Lighting as a service

Lighting as a Service (LaaS), also known as Light as a Service, is a service based business model in which light service is charged on a subscription basis rather than via a one-time payment. It is managed by third parties, more precisely, by specialized service providers and may include light design, financing, installation, maintenance and other services. The model enables customers to outsource lighting aspects of their business over a set time. In opposition to an operating lease, the LaaS provider doesn’t transfer the ownership of a product but maintains the ownership of the equipment throughout the duration of the subscription contract. This makes it an environmentally friendly business approach allowing an extended product life with several lifecycles. The LaaS model has become more common in commercial and citywide installations of LED lights, specifically in retrofitting buildings and outdoor facilities, with the prior aim of reducing installation costs. Since nowadays lighting design has to consider aspects such as safety and health at work, environmental performance, energy consumption and durability of the products the model is continuously gaining more and more importance for company structures. Refitting and maintaining buildings with energy efficient lighting systems by means of a LaaS provider enables it to be operated more economically. Light vendors have used an LaaS strategy in selling value-added services such as Internet-connected lighting and energy management.

History

Over the years the lighting industry has faced a major disruption due to the shift in demand from conventional light sources to energy-efficient lighting. Especially in the commercial sector this industrial change has caused a higher demand in long-life LED products which come along with lower energy consumption and improved physical robustness. While light bulbs have to be replaced approximately every year or two, LED products last around 20 years. The idea of Lighting as a Service was invented in response to business demand in order to decrease the costs and boost the efficiency of energy without any investment from the end users side. All of this is achieved by the help of light control systems and the Internet of Things.

The concept of selling Lighting as a Service was developed by Thomas Rau in collaboration with Philips throughout the first „Pay per Lux“ project. Customers would only pay for the amount of light they use. The idea originated when Thomas Rau equipped the office of RAU Architects in Amsterdam. Instead of purchasing lighting infrastructure that comes with high costs and the need to be replaced after some time, he applied the model of Light as a Service to furnish the building with lighting. LED installations along with a sensor and controller system to minimize energy use were provided by Philips who maintained the ownership of the set-up. RAU Architects on the other hand benefited from the entire maintenance service.

Value Proposition

Lighting as a Service offerings include indoor and outdoor service types and usually are demanded by end users from the commercial, municipal or industrial sectors. LaaS supplies client companies with efficient lighting technology and in the most cases undertakes associated services including project management, product delivery and installation as well as maintenance.

Pros

Since no upfront investment has to be done, the subscription to LaaS offers comes with less engagement of personal resources. This subsequently has a positive impact on the reduction of risks and costs for the end user. Furthermore modern lighting technology solutions, such as intelligent LED light systems or daylight and shading technology, used by LaaS vendors result in a lower energy consumption, thus lower energy costs as well as the reduction of carbon emissions and a healthier lighting in general. The light supplier as an expert in the light industry remains accountable for monitoring and maintaining the lighting systems, including replacements, and also deals with recycling issues.

Cons

The subscription to LaaS offerings doesn’t involve the acquisition of the lighting product itself and makes the provider retain the ownership. Throughout the duration of the contract the client is bound to its provider which, depending upon the contract arrangement and funding model, can be set up to long durations.

Market

Development

The global Lighting as a Service market is growing rapidly, welcoming more and more lighting companies, IT integrators and facility management service providers trying to capture the new market by the means of refining their business models to „as a service“ offerings but also through mergers, collaborations and partnerships. In the face of the current global situation smart bulding technology vendors are currently launching lighting propositions to improve the infection control of buildings in ordert to kill bacteria and viruses from surfaces with safe lightings rays such as ultraviolet light.

Keyplayers

In terms of geographical distribution the LaaS market is categorized into seven main regions: North and Latin America, Eastern Europe, Western Europe, Asia-Pacific, Japan and the Middle East and Africa. North America constitutes the largest market for LaaS, closely followed by Western and Eastern Europe which is expected to witness the fastest growth rate in 2018-2025. This change is attributed to he widespread adoption of LaaS in Germany and the UK. Global key players are Cooper Industries Inc. (USA), SIB Lighting (USA), Cree Inc. (USA), Digital Lumens Inc. (USA), Lutron Electronics Company Inc. (USA), General Electric Lighting (USA), Itelecom USA (USA), Future Energy Solutions (USA & UK), Igor Inc. (UK), Legrand (France), Koninklijke Philips N.V. (Netherlands), Eaton Corporation (Ireland), Urban Volt (Ireland), Zumtobel Group (Austria), Osram Ag (Germany), Deutsche Lichtmiete (Germany) and RCG Lighthouse (Latvia).