Despite product quality issues in some regions participating in the 21 Cities of 10,000 Lights program, demonstration projects in Guangdong Province proved successful. This stemmed from more rigorous technical requirements and standards associated with energy management contracts (EMC), which were pioneered in China by Guangdong's cities. In this model, banks provide project financing to cities to cover third-party testing data, feasibility analysis, street reconstruction and lighting sources. The loans are repaid from energy savings over a six-year period, which requires periodic field monitoring. Meanwhile, product quality and life are protected by warranty for five years and further guaranteed by insurance companies. Typically, 10% of the project cost was subsidized by Guangdong Province, 15% by municipal government, and the remaining 75% financed through an EMC with an energy service company (ESCO).
Guangdong's leadership on LEDs is driven by the importance of the technology to the Province's economy. Companies located in the province supplied 70% of China's LED packages in 2010, with foreign investment in local LED firms approaching US$1.5 billion, much of it centered in Shenzhen's Special Economic Zone. In order to maintain this momentum, Guangdong relies on expanding local procurement to grow the provincial market for locally-produced LED products. By the end of 2011, 200,000 street lights had been installed on 2,000 kilometers of provincial streets and roads, including 100,000 in the provincial capital, Guangzhou. Installation of another three million LED street lights has been set as a medium-term goal for the Province.
Partly due to the 21 Cities of 10,000 Lights program and Guangdong's LED installations, China now leads the world in the deployment of LED street lights. In 2010, approximately 350,000 LED street lights were installed in Chinese cities, 74% of the global total. This volume is likely to decline to 200,000 in 2011 due to the slowdown in the project.
12TH FIVE YEAR PLAN (2011-2015)
China is expected to continue its ambitious LED program in the current Five Year Plan, which aims for LEDs to achieve 30% market share of China's general lighting market by 2015. Guangdong Province has adopted probably the most ambitious provincial goal under the Plan: installation of 30 million indoor LED lights by 2015. As well as improvements and expansion of its 21 Cities of 10,000 Lights program, China will continue to invest in R&D (including the establishment of national photonics laboratories) and develop advanced LED manufacturing technologies, as well as include LEDs in the central Government's Green Lights program of subsidies and aggregate LED procurement.
While product quality issues have dogged China's LED efforts to date, it is clear that this will not impede the country's long-term ambition to become a world leader in LED manufacture.
Indeed, the current status of LED manufacturing in China today mirrors the nation's experience with rollout of CFLs previously. The low quality of early CFL products from China dampened consumer enthusiasm for the technology in the 1990s. But today, Chinese firms manufacture high quality CFLs, dominating global markets.
It is expected that Chinese governments will address LED product quality problems throughout the supply chain using R&D and procurement initiatives as well as joint ventures with western LED companies. By deploying a mix of policies, subsidies, and market aggregation initiatives that capitalize on the large size of China's market, the country is well placed to gain comparative advantage.
INDIA
Until recently, the high brightness LED revolution had bypassed India. This is perhaps surprising because the lighting market in India is valued at US$1.4 billion and has been growing at the robust rate of 18% annually.95 Western lighting companies have been manufacturing in India for 75 years, now with thousands of employees alongside well known Indian brands.
In 2009, the rapidly growing influx of inexpensive Chinese manufactured LED products caught the attention of Indian policymakers. By 2010, the LED lighting market in India had grown to US$73 million, with a forecast growth rate of 45% to at least 2015.96 India's National Manufacturing Competitive Council, an agency with Cabinet ranking, convened a Core Committee chaired by the Ministry of Power to look into the appropriate policy measures for accelerating adoption of LEDs in India. After extensive consultation with the lighting industry, LED manufacturers, states and cities, and other stakeholders, the Committee submitted its report, The Economic Case to Stimulate LED Lighting in India, in May 2010.
A key driver of Indian government LED policy is the need to achieve significant energy efficiency across all sectors of the economy, in order to decouple growth in energy demand from economy growth. Otherwise, a costly three to four-fold increase in primary energy production will be required by 2031 to 2032 to sustain economic growth of 8% to 9% annually,97 which is the rate India wants to maintain to eradicate poverty and improve living standards. The Core Committee's report, which was drafted largely by the Ministry's Bureau of Energy Efficiency (BEE), highlighted the potential for LEDs to reduce electricity demand for lighting, which consumes 18% of the national load.
The report identified the key barriers to the market penetration of LEDs in India. These included: limited product availability locally; high initial cost; absence of national technical standards leading to the import of sub-standard devices; absence of testing protocols and laboratories; and inadequate incentives to attract major LED firms to manufacture in India.
In order to address these barriers, a new aggregate demand policy, modeled after the Government of India's innovative Bachat Lamp Yojana (BLY) program—the Lamp Savings Plan—was proposed. BLY had successfully increased CFL sales from 20 million annually in 2003—2004 to 250 million in 2009—2010 by creating an aggregate demand mechanism where utilities equivalent to the output of two or three large power plants. To date, 13 LED projects have been completed in cities in Arunachal Pradesh, Assam, Maharashtra and Nagaland. While anecdotal evidence suggests that the pilots' results have been mixed, with some product failures, this is largely due to poor knowledge about quality LED procurement at the municipal level.
CONCLUSION
Governments have a key role to play in removing the remaining obstacles to LED scale-up. Well-crafted policy interventions will accelerate the LED revolution, ensure that general lighting is transformed by 2020, and bring immense dividends through economic growth and improved quality of life.
Cities are among the largest consumers of lighting, and as such are a critical source of early market demand – and impetus for the ongoing market penetration of LED and smart control technologies. Early adoption of outdoor LED lighting is not, however, merely an act of philanthropy: LEDs are mature in outdoor lighting, and are the most cost-effective option in several niches. Procuring LED luminaires allows cities to benefit from energy and maintenance savings. But perhaps even more compellingly, it allows them to unlock a range of non-monetary benefits – the positive effects of LEDs on safety, visibility, aesthetics, reputation, and on reducing the city's carbon footprint.
For many cities, LEDs may provide the highest-value technology, but are unreachable due to financial constraints or project-specific economic factors. States and nations can use the larger resources at their disposal to provide economic and financial incentives for LED deployment. The goal of such investments may vary: helping develop local LED industries and reducing pressure on regional electricity grids are key factors in China and India; stimulating jobs growth has been a core goal of California's program; and improving quality of life in the area and reducing carbon emissions are goals common to almost all LED projects.
Finally, nations and states can also influence the standards development process. Ensuring that standards keep up with the rapid pace of technological progress will be critical for introducing more certainty among lighting managers about how to treat LED lighting – and how to reap its full benefits as soon as possible.
