Cleantech Canada: growth of a new global player

Long known for its anti-environmental stance across a number of issues, especially the burning of tar sands in Alberta and the killing of baby seals across the northern territories, Canada is gradually transforming its image. The combination of growing energy expertise among the country’s vibrant university campuses, a new generation focused on becoming more green and state support for energy-efficiency initiatives are nurturing a healthy cleantech landscape. Canada’s proximity to Silicon Valley offers a strong channel for cross-border venture capital, while sell businesses are on alert for some high-potential exits from the country’s domestic cleantech scene.

A company that has led Canada’s cleantech drive and which underlines the know-how emanating from its core academic hubs is Hydrogenics, founded in 1995 by two of University of Toronto graduates. The firm generated gross profits of $5.2 million in 2012 on revenues of almost $32 million. Hydrogenics has also attracted large new equity investments from Enbridge, the Canadian energy giant, and CommScope, a $3 billion-a-year cellular tower equipment manufacturer that acquired a 25% stake. The company is leaving a strong footprint in Germany, where a new industrial-scale power to gas facility, a joint venture between German utility giant E.ON and Hydrogenics, is set to deliver considerable energy savings. The plant takes the electricity generated by wind and solar farms and adds the chemical by-product hydrogen to the local natural gas grid.

Ontario province has emerged as the primary hub for cleantech development in a country that has strong ethical and industrial divisions by regions. Alberta in the west, for example, holds similar conservative pro-hydrocarbons views to Texas in the US. Highly liberal Ontario benefits from the successful combination of university-level research, local talent pools and ambitious renewable energy procurement goals. In 2009, the province introduced the continent’s first feed-in-tariff programme, which has led to a surge in foreign direct investment by green energy equipment suppliers.

A major catalyst to greater equity capital entering Ontario has been the province’s decision to phase-out coal-fired generation by 2014. As a result, private investment has poured into the development of multi-thousand-MW of new wind and solar facilities that are helping to replace the lost generating capacity. A number of innovative projects have been inspired by the official movement away from coal. The $170-million biomass conversion project at the Atikokan Generating Station, a 200-MW coal plant in northwestern Ontario, is entering service in 2015 and is expected to burn about 90,000 tonnes of pelletised wood waste sourced from a pair of regional wood pellet plants annually, with the resulting steam generated in the plant’s burners expected to generate 150-million kWh of power a year.

Canada, and especially Ontario, is taking advantage of its academic resources and a number of research hubs, such as Thunder Bay’s Lakehead University and the University of Toronto, are working on process testing, safety procedures and lifecycle analyses at the Atikokan Generating Station. The work is helping spawn a generation of cleantech-minded entrepreneurs, which are likely to use the fiscal resources south of the border to serve the world’s growing energy efficiency needs. Corporate finance boutiques are set to watch this space closely.

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