40¢ incandescent lamps. This was followed by the Minimum Energy Performance Standards (MEPS), agreed in tandem with New Zealand, which set energy-efficiency standards for linear fluorescent lamps, compact fluorescent lamps, transformers and converters of halogen lighting systems.
Then, in 2011, the Building Code of Australia was updated to include wattage allowances for all hard-wired fittings in new premises.
Energy-efficiency standards have been embraced by successive Australian governments, with the regulations reducing electricity demand by 10.5 terawatt-hours (TWh) between 2006 and 2013 – or 28 per cent of the total 37TWh reduction in that period. Premier Tony Abbott has scrapped the country’s carbon tax, so energy efficiency is one of the few weapons left with which to tackle Australia’s sky-high per capita carbon emissions.
All of this is good news for businesses that upgrade the outdated lighting systems common in commercial Australian buildings.
LED designer Enlighten has just celebrated its fifth birthday, having sold 60,000 LEDs of its own design, saving clients an estimated $5 million a year in lighting costs. The company’s revenue grew by around 20 per cent in the last quarter, with 98 per cent derived from retrofits.
Steve Cahill, Enlighten’s chief executive, says that the supply chain is also changing. Rather than go through a wholesaler or catalogue, clients are coming directly to him. LED chips make up most of the market focus down under.
‘I think Australia is ahead of the game in retrofitting,’ he says. ‘I sense there is a lot more talk of innovation and technology overseas, in Europe and the US, but there is a huge change going on in Australia in terms of moving to LEDs.’
For clients, price is the key priority, coupled with payback time.
‘These decisions are run by chief financial officers, so cost and payback take priority over function. This is a business decision,’ Cahill says. ‘Maintenance is up there as a major selection criterion as the cost of maintenance is extraordinarily high.’
Douglas says the LED transformation is not likely to abate in the next couple of years. ‘We will probably see saturation by the end of the decade but until then we will see investment in smart lighting at home, but also outdoor and roadway lighting. We are on the brink of a revolution here.
‘Historically the major technological breakthroughs have come from overseas, but with the advent of lighting controls there is an opportunity for savvy Australians companies to join in.
‘It won’t be easy if we’re competing with the likes of Apple and Google, who are looking to get in to this space, but there will be a niche market for Australian companies.’
Niche is certainly the word. The vast majority of Australian lighting firms are importers and resellers rather than designers and manufacturers. The export market is tiny, but there is innovation, if you look for it, as well as the hope that the export market will open up.
‘We designed the Chameleon light [pictired], which has a microwave sensor in it, for fire stairs and car parks – there’s a lot of success there for us,’ says Cahill.
‘The next step is the interface, putting new radio-frequency controls into high bay lights. In large areas such as warehouses and car park entrances, there is interest in controls that can dim lights to provide a natural sort of light you get through translucent sheets on the roof.
‘Export is something we are considering, it’s an issue we’re wrestling with at the moment. There is a small window of time for retrofitting at the moment, so the question is, what’s next?’
Outside the square
‘We are starting to think outside the square a bit,’ he said. ‘We can have round lights now, we’re not restricted to a tube. Everyone expects high bay lighting to be a dome but we can change the look of that now. LED is very receptive to switching or dimming. People wouldn’t think of controlling warehousing lighting like that before, but now they can produce a result they never thought possible.’
That’s not to say that everything is looking rosy. The industry in Australia has two main bugbears – the sea of ordinary products that has washed in from China and some pesky Australian regulations that seem to be modelled on Europe without exactly aligning.
For example, Australia has a hot wire test for components that requires heat resistance to 800°C before they catch fire. In Europe it’s 750°C. Lighting products in Australia must be earthed, a stipulation not required universally in the US or Canada.
For a Chinese manufacturer, making these sorts of alterations for a country of just 23 million people is problematic.
‘They say “no we can’t do that”, which is very annoying,’ said Rutherford. ‘Australian standards are awfully confusing and difficult to do. This means the rules aren’t always enforced and therefore not followed, it’s a vicious circle.’
In April, a New South Wales woman was electrocuted by a cheap USB charger, a situation that Rutherford blames on this complex and lax regime, although no such disasters with lighting have occurred.
‘There remains a lingering doubt in the marketplace about LED lighting,’ he says. ‘There is some cheap, non-approved product that hasn’t gone through regulatory process.’
Douglas says Lighting Council Australia will soon release a guide for consumers and businesses on how to identify high-quality lighting.
‘There are good quality LEDs available but there remains a lot of rubbish in the marketplace,’ he concedes. ‘We also have a rather uneducated marketplace that can’t be expected to distinguish between good and bad product. We need to educate people more about that.
‘There are also a lot of untruths told by marketers about the performance of products. The government has had a hands-off approach to regulating LEDs and we do expect them to do that with labelling, but we are some way off that happening.’
Cahill said he hopes the smarter Australian businesses take matters into their own hands and start displacing some of the lower-grade products available in the market.
‘China has mass produced a whole lot of cheap LED bulbs and tubes and unfortunately they’ve spread across the world,’ he said. ‘There are good, high-quality manufacturers in China, but Australian manufacturers have been so short on the technology front that they’ve had to import from China, so we’ve seen a lot of junk.
‘The discussion taking place around the world about technology hasn’t translated into product development here, yet. We are one of the companies designing our own radio-frequency control systems and there are some examples of innovative designs coming out of Australia, but that’s the exception rather than the rule.
‘I’d hope more companies will start to move in that direction. At the moment it’s a race to see who can innovate the fastest and that race will unfold in the next couple of years.’
While cost is still king for residential and business customers, the industry feels a shift is under way. While most families might be happy to burn a fluorescent light, there are enough wealthy households for smart mood lighting controls to be viable. Also, although operators of commercial buildings will want their energy-efficiency rating to be as high as possible, they will start to look at control features that take the technology to the next level.
‘We will see fewer and fewer players selling classic lighting technology in Australia,’ Douglas predicts. ‘Companies that do not adapt will struggle to find a place in the Australian market.
‘There is an enormous number of start-up companies in Australia, driven by individuals who don’t know much about lighting but who can go to China, pick up a container of LEDs and bring them here. I can’t see them surviving.
‘You will need to add value in the future, not just import and distribute. There are simply too many of those importers and many will fall by the wayside. But there will be a few really high-quality Australian businesses left from that.’
Report by Oliver Milman