Updating our Views on Electrochromic Glass

One year ago, n-tech Research projected that electrochromic (EC) glass was positioned to step beyond its stronghold in automotive smart mirrors to capitalize on considerable opportunities in the smart windows markets for buildings and automotive, and maybe even new areas like smartphone camera designs.

That broad market sentiment still rings largely true. If anything, we’ve strengthened our view of EC auto mirrors as a “cash cow” for this technology. Our expectations for EC glass in smart windows also has increased, especially in the medium- to long-term. We now see EC glass markets nearly doubling from today’s levels to exceed $2.5 billion by 2019, and nearly doubling again to $4.8 billion by 2022.

What’s Resonating with Customers, and Why

What has changed, in our view, with EC glass and end markets is that different messaging from suppliers than they’ve used in the past seems to be resonating with customers, along several fronts, where it may not have before. This is manifesting in an upswell in customer activity in building projects — serving as both success stories but also growing points of reference to help inform and compel new customers about EC’s benefits and value.

So what’s resonating with customers now, to convince them of the benefits of EC glass? We’re seeing three themes — but also, one key point that we think will become a bigger part of the conversation, if not right now sometime in the near future:

–    Addressing risk aversion.  Architects and designers tend to be conservative and risk-averse; most do not wish to recommend a new unproven technology. Getting any new technology into the building industry can be hard. We’re hearing from EC firms that potential specifiers don’t need the same handholding that they did a year ago. Terms like “smart glass,” “dynamic glass,” and “self-dimming glass” are still being used broadly interchangeably, however, and often without differentiation of what technologies that incorporates, EC or otherwise. Clearly education is still greatly needed.

–    Value proposition #1. Total cost reductions. Customers seem to be receptive to different value propositions for EC glass, especially in two areas. First is total cost reduction, where the business case for EC glass speaks to broader cost points in architects’ budgets — not only glass but also shades and blinds, sunshades, HVAC systems, and lighting.  The business case for EC glass is refocusing on avoiding those extra costs.

–    Value proposition #2. Comfort and productivity. Another winning selling point now for EC glass is making a connection between the benefits of improved lighting, aesthetics, connection with the environment, and room heating/cooling to real bottom-line numbers.

–    Overstock.com, which is using EC glass for its new Salt Lake City headquarters opening in 2016, suggests that every one percent in employee productivity derived from those aforementioned benefits translates to $1 million dollars in savings given the firm’s $100 million payroll. Other studies indicate that day-lit environments and connection with the outdoor environment result in significantly faster progress in school students’ learning, and in hospital patient recovery.

–    Energy efficiency and green. We’re seeing these become less of a selling feature for EC glass, largely due to low energy prices. Also, building designers have plucked much of the lower-hanging fruit for energy efficiency. This always will be part of the story for EC glass, though, and there may be specific areas where this is still a strong selling point, such as in near-zero-energy buildings which are receiving a lot of attention (including subsidies) within the “green” theme.

ROI: Still an Elephant in the Room

All of that is encouraging for the EC glass sector, but those successful dialogs hide a still-inconvenient truth about EC glass. It is still a “battle,” according to EC glass firms, to avoid purely glass-to-glass cost comparisons. Costs have improved in the past year ($40-$50/ft2 to the glazer), but overall EC is still around 2x more expensive than low-end static glass.

More familiarity with EC windows among architects, construction firms, building managers and owners will help calm the “shock of the new” and risk aversion. However, that also means a rising reliance upon genuine ROI analysis. EC glass companies can (and should) continue emphasizing total cost savings and occupant-friendly metrics, but eventually ROI will be a deciding factor that must be addressed.

Lowering Costs: What We Think Still Needs to Happen

From a smart windows standpoint, EC is inarguably the leader among a wide range of self-dimming technologies, against options such as thermochromic, photochromic, and suspended-particle device (SPD). On the other hand, no technology (or manufacturers) have established a strong enough lead as yet to constitute a significant barrier to entry.

We think the growing popularity of smart windows will set off a search for technologies that are better than EC in some sense. This ranges from simply improving existing technologies in an evolutionary way (which is happening already in EC), to pushing new kinds of EC materials or other new material platforms such as hydrogels and electrophoretic materials (both years away from commercialization), to enabling new levels of control to help tap into the Internet-of-Things meme (which is also happening to a degree).

EC firms still seem to favor established sputtering and deposition manufacturing processes, expecting that incremental improvements and scaling up will be enough to lower costs and meet demands. Eventually, though, EC glass will have to address cost pressures, and to our thinking this can happen in a number of ways:

Electrochromic film:  The bulk of EC windows involve glass, but film-based EC promises vastly lower production costs (one startup in this area boasts a 7x reduction). This opens up new avenues, not only in retrofits but also incorporation into regular IGUs. We’re seeing increased activity in this space, largely among startups with bold ambitions.

Roll-to-roll:  There is considerable emphasis on shifting to an R2R process, which also seems to imply a good future for EC films.

Moving to new processing technologies: Besides sputtering, coating and printing technologies also have been investigated. These processes are less wasteful and permit the deposition of EC materials on film, lowering costs and permitting retrofitting onto windows.

The siren song of simpler and cheaper manufacturing with organic-based technologies has, of course, been sung for many industries with very little success to show for it. Printing technologies are attractive in theory, but in practice they never seem to work out and often lead to lower performance. Nevertheless, dramatic production improvements and cost reductions may well rely on pursuing and solving such technical paths to address longer-term market success.

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