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.