Fremont, Calif.-based startup Redwood Systems revealed today it closed a $15 million Series B round for its LED lighting control system, coming on the heels of a $12.7 million Series B for Lumenergi, a lighting controls startup based in nearby Newark, California.

The two companies are illustrative of a fast-growing sub-sector within lighting that’s gaining investor support and market adoption. Lighting controls companies secured 16% of VC investment within lighting from 2005 to 2010, but that’s jumped to 21% in 2009 and 2010 to-date.

Source: Cleantech Group analysis

Why all the interest? Lighting is considered the low-hanging fruit for energy efficiency retrofits, as illumination accounts for  44% of electricity in U.S. office buildings and a quarter of the energy in residential buildings–roughly the same energy consumed by cooling. Lighting controls–including software, sensors, drivers, fixtures, and intelligent ballasts–can maximize energy efficiency of multiple lighting sources, with some vendors claiming up to 75% reduction in energy use due to controls technology.

Redwood offers a unique lighting control system that combines power and control of LEDs over the same low-voltage data cable for office buildings and data centers. While adoption of LEDs is projected to increase to about 80% of the market by 2020, it’s a small market today, which means the majority of Redwood’s customers are in the new construction or major renovation markets.

I recently wrote about Redwood Systems (and its competitors Adura Technologies, Cavet Technologies, Encelium, Daintree Networks, and Starfield Controls) in a report about software control solutions for lighting, the first of two reports I’m publishing on the lighting controls sector. The second report is focused on differentiating the players developing innovative software paired with advanced ballasts, fixtures and drivers for control at the individual light level. Lumenergi, Digital Lumens, and Juice Technology are among the many companies I’m currently interviewing for this report.

Like Redwood, Lumenergi develops lighting control software. Its approach is slightly different from Redwood in that it’s focused on fluorescent lighting and develops integrated intelligent ballasts. Redwood doesn’t sell individual fixtures, but brokers with Lunera, Acuity Brands and Philips to offer integrated lighting control systems to customers.

Redwood Systems CEO Dave Leonard tells me the new capital is in part going to be used for product development. Specifically, Redwood is looking at offering a solution for fluorescent lighting by adding capabilities to the current LED system. Redwood is also working on software and hardware features that could improve the product, and advanced energy-saving algorithms.

In three to six months, Redwood plans to introduce a feature that uses BACnet IP and a web API to integrate with building management systems. “Some customers insist this is a critical feature, while others are happy to use our web-based interface for energy management without integration,” Leonard said. “This is not a show stopper today, but it’s going to become more and more important in the long run.”

Leonard said the $15 million go-to-market round will help Redwood reach general availability of its products, building off successful field demonstrations. Redwood also plans to focus on sales, distribution and marketing, expanding its staff “fairly significantly,” up from 42 employees today.

The round was led by Switzerland-based Index Ventures, and included Battery Ventures and U.S. Venture Partners, the two firms that invested $12 million in Redwood in 2008.

Redwood is focused on the U.S. market, but is looking to expand to Europe (aided by new investor Index) and certain parts of Asia next year, where markets are more favorable because of high energy costs and awareness of lighting controls, Leonard said.

Redwood revealed today that one if its field demonstrations is in the Building Efficiency headquarters of ESCO Johnson Controls. Redwood’s solution reduces energy consumption by LED systems through methods including occupancy sensors, task tuning, and daylighting (which alone can account for 15% to 20% of the total energy savings, Leonard said).