Sunday, March 29, 2020

The Case for Staying Home - The light at the end of the Italian tunnel

From Lord of the Rings, Fellowship of the Ring

Aragorn: Are you frightened?

Frodo: …Yes.

Aragorn: Not nearly frightened enough.  I know what hunts you.

I posted a little over a week ago, and I wanted to update everyone.  I included this quote because not enough people in California are abiding by the restrictions (they *finally* had to shut down the Rose Bowl loop and parks because people just didn’t get it).  And nationally, as of Friday, 27 states still did not have *any* stay-at-home restrictions.  To those governors, this is all a big joke.  So, this post has three purposes - 1) to share some good news out of Italy and to project what that means for LA; 2) to encourage people to continue to follow the isolation policies and to explain how much more there is to come, and 3) to ask you to implore your loved ones who live in the half of the country not under these restrictions to self-isolate regardless.  They are going to be slammed hard.

1) Ok, let’s start with the good news out of Italy.  Many people have been watching Italy to see what it tells us about the path ahead.  Data from China is near useless, and the only other major country (South Korea) to have gotten through this employed massive testing to prevent an explosion.  We did not.  So, the tragedy of Italy (and Germany, Spain, etc) gives us the best look ahead for our fate.

The virus can have a 14 day lag from the time a person is infected until they show symptoms.  In theory, this means that we should expect a 14-day delay from the time of shutdown until the peak of infection (roughly - people don’t follow the shutdown perfectly, and the time to symptoms varies from person to person).  After the peak “new cases”, the number of new cases should begin to drop off (the rate of drop-off being related to the effectiveness of the self-isolation).  Well, Italy initiated their shut-down on March 10, and therefore by March 24 they should be at their peak.  The fantastic news is that is almost exactly what has happened:

Now, Italy’s peak was really lumpy, and it’s possible that it will shoot up next week and all of this optimism is misplaced.  However, I’m going to optimistically project that they are on the other side of this.  They haven’t had a day with more than their peak (6,557 new cases) since March 21, and it really looks like they are on the way down.  Now, we don’t know what the second half looks like.  However, a safe assumption is that they will see at least another 14 days of decline, and then by mid-April will have zero new cases.  Let’s hope that follows through.

The other piece of good news for Italy is the accompanying decline in their infection rate.  This is also shown on the graph.  They’ve managed to get their infection rate down from 25%/day to *5.6%/day*.  It seems hard to believe that Italy isn’t looking at the light at the end of the tunnel, which is great news for us.

2) So what does this mean for Los Angeles?  We initiated a shut-down on March 19.  However, we did it 7x sooner than Italy (at 0.002% infected, rather than 0.015%), so hopefully our peak will be much lower than that of Italy.  If we also see a peak at the 14 day mark, that would put it at April 2 (this Thursday) and possibly even earlier (the chart implies that we might be in it now, but we should see how the next few days play out).  There are a million reasons that this might not happen, but it is tracking that way.  Now, even with that good-news proclamation comes the warning - there are *many* people in LA who still don’t understand the seriousness of this (the Rose Bowl loop was finally closed because people weren’t distancing).  People need to understand that they need to stay indoors to stop the spread.  However, if that’s not enough motivation, then stay indoors to protect yourself.  Just like Frodo, people aren’t nearly frightened enough.  Stay away from each other!

I’ve included the LA chart, just for the completeness of being updated, but it’s really hard to confirm a slowing yet.  However, it is important to note that LA has far fewer people than Italy, and therefore the data will be much noisier (also, we’ve kept this much lower - we’re still 10x lower on a per capita basis than Italy, which is fantastic).

3) What about the US as a whole?  Ok, this is the real horror story.  People are talking about Washington, New York and California.  I don’t want to turn this into a political discussion, but I will say this.  The power of the Republican party is in their ability to stick to a unified set of actions.  It is extremely difficult for any Republican governor to defy President Trump.  Right now, Trump is focusing on a message of blaming others (the China Virus, blaming New York, etc).  This results in 27 states not even starting to self-isolate, while maintaining a narrative that this is a Democrat hoax, no more serious than the flu, we should lift all restrictions by Easter, etc (although, he’s walking that one back).  I implore you, if you have loved ones in a state that has not shut down, to tell them that they need to isolate to save themselves.  Health care in remote, rural areas, is even less capable of dealing with this epidemic than urban areas are.  Georgia has 2600 cases, Tennessee has 1500, Florida has over 4200.  These are numbers California had only a couple of days ago.  On a per capita basis, much of the country is in a much worse position than California.  And yet nobody is doing anything.  Here’s a map from Business Insider from March 27 (it’s a little out of date - my understanding is that Alaska has now shut down).  You can see a huge swath of the country is still not taking this seriously.

