Published Date: October 12, 2016
n-tech Research has been providing coverage of the smart windows market for almost a decade and has produced detailed studies of this market and related businesses including the smart windows materials markets, smart mirrors and smart auto glass.
As with all n-tech reports this report presents our analysis of the latest developments in the smart window space. However, this report is also different in that what n-tech is seeing at the present time are new forces at work that we believe will radically transform the opportunities available from this space.
n-tech is seeing a maturing of the smart windows sector with electrochromic (EC) windows beginning to take a dominant role in smart windows for buildings and with potential for it to see a market expansion into the smart automotive windows space.
Electrochromics brings to the table a list of positives that we believe will combine to position electrochromic materials as the materials of choice for smart windows in many instances. The “pros” for electrochromic windows include (1) low technological risk (already widely used in car mirrors), long product life (coating not degraded by sunlight), low power requirements (can be powered with solar energy), and potentially low cost.
But we don’t see this battle as won yet. New smart windows technologies are also appearing – ranging from electrophoretic windows to “nanoblinds” — None of these have any market share worth speaking of at present, but in our view EC windows are not entrenched enough to be able to ward of all competition. And in the automotive sector, SPD still has much of the market.
In a 2014 n-tech report we raised the question as to whether smart windows can move beyond the luxury market. Thus in the construction industry smart windows are most often associated with “prestige buildings,” where they are often installed to show off how “green” the construction is and how technologically savvy the building’s owners are. In cars, the use of smart windows is most closely associated with the most luxurious of luxury cars. PDLC technology is marketed as privacy glass; in most cases an inherently a luxury product.
Smart windows vendors tell n-tech that in the construction sector smart windows are already beginning to make their way into more conventional commercial buildings. When n-tech started provided coverage in this space, actual examples of buildings with smart windows were few and far between, now such buildings run into the many hundreds, many of which would be considered mundane in terms of design, purpose and ownership.
That said, there are still plenty of questions hanging over the future of smart windows. Even if we can see unmistakable signs of smart windows showing unmistakable signs of moving down market, which continue to wonder just how far down market they can go? In addition, our fairly bullish feelings about the construction market for smart windows is not matched by our view of the automotive sector, where there seems to have been relative little positive change in the past couple of years.
We wonder whether smart windows will ever amount to much in the automobile space. Also if the smart automotive windows ever really take off commercially, what technology platform will they use. This is a market that has been dominated by SPD since inception. However, we think that electrochromic technology can make inroads in this area too.
Comfort is the New Green
In the past the benefits of smart windows have generally be defined almost exclusively in terms of energy efficiency and sustainability. However, what n-tech is seeing is that the marketing story around smart windows is now broadening. Smart windows continue to be sold as “greentech,” but also on the basis of the enhanced comfort that they can create.
In our opinion this change will have a profound effect on the business case for smart windows. No longer will the value added for smart windows attributable to the pros and cons of a particular self-dimming material. Instead, n-tech believes that in the future much of the value added available to smart windows suppliers will flow from sales of control and interface systems and related electronics. Specifically, we are looking at connectivity from smart windows to building automation systems, smart lighting systems and the Internet-of-Things (IoT).
This means that are new ways to be a winner in the smart windows space and plenty of new possibilities for new alliances (between smart windows firms and lighting firms, for example) to create commercial ecosystems for building technology ecosystems in which smart windows play an important role. That said, we wonder whether these trends would be negative for passive smart windows, which, by definition, do not offer the same degree of potential integration into a smart building or smart city. Thermochromic smart windows continue to hold a small share of the smart windows space and we wonder whether they would do well in a market environment where control is at a premium.
A note on near-zero-net energy buildings: While marketing smart windows as a comfort enhancer may be “what’s next” in the smart windows business, energy efficiency is never going to disappear entirely as a market driver either.
In this context, we find the opportunity presented by near-zero net energy buildings especially interesting. Such buildings are those that use no more energy than they produce. Increasingly building codes and national regulations promote near-zero-net energy buildings. And smart windows are a very good fit with near-zero-net energy buildings because these windows can (1) allow lighting to be used more cost effectively through improved light management and (2) cut down on the use of air conditioning and perhaps even heating through improved thermal management
Supply Chains and Retrofits
Finally, we are seeing the earliest signs of growing sophistication in the supply chain for smart windows. At the present time, this supply chain mostly consists of the customer and smart windows firm itself. In this business model the smart windows company that is the hub of all activity, actively going out and seeking business and then controlling the process of shipping glass to IGU makers and making arrangements for the IGU to go to a general contractor.
If smart windows firms are going to move beyond their current niches, n-tech believes that the supply chain will have to evolve with local and regional entities taking on more responsibility. This may take the form of local windows suppliers and IGU makers adopting a particular brand of smart windows.
But all this only really makes sense if there is sufficient volume of business to make the cost of branding local or regional activities worth it. This is most likely to occur if retrofitting takes off as a process within the smart windows community. And this is only just beginning to happen.