Clean tech: industry's new wave
When one door closes, another one opens. On July 28, after 90 years of production, the last car rolled off the assembly line at Windsor, Ont.’s General Motors plant. Along with a lament for the end of an era, there was a glimmer of hope. The Canadian Auto Workers Union reportedly pointed out that the GM plant is a prime candidate for redevelopment as a factory for solar energy companies, which enjoy generous government subsidies.
Welcome to the green shift in the industrial revolution.
Canadian manufacturers seeking opportunities for growth in a pokey economy would do well to consider the burgeoning clean technology industry. In 2008, global clean tech revenues were a whopping US$148.4 billion. According to the Conference Board of Canada’s report: Global Climate-Friendly Trade: Canada’s Chance to Clean Up, venture capital and private equity financing in renewable energy projects grew by almost 70% compounded annually from 2002 to 2008.
Celine Bak, partner with consulting firm Russell Mitchell Group and author of The 2010 SDTC Clean Tech Growth and Go-To-Market Report, says that on average the clean technology industry in Canada in 2010 is expected to grow an astonishing 117 per cent.
That’s on average. Some clean tech sectors in Canada are expected to grow substantially more than that. Alternative power generation, for example, is expected to see a 149% increase in 2010. Energy efficiency could grow 129% this year. Process efficiency and abatement is expected to grow 147 per cent.
Also spurring growth now is government stimulus programs worldwide amounting to US$430 billion: money that should help reduce the environmental impact of climate change, improve energy efficiency and create jobs.
On prospects for growth, Duncan Stewart, director of research for technology, media and telecom at Deloitte puts it succinctly: “Clean tech is the new internet.”
What is clean tech? The 2010 SDTC Clean Tech Growth and Go-to-Market Report defines a clean technology company as one that, based on its proprietary technology, develops and markets products or services that eliminate negative environmental impacts and address social needs. In Canada clean tech is an export-focused, innovation-based industry that offers the opportunity for capital-efficient economic development.
Watch for clean tech opportunities to boom in these areas:
• alternative power, including wind, solar, hydro, geothermal, fuel cells and tidal;
• biofuels and biochemicals, such as feedstocks and biomass projects;
energy infrastructure management systems, storage and smart grids;
energy efficiency in buildings, lighting;
• process efficiency and abatement, pollution prevention and emissions control, nano and biomaterials;
• remediation of contaminated sites and Brownfield development;
• zero- and low-emissions vehicles, emission reductions for moving vehicles;
• recycling, hazardous waste elimination, energy from waste and material handling; and
waste and wastewater purification, treatment, conservation and infrastructure.
Yet, for the most part, Canadian research, policies and businesses have not focused on these opportunities, according to the Conference Board of Canada’s clean tech report.
“Canada overall is doing poorly,” says Danielle Goldfarb, the Conference Board’s associate director, international trade and investment.
Canada is the 14th largest clean tech exporter, with only $4 billion in global sales in 2008 or one-tenth of Germany’s exports; even less than Mexico’s exports.
One explanation is that unlike leaders in clean tech—such as Denmark, Germany and Japan—to date Canada doesn’t have a clear and comprehensive climate policy. Denmark, Germany and Japan made sustained investments and established supportive polices for the development of wind and solar energy as early as the 1970s. Today Denmark produces about a third of the world’s wind turbines. Germany and Japan are world leaders in solar power.
“The [Conference Board of Canada’s] report really reinforced for me that those countries that had sustained policies in place had done well in this area. It’s really important for governments to send clear policy signals that enable people to make long-term decisions and investments,” Goldfarb notes.
Creating green jobs
Case in point: Ontario passed its Green Energy Act in May 2009. In January, the provincial government announced a $7-billion deal with a consortium including Samsung C&T Corp. and the Korea Electric Power Corp. to build 2,500 megawatts of wind and solar generating capacity, and four manufacturing plants in Ontario. The deal is expected to generate 16,000 green jobs over the next six years in construction, installation, operations and manufacturing.
To provide renewable energy for the new capacity, Ontario introduced its Feed-In-Tariff (FIT) program in 2009. It guarantees—some say hefty—rates, especially for rooftop solar-generated electricity but for other types of renewable energy as well. This past spring the province offered 694 FIT contracts that will provide 2,500 megawatts or enough to power 6,000 homes, according to Kristin Jenkins, spokesperson for the Ontario Power Authority.
There is a caveat. FIT contracts must have 50% domestic content and Jenkins says the rate is expected to increase to 60% for solar projects in the next round.
“We estimate that the 694 FIT contracts will stimulate 20,000 direct and indirect jobs and attract $9 billion in private sector investment in Ontario,” says Jenkins.
Quebec’s 2006 energy strategy to ensure wind-generated power is at least 10% of the province’s electricity mix is seeing results. Domestic content requirements are 60% and that’s bringing investment and jobs to the region. Wind-turbine manufacturer Enercon GmbH, for example, is building in Gaspé, partnering with local firms and hiring between 100 to 115 people in the next few months, according to Jean-Francois Nolet, policy manager, Quebec and Atlantic Canada, for the Canadian Wind Energy Association (CanWEA).
