David Crane

Lessons for a Canadian clean energy strategy

By David Crane

The best opportunities for research and innovation are in the areas where there are the greatest needs. Nowhere is this truer than in the urgency of addressing climate change and the need for clean energy. With the right policies and leadership, these challenges can form the basis for a new industrial strategy and new industries and jobs. This seems to be much better understood in Europe and Japan than in North America.

During a recent trip to Britain for brief-ings from the Department of Trade and Industry, Scottish Renewables and other industry groups it was clear that the British are not only much more strongly committed than Canada to dealing with climate change, but they have adopted a strategies to achieve their goals while creating new businesses and jobs as part of an industrial strategy. They are building their own enterprises and attracting foreign investment.

The British have created a market for renewable energy, forcing electric power suppliers to meet 10.4% of their electricity needs from renewables by 2010, rising to 15.4% by 2015 and a goal of 20% by 2020. Suppliers who fail face hefty fines. There is also a Climate Levy on fossil fuels, and tax incentives for the purchase of energy efficiency technologies.

The British have put more emphasis on funding demonstrating projects and financing R&D for renewable energy technologies, with a $1.2-billion fund for the period 2002-08. It has also set up the Carbon Trust, an arm’s length entity helping to commercialize new energy and energy efficiency projects and operating a venture fund to help start-ups. The British also have five major centres for renewable energy innovation at leading universities.

Scotland, through Scottish Renewables, has gone even further in an effort to build up the renewables sector, as North Sea oil and gas production declines. The independent organization is a driving force, backed by many leading firms. The Scottish government has also set up ITI Energy, with about $350 million over five years, to finance the gap between early-stage publicly-funded R&D and commercial development.

In Canada, we have ambitious ideas about what we can accomplish. And we have some enterprising businesses that want to be part of the solution –— companies like Hydrogenics Corp, Arise Technologies Corp, Iogen Corp and Xantrex Technology Inc. But major business organizations, such as the Canadian Council of Chief Executives, Canadian Chamber of Commerce and Canadian Petroleum Producers Association, have been shrill voices fighting change, making it harder for Canada’s more innovative businesses that see the energy/environment challenge as an opportunity to be heard.

Among major Canadian corporations there has been no equivalent of Jeffrey Immelt, CEO of General Electric, who in May demonstrated the kind of leadership from business that’s essential to put the world on a sustainable energy and environment path. He criticized the Bush administration for its failure to face up to climate change, promising to double his own company’s R&D investment in clean energy technologies to US$1.5 billion a year by 2010.

This, he argued, was good business: “Europe has been a leader in renewable energy. They have set clear goals – 12 per cent renewable energy by 2010. China offers immense business opportunities. Of the 20 most polluted cities in the world, 16 are in China. The Chinese government has set aside US$85 billion for environmental spending. This will require substantial commitments in new power generating technology and desalination.” Interestingly, engineers at GE’s Peterborough ON facility played an important role in developing GE’s latest generation of wind turbines.

While Europe has been at the leading edge, Japan is also pushing hard, especially in energy efficiency. And even in the US, where the Bush administration is so hostile to the Kyoto Protocol, corporations are starting to adopt a different approach, as are a number of state governments. And the US government is heavily funding R&D in new clean energy and energy efficiency.

In its budget earlier this year and its subsequent climate change strategy — Moving Forward on Climate Change — the Paul Martin government puts strong emphasis on the industrial development potential in meeting Canada’s greenhouse gas emissions targets. “Encouraging innovation and the development of environmental technology is a key aspect of the Government’s approach to climate change in the longer term,” it declares, adding that its initiatives “are designed to establish Canada as a global leader in the field of environmental technology and thus develop a competitive advantage.”

These are fine-sounding words, but should be treated with caution considering our propensity to declare Canada a world leader — such as in fuel cells or biotechnology — before the results justify such a claim.

Moreover, despite government ambitions in different areas, Canada is often weak on execution. Our failure to seize our then leadership in fuel cell and hydrogen technologies in the mid-late 1990s is just one example. Even the crafting of a climate change strategy has been a long drawn-out affair and Canada lost valuable time moving to meet its targets and creating incentives for innovation.

The Canadian government does plan a new Sustainable Energy Science and Technology Strategy, with a $200-million contribution. But this is planned for the end of 2006, so we will have to wait. In the also-planned emissions trading system, companies will be able to get some credits for investment in clean energy R&D.

It is extending the subsidy for windpower projects for five years with a $200-million additional contribution, along with a $97-million subsidy for other renewable power production projects, and additional tax incentives to lower the cost of efficient and renewable energy technologies. Canada also has the Sustainable Development Technology Fund and the Green Municipal Fund to help finance technology development. Moreover, more provinces are moving to renewable energy production.

But can all of this be brought together into a more cohesive innovation strategy, with ample funding for demonstration projects? This depends on strong public and private leadership, and it is typically Canada’s weak point in trying to gain competitive advantage. To succeed, we will need public and private champions.

David Crane (crane@interlog.com) is a writer and adviser on innovation strategy. His column appears on Fridays in The Toronto Star.