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.
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.
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.
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).
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.
[4]
https://www.seia.org/solar-industry-research-data
[5] https://www.greentechmedia.com/articles/read/everything-you-need-to-know-about-californias-new-solar-roof-mandate
