Cleantech projects stuck in limbo
Toronto: There’s no shortage of clean technology ideas in Canada. But there is a lack of money to commercialize them.
That was a major theme at the Carbon Economy Summit in Toronto recently, where investors, start-ups and manufacturing executives gathered to discuss cleantech’s promise and hurdles.
Speakers wondered if skittish investors will cause Canada to be left out of the global cleantech market.
“There is a huge funding gap,” said Sasha Jacob, president and CEO of Jacob Securities, a Toronto-based independent investment bank focused on renewable power, cleantech and energy.
“The Canadian banks are certainly not stepping up to the plate. They’re very slow and very cautious. This is a significant issue and we think the biggest issue, and it will probably result in attrition of a lot of the [renewable energy] contracts that have been awarded today.”
Clean technology projects are typically high risk, and there are numerous failures, Jacob added, “but the rates of return [on investment] are far higher than you’d get in the market.”
He sees energy efficiency as one of the biggest growth areas, along with biomass projects involving wood chips.
Large companies are buying interests in these markets, using their own balance sheets to fund the deals. But smaller companies are often out of luck.
Tom Rand echoed the notion. As cleantech practice lead advisor at the MaRS Discovery District in Toronto, he spends much of his time helping companies commercialize green technology. The ideas are promising, but often stuck in limbo.
“We have no venture capital in this city, this province, this country. We’ve stranded IP [intellectual property].”
Nicholas Parker, executive chairman and co-founder of the Cleantech Group (San Francisco) and one of the first investors in alternative technologies, said Canada is poised for profit. “We’ve got the people. We’ve got great entrepreneurs.”
But the reluctance of banks to assume some venture risk has left the country hamstrung.
“It’s a disaster. It’s a train wreck. Nothing is happening…We’ll leave it up to China to make it and sell it to us…We are risk averse and we are way too comfortable,” Parker said. “We have an emasculated venture capital industry.”
He pointed out Canada is lagging behind other countries in the clean tech space. China has the most patents in alternative technology than any other country in the world. India has introduced a carbon tax. Germany has emerged as a cleantech powerhouse.
The good news is “for the first time in human history we’re innovating globally,” he added.
In the past, developed countries took the lead with technology research. But where climate change is concerned, mature and developing countries are working in unison.
Globally, cleantech is now the largest venture capital market, said Parker, who refers to industry as the next “space race.”
The challenge for Canadian investors is realizing there’s money to be made in this multi-trillion dollar global industry, he added.