Ok, so what does that mean for the rest of the US?  If California (and New York and Washington state, and others) start to peak this week, and then begins to decline in the first half of April, we will still see a horrific explosion in the rest of the states.  The US added over 20,000 cases on Friday.  While the US infection rate is declining, this is because New York is dominating.  Once Florida and Louisiana explode, they will continue to push up that curve.  If you have loved ones who have not sheltered in place yet, in a state that is not responding, for their sake they need to protect themselves.

I’d like to close by sharing a video from Science Insider.  There are two take-aways.  The first is that when people say that 80% of cases of Covid-19 are mild, this is true.  However, a “mild case” is defined as any case that doesn’t require *oxygen*.  That’s the definition of mild.  Anything more severe and you are looking at hospitalization.  Now, what’s the second case?  The pathway for death is something called Acute Respiratory Distress Syndrome (ARDS).  I had a very close family member pass away from ARDS, and we spent a month watching him die, watching his lungs get weaker and weaker as we hoped against hope, until it was over.  This is not “just the flu”, this is not mild, and you don’t want anyone you know to go out that way.

So, let’s recoup.  Italy is our best predictor and they look like they are half-way through.  If we follow that path, we (Los Angeles) will peak this week.  However, people aren’t distancing enough, and that’s because they don’t take this serious enough.  If you don’t care about saving others, save yourself - stay home.  Finally, at least we here in California have solid leadership from at the state and local level.  That’s not happening in over half the country.  If you know or care about someone in one of these states, please have them stay at home for the same reason, or we’ll see horrific numbers just as New York, California, and Washington are recovering.

We can see the light at the end of the tunnel.  It’s a long way off, but I think we can see it.  Stay home and stay safe. 

Remember - we know what hunts us.

The case for staying at home (March 24)

I posted this to a local group on back on March 24.  A lot has changed since then, but I'm posting this now to be a background for an update that I will post next.

Hello neighbors. I realize that we're all going through a very difficult time. However, it seems that many people in California don't fully understand the benefit of social distancing, or why we need to stay indoors. I have been tracking data from Johns Hopkins, and I thought I would share. 

The first case to look is Italy. Outside of China, Italy is the most infected country in the world with 63,927 cases on March 23 (let's not get too happy - we're at 46,332). They were growing at a rate of 33%/day (like pretty much every country other than Japan). However, when 0.015% of their population was infected, they implemented a country-wide shutdown. This was on March 10. It's now been two weeks, and we can see the results in the graph. 

Their growth rate started dropping - 25%/day, 20%/day, 18%/day, 15%/day, 10%/day, and then yesterday they grew at 8%/day. The last two days showed fewer new cases than the day before. Two weeks after a national shutdown, they *may* be over the half-way point. If their infectivity keeps dropping, they might only see 15,000 deaths. 

However, if we compare their results to the US, we see a few things. Italy shut down at 0.015%, Spain shut down at 0.014% and LA shutdown (Eaton canyon and beaches aside) at 0.002%. The US as a whole will burst past 0.015% tomorrow, and instead President Trump is talking about *lifting* any restrictions. Ok, so how are those restrictions doing for us? 

The second graph shows Italy, the US, Los Angeles (LA), and Canada and it plots the new cases each day (as a percent of population). You can see Italy's recent downturn. But you can see how the US has exploded nationally (over 11 thousand cases were added *yesterday* - a week ago the entire country only had 4,661). 

So, what does this second graph tell us? Well, the US is where Italy and Spain shut down, and the federal government is still not doing that (although multiple states and cities are acting on their own to do so). Secondly, we're just where Italy was about 10 days ago, but growing much more rapidly. Third, you can see a significant difference between LA and the rest of the US (note, these figures already have population factored in, so don't make the mistake of thinking that LA has fewer people than the US - this has been accounted for). 

