NanoMarkets has been following the fortunes of the smart windows sector for six years now. In that time we have seen few if any great leaps forward either in terms of market expansion or in terms of technology. This judgment remains true whether one considers "smart widows" to include only "self-tinting" windows (the most common definition) or whether one adopts a broader definition of smart windows that includes self-healing and self-cleaning windows.
Rich Niche and Beyond
As NanoMarkets sees it, smart windows are at the present time stuck in a niche scenario in which they are mainly the "playthings of the rich:"
• Thus in construction markets these windows are most obviously associated with "prestige buildings," where they are often installed to show off how sustainable the construction is.
• In cars, the use of smart windows is most closely associated with luxury cars. In fact, the only brand of car where smart windows are consistently used at the present time are Mercedes automobiles.
• PDLC technology is marketed as privacy glass, but again, this is something of a luxury product.
It seem quite plausible to us that smart windows' current niche will not be transcended. There are plenty of building and automotive products that never make it out of the "rich niche."
Nonetheless, NanoMarkets is more optimistic about the commercial future of smart windows. The reason for NanoMarkets' bullishness is that (absent some kind of energy technology breakthrough) the real price of energy seems likely to increase over the coming decade. In this environment we think that smart windows (in conjunction with smart lighting and BIPV) will become a critical enabling technology for energy cost reduction:
• Whether specifically under the name "zero net energy buildings" or something similar, the trend towards construction of buildings that use no more energy than they produce seems unstoppable. In part, this is because of building codes and national regulations that promote this. However, with the rising cost of energy we think that smart windows may increasingly make sense when the home owner, building manager, etc., makes basic calculations about energy costs and uses. Smart 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
• Something similar can be expected in automobiles and most of the points raised about buildings also apply to cars and trucks. However, automobiles will increasingly adopt smart windows primarily to keep interiors cool and cut down on the need for air-conditioning on sunny days, while letting as much light as possible through on gloomy ones.
While, the drivers listed above are the main factors that NanoMarkets believes will take smart windows out of their niche status, this is not the whole of the story. In particular, we expect these primary drivers for smart windows to combine with more traditional ones—especially the need to reduce glare in the summer while not obscuring visibility in the winter.
We also note that some products that we take to be within the scope of smart windows are not driven by the primary reasons. Most importantly, they do not apply to smart mirrors, which has an entirely different market dynamic. In addition, PDLC privacy glass is not an environmental/sustainability play in the way that the other smart glass technologies are.
The rest of the smart windows technologies that we list in Exhibit 1-1 will compete for the expanded addressable market defined by the core drivers for smart windows mentioned above. Perhaps some of these technologies will ultimately fall by the wayside. On the other hand there may be no single winner.
That said, we think that within what passes for the mainstream of smart windows, the one technology that stands out is electrochromic smart windows: electrochromic materials are currently available as both smart electrochromic glass and electrochromic film. What electrochromics brings to the table is 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 the following:
• Electrochromic windows are an active technology. They can therefore be controlled directly by humans or building automation systems for maximum comfort and energy control. The fact that these windows are active does add to cost somewhat.
• Low technological risk. Electrochromic materials are already widely used in auto mirrors, so much is already understood about their performance and capabilities
• Potentially low cost. Electrochromic windows are fabricated with non-exotic materials such as conductive polymers and metal oxides. Prices of electrochromic windows remain high reflecting the early stage of the self-tinting windows market, but there is plenty of opportunity for price declines in the future
• Long product life. Electrochromic materials are typically not easily degraded by light, adding to the life of the window; lifetimes being an obviously important factor for any building product.
• Low power requirements. Although smart windows based on electrochromic materials need to be powered, this is not a major drawback. According to NREL, powering 1,500 square feet of color-changing glass (about 100 windows) would require less power than a 75-watt light bulb. Using a small solar panel to do the powering is a distinct possibility, making the electrochromic window essentially self-powering
At least four companies are actively pursuing the development of electrochromic windows, Sage, View, Chromogenics and US e-Chromic. At least two of these companies—Sage and View—are already shipping and both have access to extensive marketing and financial resources. So the bottom line with electrochromic windows is that they represents a highly functional technology that is at, or near, full commercialization.
