From startups to large corporations and national governments, organizations worldwide are embracing cleantech as a means of growth, efficiency and competitive advantage. And make no mistake, there is a global race underway to achieve market-leading positions in key cleantech sub-sectors, and Canada is well placed.
The world has seen a dramatic rise in demand for cleantech products and services in the past five years. A voracious global appetite for natural resources, spurred by increased energy use, rising emerging market demand and widespread regulatory requirements, has created a lucrative global market.
This global cleantech sector, whose market value is estimated at $3-to-$4-trillion a year, showed remarkable resilience during the 2007 to 2009 recession, with average revenue growth of 45 per cent in that period – 47 per cent for Canada. In 2010 Canadian cleantech revenues were more than $9 billion, including $4.8 billion in exports, and are expected to reach $18 billion in the next five years and $60 billion in the next 10.
Where does Canada stand?
“Canada’s skilled workforce, innovation clusters, research excellence and stable investment climate make it an ideal growth environment for cleantech firms,” says EDC’s cleantech lead Rod Lever.
As the world’s conventional energy sources dwindle, the focus has shifted to developing renewable sources as well as the technologies to extract them in a sustainable manner. With some of the most diverse natural resources on the planet, Canada is uniquely positioned to diversify its manufacturing mix and capitalize on new opportunities.
“We have Canadian capability clusters, technologies developed on the backs of industries where we have a critical mass of experience, which can lead to natural cross-overs for clean technologies,” says Lever. “The B.C. forestry sector comes to mind.”
What is Cleantech?
Cleantech (clean technology) describes products or services that improve operational performance, productivity, cost-effectiveness, inputs and energy consumption, and reduce waste and pollution. Examples include: bio (green) chemicals, power generation (solar, wind and hydro), energy infrastructure (smart grids), energy efficiency (lighting, glass, buildings), air pollution abatement, recycling and waste-to-energy conversion, site and soil remediation, electric vehicles (hydrogen and fuel cells) and water and wastewater treatment.
It’s estimated that Canada is already home to more than 700 cleantech companies, the majority of which are small and medium-sized enterprises, employing about 44,000 Canadians. Cleantech firms are also major drivers of innovation, investing nearly $2 billion in R&D between 2008 and 2010 alone. And the activity is well distributed throughout Ontario, British Columbia, Quebec and Alberta.
This unique combination of factors provides the foundation for Canada to become a powerful global cleantech competitor.
A 2009 analysis by Cleantech Group LLC ranked Canada as a Top 10 cleantech country, based on government initiatives and programs, large investment mandate, entrepreneurial innovation and cultural and social drivers. Canada’s main competitors in that list are Denmark, Germany, Sweden, the U.K., Israel, China, the UAE and the U.S.; Canada also has many development-stage companies, a good portion of which are now commercializing their technologies.
Where are the opportunities?
According to the International Energy Agency, China should overtake Europe as the world’s top renewable energy growth market this year as Europe’s economic downturn and maturing renewable markets shift the growth centre to major emerging countries.
That said, nearly all major economies have prioritized the development of their respective cleantech industries. As a result of the recession, for the first time in decades, governments were spending massive amounts of money on stimulus programs and earmarked billions for cleantech initiatives – particularly emerging markets that were eager to address rapidly deteriorating environmental conditions.
“Cleantech markets where we see the most promise are Southeast Asia, China, India, Central America and Mexico,” says Lever. “China is already one of the world’s largest importers and developers of cleantech solutions. The Chinese government has two goals in mind for its massive investment in cleantech: mitigating its environmental degradation to improve the quality of life demanded by its growing middle class, and positioning the country at the forefront of a future strategic industry.”
$3-to-$4-trillion global market
$9 billion in Canada (2010)
$60 billion forecast over next 10 years
700 Canadian cleantech companies
80% export or invest abroad
Recognizing such opportunities, a critical mass of Canadian cleantech companies is moving quickly to the export market.
The sector also faces complex challenges; in particular, market research suggests that gaps exist in the availability of loans and insurance that enable cleantech firms to move past the development stage and effectively penetrate global markets. For young companies, accessing such financial products can be among the biggest hurdles they face, even when their technology has been commercially proven.
“The business of cleantech is similar to the information technology sector,” adds Lever, “in that it’s technology-based. But clean technologies generally have longer lifecycles to market; companies often need to build a plant for example, so it’s much more capital intensive. This means venture capital or private equity firms have to wait much longer before they can cash out, which can be unappealing for many investors.”
LED Roadway Lighting – Light Years Ahead
If you’ve ever driven across Prince Edward Island’s Confederation Bridge at night, in the winter, you can thank LED Roadway Lighting (LRL) for making the drive a little less intimidating.