So, we *NEED* to shut down. It does work. It is working. We need to stay away from each other. Group with your family, but don't go near anyone else. We must freeze this in its tracks, and the benefits are there. The quicker we shut this down, the shorter we'll be stuck in home. The US as a whole is growing at 35%/day. Unabated, this will be close to ONE MILLION people infected by early April. We cannot let that happen, and this is why everyone is saying this is as serious as it is. I hope this data has been helpful. You can see it yourself at Johns Hopkins ( 

Stay safe. Help your neighbors. Let's get through this.

Saturday, April 13, 2019

Thin Line Capital closes its first investment

Thin Line Capital has made its first investment under its new structure.  I've been sharing my thesis with many people now ("we are in a 2nd wave of cleantech investing, one that supports high-growth low-capex opportunities") and I continue to attract investors willing to back me, as well as discover tremendously exciting new companies.

Sistine Solar is one of those companies.  I'm struck by the passion and success of the founder/CEO, Senthil Balasubramanian, and the rest of the team.  They are a group from MIT and they are working to unlock a whole new section of the market interested in aesthetics - a market segment awakened by Tesla's promises of a solar roof.  Sistine is looking to serve that need with their novel SolarSkin technology, allowing the solar panels to blend visually into the roof.  Check them out here at Sistine Solar.

And, to accompany this, here's the January edition of my newsletter.

The Thin Line                                   January, 2019
The Newsletter of Thin Line Capital                                   Aaron Fyke, Managing Director

New Opportunities in Residential PV
This month I’m focusing on the changing solar market.  The solar industry is split into three major segments – utility-scale, commercial and industrial (C&I) and residential.  Utility-scale installations account for about 50% of the US market.  They are the largest (>5 MW)[1], consuming the most amount of land, ground mounted, and usually with at least one-axis, or two-axis tracking. C&I installations are the second largest in size (~500kW average), and represent 25% of the market.  A typical C&I installation would be on a flat roofed building, like a warehouse, factory, or retail center.  The smallest installations (around 5kW) form the last 25% of the market.  These are the residential installations, mostly located on single-family homes and mounted directly to the pitch of the roof.   

The Changing Face of Growth

The solar industry has seen staggering historic growth.  From 2010 to 2015 the average CAGR of all three market sectors was 55%/yr[2].  However, growth over the next five years is expected to be more muted, with an average CAGR of 4%.  The C&I industry is projected to be steady, with utility-scale growing at 

4%/yr and residential installations seeing a CAGR of 8% (from 2017 to 2023). The reasons are varied, but the ability of the grid to manage the variability of the solar resource, and the necessary adoption of storage are providing regulatory headwinds[3].  And yet, residential solar installations are still only between 1-2% of US homes.  

Residential Takes the Lead

Utility-scale solar has dominated the market for the past several years.  As the costs of solar equipment have collapsed, utility-scale solar has been the sector best positioned to take advantage of this.  With its smaller batch sizes, and greater labor content, the “soft-costs” of solar dominate in residential installations.  A typical residential installation might cost $3/W installed, whereas a utility-scale installation is under $1/W. 

Going forward, however, we see that the growth rate of residential solar is twice that of utility-scale solar.  That is where investment is most attractive. This will focus the attention of the industry on exploiting more the residential market, with less focus on growth in the utility market.

California Continues to Dominate

California dominates the national installation market for residential PV, accounting for around 40% of national installs[4].  As growth continues through 2023 forecasts, that ratio stays constant.  The market for residential solar in 2023 will be close to 1600 MW/yr in California and 3700 MW/yr nationally.  At $2.5/W
(assuming costs fall from today’s $3/W) that results in a $9.2B spend on solar hardware and installations in 2023.
Part of this growth is due to a market opportunity currently unique to California.  In May 2018, the five commissioners of the California Energy Commission voted unanimously to require that nearly all new homes in the state be built with solar panels.  The effect of this is that, starting in 2020, there will be an additional 200 MW/yr[5] due to new construction.  There are two takeaways from this – 1) the new home opportunity will add an additional $500M of spend to the market, and 2) due to the size of California’s market, this only adds about 12% to the already large market, which speaks both about the value of California policy, and the robustness of the market in absence of policy.

