A Victory Bond for the war against climate change

A group of five young professionals from a Vancouver-based organization called Action Canada wants the Canadian government to back the creation of a Green Bond that would guarantee a modest return on investment and assure a steady flow of money into green technologies and projects. You can read a 41-page summary of their ambitious proposal here. The group describes it as a “modern-day Victory Bond for the environment — purchased by Canadians, backed by government, managed by the private sector, and designed to accelerate the rollout of sustainable energy.” They think Canadians will jump at it. “It’s simple, politically sexy, and we have every reason to believe it will be wildly popular.” Apparently the federal government is taking a serious look, and so they should. It has been successful in the European Union, which launched a “climate awareness bond” in 2007 that has so far raised $1.5 billion for renewable energy projects. It seems like a perfect way for people who feel powerless against a global climate menace to help fund some positive change while getting a little in return for their investment. With one caveat: it has to be managed responsibly and have enough checks and balances to make sure money doesn’t flow to a select groups of companies and projects — some of them suspect — who benefit from the right political connections.

Railpower to build hybrid rail manufacturing plant near Montreal

Railpower Technologies Corp., once a high-flying cleantech play, has struggled of late and continues to play in penny-stock waters waiting for the tide to lift its fortunes. Oil above $130 a barrel helps, given the company is in the business of making hybrid locomotives for railyards that significantly reduce emissions and fuel consumption. But a number of expensive recalls on its first round of sales has left it with a confidence deficit, so the only hope for this company is for sales to move beyond a trickle and into a strong momentous flow. Railpower, based in Quebec, has had some help from the Ontario Teachers’ Pension Plan, which invested $35 million in the company earlier this year and just announced it’s throwing in another $20 million, in the form of a convertible debenture, to help Railpower build a manufacturing facility near Montreal. The new plant will lead to 125 new jobs, but more importantly it allows the company to bring quality control under its belt and improve manufacturing efficiencies, not to mention margins. It’s a good sign, if only because the injection from a conservative pension fund is a vote of confidence that the company — while it struggled as many startups do — has a good product at a good time for an industry about to face tightened emission limits. General Electric is also in this game, and others, though they have focused more on longer range locomotives. Railpower has a niche business, but it’s also venturing into new territory, whether it’s hybrid tugboats or hybrid loading crains. What the company really needs is to follow up this latest announcement with a major sale or two, which would indicate that railway customers haven’t given up on the company.

Ontario experiments with zero-interest loans for renewables

It’s a pilot project for now, but one that could expand across the province. Ontario’s largest transmission/distribution utility, Hydro One, has partnered with local utilities in the communities of Mississauga, Brampton and York Region to test out a zero-interest loan program — called the PowerHouse Initiative — that supports the use of residential renewable-energy systems. Homeowners in the area can get access to zero-interest loans ranging from $2,000 to $50,000, or a rebate for installing qualifying solar PV, solar hot water, geothermal and small-wind systems. If the one-year program is successful and broadly expanded, this could have a dramatic impact on renewable-energy adoption in Ontario.

The repayment period for the loan depends on the size. Loan that are around $2,000 to $5,000 must be paid back in three years. A $50,000 loan can be repaid in up to 10 years. Alternatively, a customer can opt for a rebate instead — 10 per cent for the first $5,000 of project cost, followed by 15 per cent for the next $15,000 and 20 per cent on the next $30,000. It doesn’t completely eliminate the barriers to adoption, but it goes a long way toward helping.

Is expensive oil deglobalizing the world?

A report today from CIBC World Markets says the skyrocketing cost of transportation is leading to inflation and taking away the edge that many Asian countries have had in offering cheap labour. The end result, as oil approaches $200 a barrel, is what the bank sees as a deglobalization of world markets. The report finds that the cost of shipping a standard 40-foot container from East Asia to North America’s east coast has tripled since 2000 and is expected to double again as oil reaches $200 a barrel. In 2000 it cost roughly $3,000 to ship a standard container from Shanghai to North America’s east coast, including inland transportation. That was when oil was $20 a barrel. Today that cost is $8,000 and at $200 a barrel it soars to $15,000. Jeff Rubin, CIBC’s chief economist, said if this were translated into a tariff it would represent an 11 per cent trade tariff today on goods coming to North America, and a 15 per cent tariff when oil reaches $200.

This, the bank argues, threatens decades of trade liberalization and will force some overseas manufacturing to relocate closer to home. “Higher energy prices are impacting transport costs at an unprecedented rate,” says Rubin. “So much so that the cost of moving goods, not the cost of tariffs, is the largest barrier to global trade today.”

It must be forcing companies such as Wal-Mart to rethink their business. Business decisions in the future, argues Rubin, will be based on finding the cheapeset labour force within a reasonable shipping distance to a destination market. It sure makes Mexico look good. At $200 a barrel, it will cost three times as much to ship an item from China as it will from Mexico. Rubin points to the steel market to illustrate his point. Steel exports from China to the U.S. are falling 20 per cent year over year, while U.S. domestic steel production has increased 10 per cent. It’s no wonder wind-turbine makers are looking to establish themselves in North America, rather than build in Europe or China and ship across the ocean.

This fact — this renewed appreciation of domestic production — could mean happy days ahead for American and Canadian startups who in the past have had their innovations stolen and replicated at low cost overseas, then shipped back into North America. Battery makers, solar manufacturers, electronics makers in North America could suddenly find themselves more competitive. It could also mean better days ahead for North America’s struggling automotive sector, if it can adapt to the need for more efficient vehicles that don’t necessarily burn gasoline. And if unions can adapt as well.

But one thing is for certain: It won’t lead to lower prices. It just means goods from China, benefitting from cheap oil in the past, are now on more even cost-footing with North American rivals. Consumers are still going to feel the pinch of inflation over the coming years. And, it should be pointed out, the effect is a two-way street. North American manufacturers will find it too costly to sell into Asia markets without setting up their own manufacturing facilities in the region they wish to sell into. Likewise, the Chinese and other East Asian countries may get to the point where it makes more economic sense to build manufacturing in Canada or the United States and populate the plants with their own countrymen.

Menova Energy puts solar PV, thermal atop Wal-Mart Supercentre

I’ve got an article in the Toronto Star today about an Ottawa-based company named Menova Energy, which has what hockey fans might call a “hat trick” solar technology. The company’s Power-Spar array is a concentrated solar power system (1,000 suns), a solar thermal system, and a solar lighting system (using fibre-optic redirecton) in one. Menova announced today a $6 million project, half of it paid for through a loan from Ontario’s Ministry of Research and Innovation, that will see a solar PV/thermal combo built on the rooftop of a Wal-Mart Canada Supercentre being constructed later this year in Markham, Ontario. Wal-Mart is testing the technology to see if it could be used in other locations across the Canadian, and possibly U.S. chain. What’s interesting is that the Power-Spar units will be manufactured in Toronto at an automotive tool and die facility, which has been devasted by a decline in the Ontario automotive sector. It’s encouraging to see that one struggling sector can adapt to take advantage of green-collar jobs.

The low-profile array is unique in its design (I’ll go into details in a later article), but perhaps most interesting is that it sits on a turntable-like system that rotates the entire array as it tracks the sun, allowing for two axis tracking. The Wal-Mart project will be 850 kilowatts in size, but will have the equivalent amount of heat energy. The solar lighting part, which the company is experimenting with for biofuel algae production and thermal storage applications, won’t be included in the Wal-Mart project.