He says Atlantic Canada, where “the wind resource is unbelievable,” generates investments and jobs by setting renewable energy targets. In Trenton, NS an old, empty rail-car manufacturing facility was revived by a $40-million agreement between the province and Korean firm Daewoo Shipbuilding and Marine Engineering (DSME) to build wind-turbine components there. The venture will employ about 500 people thanks to the target established by the Nova Scotia government to make renewables 25% of its energy mix by 2015, and 40% by 2020. New Brunswick’s target to install 400 megawatts of wind power “will be reached within the next two years,” Nolet says.
The introduction of the carbon tax in BC is an important initiative that will drive renewable development in that province, notes Bak. “There is also some important work happening in the province’s forestry sector to address pine beetle kill off.” (The dead pine can be used as a biomass feedstock.)
In Alberta, significant funds are available to reduce emissions in the oil and gas industry and the federal government has also contributed to carbon capture and storage projects.
“The provinces are clearly driving the show,” Nolet says. “But we need a vision at the federal level to attract investment and to ensure we are more competitive.”
Bak suggests Canadian manufacturers and clean tech firms take advantage of emerging export opportunities.
“One sector where there is opportunity in terms of growth is energy efficiency. There is a massive amount of work in the BRIC countries [Brazil, Russia, India and China], especially China. They are writing new building codes that will include new standards and that will definitely have an impact on manufacturers exporting materials within the commercial and residential building sector.”
She says government regulations regarding zero-emission buildings—be they commercial or residential—are major drivers for growth in the market for energy efficiency. Europe is leading the way with carbon-neutral regulations for both new and renovated buildings by 2020 and California is following suit.
In the biofuels sector, she notes governments in the UK introduced directives to convert some of their traditional fossil-fuel usage into biofuels. “Manufacturers who have a long tradition of selling or buying in the UK may find a pick up in demand in renewable energy and biofuels.”
Fuel efficiency standards continue to drive the transportation market. She says vehicle manufacturers in Japan, Europe and North America have specific carbon-reduction per kilometre targets, with Japan’s targets being the most stringent.
Energy security issues are also driving demand for innovation in traditional passenger vehicles. Countries such as Pakistan, Vietnam and Thailand, where foreign currency reserves are held at a premium, want alternatives to foreign oil. So compressed natural gas is an interesting strategic option for them.
In the recycling and waste sector, major demand drivers are policies to address issues of municipal waste, especially to reduce landfill. The UK is interested in biodigesters as an alternative to incineration. Poland seems to be moving toward plasmagasification. Look to local interpretations and policies to determine opportunities in this sector.
EU top target market
In power generation, renewable fuel standards are the main drivers. The Canadian clean technology companies have identified Europe as their number one market, followed by the US and Asia, with Canada being the fourth in line.
In process efficiencies and abatement, environmental regulations are driving innovation. Japan is the strongest in this sector with 75% of revenues derived from exports. She admits it’s a very tough market to be in, “but there are indications that the sector will see very aggressive growth.”
In water and wastewater, where Canada has a strong competitive advantage, there are opportunities for growth, especially in China. Even in Europe, where you would think the market is more mature, Bak notes there are opportunities. And there are opportunities for manufacturers to partner with clean tech companies. A number of firms in the study are primarily technology companies but they also manufacture. “As these companies get more mature they will start thinking, ‘How can I manage down my costs?’”
These clean tech companies have proprietary patents and technology, which they have secured on a North American or international basis. That doesn’t necessarily mean that they have to actually produce the product; they just need to know how to produce the product.
Just ask Albert Behr, CEO of Cavet Technologies, a clean tech firm based in Toronto. “If you are a Canadian manufacturer and you want to get into the clean tech space, you have to assume from day zero that you must never confuse where you live with where you make your money.”
If, for example, you’ve designed a widget that you think has clean tech potential in a worldwide marketplace, Behr says you need a partner that can manufacture it on a world scale. “If you try to do it yourself, you’ll find that you don’t have enough money, or you don’t have the right skills or you don’t have enough inventory.
“Not only must you get it to Mississauga, but to Mississippi or the middle of Germany, and you must be able to support and build and understand the entire life cycle of that product and market. Not many firms in Canada can do that.”
In the spring, Behr teamed up with Celestica, a $6-billion Canadian manufacturer with a worldwide supply chain, to make and ship his LumiSmart lighting controller.
Is clean tech going to be the next big thing, since the internet? There are similarities. Clean tech has global appeal and application. There are plenty of opportunities to develop cool technologies or apps. And those who are innovative, and act fast when opportunities present themselves are going to clean up.
For a copy of The 2010 SDTC Clean Tech Growth and Go-To-Market Report link to www.cleantechnologyreport2010.ca/en/.
Kim Laudrum is a Toronto-based business writer who specializes in manufacturing issues. Contact her at firstname.lastname@example.org.