What Opportunities are Revealed?

Thin Line Capital’s investment thesis is to pursue low-capex opportunities that target the growth of large markets created by the changing energy landscape.  We are now investigating a company that has an exciting proposition which matches this thesis.

The first observation is that future growth warrants a focus on growth in the residential sector (over utility and C&I).  The second observation is that, as growth slows, installers and module manufactures will be looking to compete on an axis of differentiation other than the two historic measures of cost and performance.

TLC has identified an MIT spinout that has a very low-cost film that can be applied to any solar panel surface, allowing the solar panel to appear to be any image desired, allowing the solar panels to blend into the surrounding roof aesthetic, while only adding a small amount to the system price.  This maintains the home’s curb appeal while allowing the homeowner to participate in the benefits of solar ownership.  Because their IP revolves around proprietary printing processes and image design, this company can participate in this identified $9.2B annual spend without anywhere near the capital intensity of other companies in the value chain (such as module, inverter or racking manufacturers).

The company has a track record of satisfied customers in six states (MA, CA, SC, NY, TX, and NJ), a backlog of installers looking to adopt their product, and partnerships with construction material partners.  They are well positioned to serve the growth in these markets (including the new home-build opportunities in California in 2020).

[1] M. Mendelsohn, et al, “Utility-Scale Concentrating
Solar Power and Photovoltaics Projects: A Technology and Market Overview”, NREL Technical Report NREL/TP-6A20-51137, April 2012.
[2] US Solar Market Insight, Q4 2018, Wood Mackenzie Power & Renewables, December, 2018.
[3] “Why The U.S. Residential Solar Market Has Slowed Down”, Forbes, June 2, 2017.

Tuesday, February 26, 2019

Thin Line Capital newsletter, October 2018 edition

My firm, Thin Line Capital, puts out a newsletter to its subscriber base, which I realize is doing double work given I also have this blog channel.  However, until I sort that out, I thought I would start posting those newsletters up here for the broader community to read.

The Thin Line                                October 19, 2018
The Newsletter of Thin Line Capital                                   Aaron Fyke, Managing Director

Electric Vehicles

This addition of the Thin Line is going to talk about electric vehicle adoption.  Although I’ve witnessed the inevitable adoption of EVs both back in the 1990s, and again in the 2000s, it really seems like we are at the start of a wave of adoption that is here to stay.  Following the Thin Line thesis, we aren’t looking to invest in the companies that are making this happen (Tesla, GM), but we are looking for companies that will do well because of this wave.  Some opportunities have already been identified.


In the 1990s, Los Angeles pushed forward a policy for 2% zero emission vehicles in 2002 and 10% by 2010.  This led to a flurry of activity with fuel cells and battery electric vehicles.  I was heavily involved with two of the companies, Ballard and AeroVironment during this time.  However, high costs and low range (as well as internal politics within GM, scuttling the EV) caused electric vehicle anticipation to be premature.

However, critical to laying the foundation of EVs, was the launch of the Honda Insight and the Toyota Prius as hybrid electric vehicles, solving both the range issue, and allowing development into electric vehicle drivetrains to move forward.  Then, in early 2000s, with the explosion of laptop and mobile phones, Tesla was able to ride this wave of battery development to launch the Roadster (2006), the Model S (2009), the Model X (2013), and the Model 3 (2016).  Tesla’s success at high-end vehicles (which could bear a price point and volume which aligned with Tesla’s actual production capacity) encouraged GM to re-enter the market (first with the Volt, then the Bolt), and other companies followed.

Today’s Opportunity

Today we are witnessing the beginning of a sea-change in the transportation sector.  Around 4M passenger cars a year are produced in the US, and around 73M worldwide (up from 53M in 2007).  This is an example of a tremendous opportunity, which will reshape the automotive, oil and gas, and electric industries with this transition.  While the automotive industry is growing at 2%/yr, the EV industry is growing at 63%/yr.  A qualitative demonstration of the future is shown in the above chart[1].  In the next five years EVs will be materially cheaper then ICE vehicles, and at that point we enter the steep part of the S-curve.