LRL designs and manufactures unique LED-based (light-emitting diode) street and area lighting fixtures and control systems; where conventional lighting lasts about six years, LRL’s fixtures last 20.
The lights’ thermal management technology is key to this longevity. LEDs don’t like heat, so the better they cool and dissipate heat, the longer they last. Furthermore, LRL’s optical design directs 70 per cent of the light on the target, compared to 50 per cent, better than any of the competition.
But the technology does more than make your drive safer; the Nova Scotia-based company has also helped clients across the globe conserve energy by retrofitting their lighting systems with LEDs, while providing municipalities and utilities with an easy-to-maintain way to reduce greenhouse gases.
LRL’s products are free of lead and mercury, provide energy savings of 50 to 80 per cent compared to conventional light sources, and have reduced maintenance costs.
Business has increased 50 per cent over last year alone, due in large part to a $14 million contract for installations in Salford, England, and on the Briton Ferry Bridge in Wales. This success spurred LRL to partner with Sony U.K. on a manufacturing facility to service the European market.
Major global inroads
With well over 300 installations in 28 countries – including major inroads in Australia, Norway, the United Kingdom and the United States – the overwhelming majority of LRL’s business is now exports. The company targets countries where Canada has free trade agreements, those with high power rates and those with the money to pay for energy efficiencies. It is now focused on developing countries, such as in Latin America and the Caribbean, as these countries are keen to make major improvements to their infrastructure and often get funding from international development banks. It also has its sights on Eastern bloc countries in Europe, with an Asia strategy in its back pocket.
Installations of this magnitude can tie up millions in capital. In addition, the industry often requires performance and bid bonds, which can eat into the company’s line of credit. With EDC insurance, LRL doesn’t have to increase its working capital, and instead can use the money to grow. EDC’s accounts receivable insurance also gives it security when it comes to getting paid. The company is also exploring the possibility of EDC financing for its foreign municipal clients.
“As a young company (LRL was established in 2007), many prospective international buyers want to know we’ll still be around in five years,” says CEO Charles Cartmill. “But LED lights are one of the most environmentally sound and reliable ways to improve your infrastructure, and the technology pays for itself in fewer than two years – so it’s a fairly easy sell.
“It’s science and math. There are no smoke and mirrors. We just build the best product we can, and the evidence is there for anyone to test.”
And with a lot of support from the Nova Scotia government, including a pilot program for 1,000 street light fixtures, the province’s roads have become the company’s display case. When clients come from around the world to see the technology in action, they just go for a drive.
In five years Cartmill expects to see the company grow substantially. The global market for retro-fitting street lights is a $150 billion industry right now, with commercial uses, such as lighting for parking lots, throwing another $150 billion into the mix – so LRL is well positioned to gain a much stronger foothold in this industry.
Ostara Nutrient Recovery Technologies – Who Says Wastewater Can’t be a Resource?
Rather than seeing treated industrial streams as waste, Ostara Nutrient Recovery Technologies sees a renewable resource that recovers one precious resource – phosphorus – to protect another – water. It also generates cost savings and revenues for treatment plants and helps them meet increasingly stringent environmental regulations.
Many wastewater treatment facilities concentrate large quantities of nitrogen and phosphorus in their sludge dewatering streams. These dissolved nutrients often form an obstructive scale in piping, pumps and valves, which severely impacts a plant’s equipment reliability, efficiency and maintenance costs.
Vancouver-based Ostara designs and builds water treatment systems with a solution that recovers these nutrients from used water streams and transforms them into a revenue-generating, environmentally responsible commercial fertilizer. Ostara’s technology also reduces nutrient run-off into waterways where it can disrupt natural ecosystems. And Ostara’s fertilizer is designed to slowly release only the amount of nutrients a plant needs, making it more efficient and environmentally safe than traditional phosphorus fertilizers.
Last year, Ostara won its largest contract to date to design, procure and construct a nutrient recovery and fertilizer production facility for long-time partner Clean Water Services, the operator of the Rock Creek Wastewater Treatment plant in Hillsboro, Oregon.
Projects of this scale often require some sort of performance or security bond. “Essentially, we had no options in the commercial markets for bonding, so we turned to EDC. They were able to provide us with project bonding, so they’ve been an instrumental piece of our early commercial development,” says Ostara president and CEO Phillip Abrary.
The company also needed a banking partner to take on some risk as part of EDC’s Export Guarantee Program and eventually partnered with a bank that understood its complicated business model. And, given that EDC would guarantee 50 per cent of the loan, its bank was comfortable with the level of risk.