A wake-up call for Canada’s cleantech sector

Worldwide cleantech venture investments were up 38 per cent to $8.4 billion (U.S.) in 2007 2008, according to the Cleantech Group. Companies in the United States raised $5.8 billion, or 68 per cent of the global total, up 56 per cent compared to 2007.

China was up 22 per cent on the year. Germany was up a staggering 217 per cent. Israel, not to be outdone, was up 224 per cent.

And Canada? Shamefully, cleantech companies from my home and native land only managed to raise $159 million from 14 disclosed financing rounds, down 58 per cent from 2007. Of the countries mentioned by the Cleantech Group that saw a fall in 2008 investments, Canada performed the worst — the others were the U.K., which fell by 11 per cent, and India with a 20-per-cent decline.

I’m bummed. I know there’s huge talent in this country, smart entrepreneurs, game-changing ideas and a solid stable of cleantech ventures — just look at the list of companies that have been funded by Sustainable Development Technology Canada over the years, and more seem to emerge by the day. Where are the champions from the financial community? Academia? Government? The high-profile talking heads ready to promote the best and brightest that Canadian, Ontario, or Toronto cleantech has to offer? Where’s the branding? The chest-thumping?

I need a glass of wine.

Maybe I’m going on a tangent here, but I can’t help but see this as an early sign of Dutch Disease, which happens when there is a reallocation of resources from high-tech service and manufacturing industries to the exploitation of natural resources, particularly as the prices of those resources rise. The Canadian government’s obsession with rapid oil sands development, the run-up last year in the price of oil, and the lack of serious attention to high-tech innovation, including cleantech, does fit that bill. It seems like the rest of the country is being gutted to support a one-trick pony, which is a blessing or a curse depending on whether you’re riding the pony or not.

I recall a speech by Mike Lazaridis, founder and co-chief executive of Research In Motion, back in March 2006 in Toronto. “Our oil resources can only carry us so far. What are we going to do after they run out?” asked Lazaridis. “What happens if there’s a major breakthrough and we’re no longer as dependent on oil as we have been in the past? What will we do? Will we have made the wise research investments, industrial investments, infrastructure investments to prepare Canada for a world without oil?”

In a word, no. These latest cleantech investment figures, IMO, are but one example of this neglect.

9 thoughts on “A wake-up call for Canada’s cleantech sector”

  1. I don’t disagree that a large part of that decline is due to economic short-term focus on the low-hanging fruit, but (for what grim “consolation” this is) it might be worth considering that perhaps the high-hanging fruit is just not that appealing yet, for reasons beyond the difficulty of getting it. A game-changing idea, after all, is only useful if it can be turned into a game-changing technology, and not all ideas will pan out in practice no matter how much money is thrown at them.

    And it might be worth remembering that comparing percentages to absolutes is not always useful, either. If our fall-off in percentage is disheartening, I can’t help but think $159 million in absolute investment is still a lot better than a number of other countries are doing.

    The overall volume of money is less important than the right amount being spent on the right potential prospects.

  2. Some people seem to see clearly that if the right resources and government incentives are applied early enough to the problem of clean technology, then economies of scale can work quickly to transform and rapidly advance its viablity. We have seen the beginnings of this in the adoption of solar technology in Spain and Germany.

    That the Canadian government is not doing more is a genuine indictment and I think a real pity.

  3. How do you propose getting the high-hanging fruit by ignorning the kinds of investments and support required to bring it lower? Governments and financial institutions in Canada just sit back and wait for that fruit to fall. Meanwhile, other jurisdictions that don’t put all their eggs in a resource basket benefit down the road from that forsight.

    On your point about absolutes versus percentages, I think the percentage comparison is most important. That’s how we measure GDP growth,right? Imagine if we ignored the fact that GDP is shrinking and said, well, you know, compared to Turkey we’re not doing too badly.

  4. I would like to join you for that glass of wine. I understand it looks frustrating and from my perspective Canadians are not risky enough. I would love to see wonderful innovation all over Canada, especially if it translates into jobs for Canadians. I agree that Canada has to stop acting like a petro-cracy and phase out of the resource-based economy.

  5. “How do you propose getting the high-hanging fruit by ignoring the kinds of investments and support required to bring it lower?”

    I don’t; but I recognize that figuring out *which* investments and what *directions* of support will actually *work* needn’t just be a matter of throwing as much money as possible at as many different targets as possible. Sometimes having to work on a budget can be a good thing, in the long run; it forces you to make smarter choices rather than scattershot hopeful ones.

    And any cleantech that does offer real solutions is going to have to be, by definition, economically viable; enforcing that restriction at the start of the process, rather than trying to reverse-engineer it into something too expensive to work outside the lab, also has its advantages — not least the fact that one of the most significant discouragements to future cleantech investments is a record of expensive, money-wasting failures that can’t recoup their losses by translating into practical product. Minimize the record of failure, and control the monies spent on each round, and you have a better chance of being able to build a sustainable cashflow rather than a disruptive, boom-and-bust cycle of windfalls followed by paucity.

    And I disagree that percentages are more important than absolutes, as a matter of fact. Some pies are so much bigger than others that a small piece of the big pie *is* better than a big piece of the small one; a shrinking Canadian GDP still beats a growing Turkish GDP, and will for some time. Focusing too much on percentages is a good way to forget the size of the absolutes; $159 million is nothing to sneeze at, and a good deal more than most of the countries on this planet can even begin to dedicate to this. If it means we have to make smarter, more careful choices about how we invest it, that may not be such a bad thing.

    Indeed, smarter, more careful choices overall are not a bad thing; remember that the last line of the quoted Wikipedia article about Dutch disease notes that some economists have argued the primary cause of the Netherlands economic disruption was “unsustainable spending on social services”. Unsustainable spending on *anything* — resource exploitation *or* cleantech development — is generally a bad idea.

  6. Hum I would like to know why a Indian 13 year old boy cna design a 3 d interconnected solar cell and not find anyone to take him up on producing a prototype.

    I believe a 5 D interconnected solar cell is possible if this prototype is developed I also believe it would revolutionize the computer industry as well as energy efficient LED lighting.

    too bad there is no one doing it yet!
    D~W

  7. Im really sorry t hear about our drop off while other nations continue to invest and nurture innovation and eco – tech. The sad fact is that of all g8 nations we are still the only one that is a resource based economy. So when you look at investment from that standpoint no onder massive investment goes into the tar sands. Alas, as the price of oil falls the tar sands look less and less important (lay offs have started). Hopefully Ottawa and Alberta see the obvious foreshadowing here and reconsider putting all their eggs on one dirty basket.

    check out the PWU comprehensive energy plan at
    abetterenergyplan.ca

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