Where is this Happening?

It’s easy to assume that all of the EVs in the US are being driven down Rodeo Drive or Sand Hill Road.  However, EV penetration, especially with lower-priced vehicles such as the Chevy Bolt (MSRP: $36,620) and the Nissan Leaf (MSRP: $29,900), has reached well into the middle class.  Beyond the US is the great opportunity that is China.

In 2016 the number of electric cars in China surpassed that of the US, and now in 2018 it is over double[2].  While opportunities in the Chinese EV market may be beyond the specific interest of Thin Line, the overall benefits to the ecosystem are not.  As the total number of vehicles manufactured (by all OEMs) increases, costs drop for everyone, due to greater efficiencies all throughout the supply chain.  As costs drop, adoption increases, and we move further along the adoption curve described above.

What Opportunities Are Revealed?

Thin Line Capital’s investment thesis is to pursue low-capex companies that take advantage of building themselves on top of existing megatrends.  There are two opportunities that Thin Line Capital is investigating now that follow this thesis.

The first company is an team out of Stanford, who had prior careers with O-Power and with Tesla.  They realize that there is a tremendous opportunity to help utility companies manage the grid by taking advantage of, and solving the problems caused by, the increased deployment of EVs.  A typical house uses around 2kW peak load, and most distribution grids are sized for this peak.  However, a Tesla charger, for example, draws 19kW peak and if several people come home and start charging their cars at the exact same moment, then there is real risk of the distribution grid failing and the local transformer burning out.  Even worse, utilities are very concerned about the liability of wildfires caused by these transformer burnouts, and yet they very much want to support EV adoption (which they see as a path for revenue growth). 
This company has an elegant, low-capex, software solution which can be deployed immediately to schedule remotely the charging of various EVs.  Each car owner wakes up the next day with a full battery, but the distribution grid did not have to suffer the effects of high peak demand.

The second company of interest has also developed a software solution.  However, this is an embedded control system to allow for what is called “inverter soft switching”.  Inverters (used in every EV, solar installation, or energy storage application) use lossy “hard-switching” to convert DC to AC electricity (and back again).  Soft-switching, with only 10% of the losses of hardswitching, was discovered in the 1990s, yet the ability to control the system wasn’t available.  Advances in computing power and control algorithms have allowed this company to bring this technology to market, and they are in discussions now with a large OEM to integrate their solution into the OEM’s electric vehicle product, increasing range by 12%.

[1] Data from PodPoint -
[2] International Energy Agency -

Wednesday, February 13, 2019

Climate Reality Leader

Hey, Climate Reality posted a video of me . If you are in southern California and would like me to speak at your organization (I've given talks to Tesla, Idealab, Google plus various schools) reach out at aaronfyke at Gmail.

Sunday, October 28, 2018

Controversial? Expand pipelines to help solve Climate Change

When I was at the Los Angeles Climate Reality training, an announcement came out that stated that the Trans Mountain (Kinder Morgan) Pipeline project had been stalled by the Canadian Supreme Court.  This announcement was met with cheers (less oil getting to market equals fewer global emissions, yes?).  Here are the details:

Allow me to spark a likely controversial discussion.  I am not sure that limiting pipeline capacity is in the best interests of reducing climate change.  In fact, it is my argument that the carrot of expanding pipeline capacity could provide regulatory agencies enough leverage to extract significant clean energy funding, and put substantial carbon-reduction policies in place, that would not otherwise be possible without this opportunity.  Now, in the case of Alberta, expanding the pipelines (both the Keystone XL, and the Trans Mountain) will allow for greater Canadian oil to get to market.  Both of these expansions have been heavily criticized.  So how could they *possibly* be good for climate change?

Allow me to explain my thinking.

First, a quick diversion - the Trans Mountain pipeline and the Keystone XL pipeline met the most resistance from First Nations groups, regarding the location of the pipeline and concerns over local environmental damage (ie, pipeline leaks).  I’m almost uncomfortable with the attachment of the phrase “Indigenous Groups” to the media articles - *all* property rights should be protected and I suspect that if these were white farmers unwilling to relinquish their land that the discussion would be very different — historically, marginalized groups with low political power have often borne the brunt of “progress”.  Local environmental spills are a concern, and may well be significant in their own right (the Supreme Court of Canada thinks so), but that won’t be part of my argument.