While there are no certainties, NanoMarkets also thinks there is some potential money available for the further development of electrochromic windows:
• Sage is especially to be watched because it is now part of the Saint-Gobain group and can muster both the money and the supply channel strength that being part of a huge multinational offers it. In fact, Sage had been well funded even before it was fully acquired by Saint-Gobain and it continues to announce new customers on a frequent basis.
• View (which used to be Soladigm) also has some customers, as well as investment that includes money from Corning and GE. View also has an alliance with Corning that NanoMarkets believes will help View move forward both technically and at the marketing/supply chain level.
• We think that another company worth watching in this context is Gentex, which dominates the electrochromic self-dimming mirror space. Gentex's electrochromic technology is not completely suited to smart windows. But Gentex is a large company that has already made windows for airliners. So, if the smart windows market grows fast, Gentex's entry would not be a complete surprise.
And the Others: Thermochromic and Photochromic Materials, SPD and PDLC
As the Exhibit at the beginning of this Chapter indicates, electrochromic windows are, by no means the only kind of smart windows, and our apparent favoring of electrochromic windows does not mean that NanoMarkets thinks that these other technologies will in any way fade away. Some of the alternatives look quite attractive from the perspective of future revenue generation, although others do not.
SPD: As we have mentioned, SPD windows are already in Mercedes cars and have also been used in BMW prototypes. This technology must be thought of as having the proverbial "first mover's advantage" in the automotive space.
But it is difficult at this point to gauge the future of smart auto glass. SPD could well establish itself as the way to go in this space and the owner of the SPD intellectual property – Research Frontiers (RFI) – has made it clear that it sees automotive as the key opportunity for its technology and intends to promote it in this area.
The open question is the degree to which SPD might be overtaken by some other less proprietary technology. For example, now that Gentex has made tentative steps into the smart windows business could it leverage its huge existing strengths in the automotive segment to launch a range of smart window products for cars and trucks.
PDLC: Some of the interviewees for NanoMarkets' ongoing smart windows research have told us that they don't think of PDLC as a smart windows technology at all. What they seem to have meant by this is that PDLC is not a "green technology" designed to create energy efficiency and better lighting, but simply a way of turning glass dark to enhance privacy for meetings and so on.
The good news about all this is that PDLC operates in an entirely different addressable market than the other kinds of smart window technologies discussed in this report and, as such, is relatively free from competition. The bad news is that it isn't driven by the core environmental factors listed at the beginning of this chapter and relies on the need for privacy glass.
While there may well be factors that will promote privacy glass in the future, they are unlikely to be as powerful as the environmental drivers that push the use of the other kinds of smart glass.
Passive smart windows and their enhancements: Passive smart windows technologies, by definition, do not offer the same degree of user control over tinting that can be provided by active smart windows. Instead, they are sold on price and low power usage.
As we discuss in the main body of this report, we think that passive smart windows don't really have enough going for them on a functionality level to ever get much market traction outside of niches such as the automotive aftermarket. That said, such niches certainly do exist and there is, NanoMarkets believes, some opportunities for semi-proprietary passive smart windows technologies to generate modest amounts of revenues:
• Thus, SWITCH Materials has developed a smart windows technology using a class of photochromic materials, developed at Simon Fraser University in Canada. This firm is pitching its smart windows at the automotive window business where it believes that high switching speeds, low cost and the ability to fit in with curved surfaces will give it an advantage over electrochromic materials.
• PPG and Pleotint jointly market a commercial window glass system that combines Pleotint's thermochromic technology with PPG glass.
Smart Windows Industry Structure: Still Evolving
As NanoMarkets sees it, the smart windows business is getting quite crowded and we think that it will take more than just a strong materials platform to win in the smart windows sector going forward. It will take money and strong partnerships.
As far as we can tell, there does not seem to be high levels of investment in the smart windows space today, which NanoMarkets sees as a problem. But we note that the big glass companies seem to be interested enough to possibly be a source of funding for the future of the smart windows sector in the future. There is also a chance that specialty chemical firms—principally those involved with coatings—might get in on the smart windows act, both in the form of a visible part of a business ecosystem and as a source of finance.
We are still at an early enough stage in the development of the smart windows business for an investment by a large company to transform the business in terms of market leadership and even in terms of which smart windows technologies really matter in the marketplace. It may even be that enough money thrown at a particular technology will lift it to a market leader that one might not have predicted based on its market share alone.