Investments in clean tech cool as subsidies end

Winding down of government spending results in ‘destruction of the market’

OTTAWA New data show Canadian investment in clean technology has cooled off over the past three years, despite myriad programs introduced by the federal government to boost spending on green infrastructure and shift the country toward a lower carbon economy.

Canadian private sector investment in clean technologies has fallen by half since 2014, dropping to a combined US$9.4 billion over the past three years, compared with US$19.5 billion between 2012-14, according to data from Bloomberg New Energy Finance. Investments rose to US$3.3 billion last year, compared to US$2.3 billion, but is less than half of the peak in 2014. Investments in the first two quarters of 2018 appear to be below the fourth-quarter running average, BNEF data shows.

The slower pace of growth mirrors a global trend, in which new investment in clean tech has eased — largely due to slower renewable energy growth in China. BNEF data shows new investment in renewable energy globally grew three per cent last year.

The moderate investment levels appear to contradict the federal government’s mantra that a suite of new incentive programs, coupled with falling costs for renewables such as wind and solar, would inevitably push clean technology investment to new heights.

Analysts say the trend is instead a result of uncommonly high investment levels from 2010-15, spurred in part by provincial and federal programs that have since been wound down. The federal Wind Power Production Incentive Program and Ontario’s feed-in tariff program ended in 2016, while Quebec met its previous target of installing 4,000 megawatts of wind capacity, in turn ending its incentive program. B.C. has ended its own program for clean energy growth.

“Any time you have a ratcheting down of subsidies, in the immediate aftermath you see a total destruction of the market,” said Amy Grace, head of North American research at Bloomberg New Energy Finance.

The gap left by those provinces is unlikely to be filled by smaller provinces like Alberta or Saskatchewan, she said, especially as Canada nears its capacity for emissions-free electricity. Today, roughly 80 per cent of Canada’s grid is powered by zero-emissions sources, mainly hydro. Canada hopes to reach 90 per cent clean sources by 2030. That leaves little space for investment to rise dramatically any time soon.

Merran Smith, executive director of Clean Energy Canada, said it is natural for investments in solar, wind and other clean technologies to flatten out due to their decadeslong life cycles. “These are longterm infrastructure projects, it’s not like buying a new iPhone which you might do every couple of years,” she said.

The investment outlook is brightest in Alberta, Smith said. It opened up bids to the private sector to install 600 megawatts of clean energy capacity in 2017, and another 700 megawatts in 2018.

Even so, investment in clean technologies is likely to remain stalled without immense spending on the electrification of Canada’s transportation system and heating appliances. Currently, only a tiny slice of Canada’s vehicle fleet are electrically powered, while most furnaces run on natural gas. Even the more bullish forecasts suggest electrifying the world’s vehicle fleet will take decades.

Some still see clean tech investment levels rising. Dave Sawyer, the head of policy advisory at EnviroEconomics, expects renewable energy spending in Canada to increase $7 billion annually to 2030, a 45-per-cent rise from current levels.

In a response to questions Tuesday, a spokesperson for the environment ministry said decisions around electricity capacity are largely a provincial issue, and that “provincial policies make a difference” in reducing emissions.

In its 2017 budget, the federal government introduced $1.4 billion in new funding through Export Development Canada and the Business Development Bank of Canada for clean tech firms, both in the form of equity financing and working capital arrangements. That was on top of roughly $1.8 billion over four years earmarked for research and development and financing efforts.

Chris Ragan, Canada’s Ecofiscal Commission chair, said lower clean tech investment could be partly tied to generally lower investment levels amid a worsening CanadaU.S. trade ties and NAFTA renegotiations. Some firms could also be holding off on new investments, Ragan said, due to uncertainty around the federal carbon tax.