Now, back to Climate Change.

Here are my arguments (all figures in USD):

1) The amount of CO2 released to the atmosphere is a function of global oil consumption, which is a function of global oil demand, which is only weakly tied to oil prices.  Therefore, if Canadian oil were throttled, the oil burned globally will simply come from somewhere else.  The only question, then, is if the addition of the pipeline capacity would be enough to move global oil prices to increase global consumption.  My feeling is that it would not.

2) Canada has much more stringent worker safety and environmental regulations than many other nations.  Every drop of oil which doesn’t come from Canada may just as likely be produced from Angola.  Therefore, from an environmental protection concern, and from a global emission concern, if the carbon intensity of Canadian oil is less than that of other producing nations, then the CO2 emissions from a policy of throttling Canadian oil may well go UP.  Alberta and Canada are very serious about reducing methane emissions, with a goal of reducing methane emissions by 45% by 2025 - not a small goal, and not far away.

2a) This is a minor point, but worth mentioning.  An oil industry executive recently mentioned to me: “The only thing worse, from a potential leak perspective, than a new pipeline is a *really old* pipeline”.  My father worked as a welder’s assistant on the pipelines in Canada when he was in high-school — the Canadian pipelines are old, and represent increased environmental risk.  Furthermore, without pipeline capacity, the oil from Alberta is being sent to Texas via rail and trucks, which poses a greater risk of catastrophic failure, and much greater carbon intensity (those trucks aren’t running off of fuel cells).

3) The sad reality is that progress in the clean energy economy is driven by money, and here is where the opportunity lies.  Due to pipeline capacity restrictions, the price of oil in western Canada (the WCS - Western Canadian Select) price is trading a a 46% discount from WTI (West Texas Intermediate).  Earlier this year that was only a 15% spread.  There are some good figures here:

Roughly 2.8 million barrels a day of oil are produced in Alberta.  If Alberta could sell that oil at a 15% discount to WTI, that would be $33.5B/yr more revenue from oil sales, at the same quantity of oil.  Imagine if, say, 25% of that were pumped into clean energy development?  Imagine if the attraction of an increased $33B into the economy allowed the government to impose aggressive carbon reduction policies.  Humans are short-term thinkers, that’s always been to our peril.  Let’s use that to our advantage - provide a short-term carrot (increase pipeline capacity) with long-term policies that we need (aggressive carbon taxes or emission limits that restrict emissions quite quickly).

Now, my numbers might be a bit off.  This study (below) states that the Alberta government is losing $7.2B (CDN - $5.5B USD)/yr due to pipeline capacity limits, but seeing as the Alberta government only gets the oil royalties, I would expect that the $33B overall revenue number is correct.

So, that’s my proposal.  Find a way to increase pipeline capacity out of Alberta, respecting property rights of everyone (compensate all land-owners affected, and don’t target Indigenous Peoples' land), recognize that Canadian Oil has a lower carbon intensity than other producers, and that pipelines have a lower carbon intensity than other logistics methods such as rail and truck, and then use the revenue windfall as a multi-billion dollar investment program for clean energy deployment, and as a means of extracting the political will for aggressive carbon reduction policies.

This is a complicated problem, and I feel that it may be necessary to lose a few battles to win the war.

Friday, October 19, 2018

Our Time is Now

Here's a well laid out argument that encapsulates a lot of what I've been reading about and talking about for the past 20+ years.  This is our moonshot, our "Day After Tomorrow", our Cuban Missile Crisis.  Nothing is more important, on a short-term and long-term scale.

Monday, October 08, 2018

We have 12 years left to act on climate change, UN warns

A great article from the Atlanta Journal-Constitution

grim report from the United Nations’ Intergovernmental Panel on Climate Change warns that if governments don’t act on climate change soon, more devastation is to be expected.

Denial vs Despair.

We have 12 years until we pass the carbon budget for 1.5C.

After 2C, we may never be able to solve this as the ball will start rolling down the hill.  This isn't a "chinese hoax" or "sunspots" or "volcanoes".  What I spend the rest of my life doing may be the last time we have to do anything.