In Clean Tech, Con­sumers Will Set the Pace of Change

Policy - - Contents - Dan Gag­nier

The last decade has seen myr­iad po­lit­i­cal and reg­u­la­tory re­sponses at­tempt­ing to ad­dress pop­u­la­tion anx­i­ety pro­voked by in­creas­ingly dire sci­en­tific as­sess­ments of en­vi­ron­men­tal re­al­i­ties. At the same time, global de­mand for fos­sil fu­els has in-creased as peo­ple in de­vel­op­ing coun­tries ac­cede to mid­dle class con­sump­tion habits. As our en­ergy land­scape ad­justs to these com­pet­ing forces, choices made by con­sumers will de­cide which new tech­nolo­gies thrive and which do not.

With the po­lit­i­cal and trade realms in dis­ar­ray, dis­rup­tion is the new nor­mal. Add to this the im­pacts of cli­mate change and the dizzy­ing pace of tech­no­log­i­cal in­no­va­tion and it’s lit­tle won­der that peo­ple are in­creas­ingly ex­er­cis­ing their abil­ity to choose what they can; the way they want to con­nect, the man­ner in which they con­sume their news and watch every­thing from movies to each other.

Clean tech falls into that bur­geon­ing ar­ray of choice. It is a term gen­er­ally used to de­fine a set of tech­nolo­gies that ei­ther re­duce or op­ti­mize the use of nat­u­ral re-sources, while at the same time re­duc­ing the neg­a­tive ef­fect that tech­nol­ogy has on the planet and its ecosys­tems.

A 2007 Study by McKin­sey & Com­pany looked at a num­ber of po­ten­tially dis­rup­tive tech­nolo­gies and as­sessed their prospects. It is worth not­ing just how ac­cu­rate these fore­casts were by the end of 2017. Many ju­ris­dic­tions with­out the re­sources or in­fra­struc­ture en­joyed by coun­tries such as Canada en­cour­age and in­cen­tivize the in­stal­la­tion of so­lar pan­els with the grid buy­ing sur­plus to sup­ply and in­crease gen­er­a­tion ca­pac­ity. “Pho­to­voltaic (PV) in­stal­la­tions [so­lar pan­els] have taken off much faster than we ex­pected,” ac­cord­ing to McKin­sey. In fact, the com­pres­sion of costs hap­pened through­out the so­lar-en­ergy sys­tem, from sourc­ing raw ma­te­ri­als to man­u­fac­tur­ing to in­stal­la­tion and ser­vice. McKin­sey ex­pected costs to fall to $2.40 per watt by 2030 but weren’t bullish enough; “in fact, they are on course to hit $1.60 per watt by 2020.”

On wind-gen­er­ated power and tur­bines, the pro­jected global base of 94 gi­gawatts in­stalled in 2007 would ex­pand to 800 gi­gawatts by 2030. As with so­lar, growth has been faster than ex­pected—an­other proof point demon­strat­ing the abil­ity of con­sumers, with or with­out state in­cen­tives, to move to new tech­nol­ogy. By 2014, McKin­sey es­ti­mated a 22 per cent in­crease or—370 gi­gawatts—of in­stalled ca­pac­ity com­pared to its pre­dic­tion for 2014. The same con­sump­tion/ cost tra­jec­tory has ap­plied to bat­ter­ies, elec­tric and hy­brid cars. Lower costs, im­proved man­fac­tur­ers’ main­te­nance pro­to­cols and tur­bine ef­fi­ciency have com­bined to push adop­tion rates for clean tech.

With both tra­di­tional and un­con­ven­tional oil and gas pro­duc­tion en­coun­ter­ing ground level as well as pol­icy protests, de­mand for oil and gas is still ris­ing but de­liv­er­ing new de­liv­ery sys­tems is prov­ing more dif­fi­cult. The re­al­ity, when we look at type of ex­trac­tion, is that it is here to stay (U.S. un­con­ven­tional-oil pro­duc­tion—frack­ing, oil sands and other non-drilled prod­uct—rose from al­most noth­ing in 2007 to 3.7 mil­lion bar­rels a day in 2014) but it is ve­he­mently op­posed in many ju­ris­dic­tions for fear of ground wa­ter and aquifer con­tam­i­na­tion.

The great hope 10 years ago was for en­ergy ef­fi­ciency as the greater mit­i­ga­tor. In­no­va­tion has come faster than McKin­sey pre­dicted and the de­ter­min­ing fac­tor un­der­ly­ing this faster pace is con­sumer be­hav­iour; cheap mo­bile com­mu­ni­ca­tions, for ex­am­ple, are en­abling the con­nected home. In ad­di­tion, hard­ware costs have fallen. For ex­am­ple, LED bulbs now cost about $12 each, down by 80 per cent from 2010.

In fact, peo­ple are al­ready mak­ing clean-tech choices as they build/ ren­o­vate and rent ac­com­mo­da­tions and pro­fes­sional space. And why not? These sys­tems are re-li­able, user friendly and in line with peo­ples’ in­creas­ing ex­pec­ta­tions for an in­ter-con­nected world.

What about the fu­ture?

In the International En­ergy Agency’s lat­est out­look for re­new­able en­ergy, it projects re­new­ables grow­ing by about 1,000 gi­gawatts—or 43 per cent—by 2022. The re­port points out that this equals about half of the cur­rent global ca­pac­ity in coal power, which took 80 years to build.

Part of the IEA’s anal­y­sis leads us to con­sider the prob­a­bil­ity that re­new­able en­ergy could re­place 25 per cent of the world’s coal power within half a decade—a growth rate that should worry coal in­vestors. (See Next Gen-

er­a­tion. Re­new­able En­ergy Comes at You Fast, by Liam Den­ning, 2017.)

Sim­i­larly, IEA projects the share of re­new­able en­ergy in the world’s elec­tric­ity mix to rise from about 24 per cent in 2016 to 29 per cent by 2022. This is still big­ger than the en­tire elec­tric­ity con­sump­tion of China, In­dia and Ger­many com­bined. In stud­ies such as the Word Wildlife Fund’s Clean Tech Sur­vey, cer­tain trends jump out in terms of both ap­pli­ca­bil­ity, eco­nomic/in­vest­ment choices and sus­tain-abil­ity op­tions. There is still a con­sid­er­able space open to large pub­lic tran­sit projects such as sus­tain­able and en­ergy-in­de­pen­dent of­fice com­plexes. De­vel­op­ers are erect­ing build­ings that serve as ur­ban agri­cul­tural pro­duc­ers and CO2 mit­i­ga­tors.

The nat­u­ral ad­van­tage in terms of in­fra­struc­ture en­joyed by re­new­able en­ergy projects em­ploy­ing clean tech lies in the abil­ity to ex­pand through mod­u­lar ap­pli­ca­tions. These projects, wind, so­lar, tidal, biomass etc. are ca­pa­ble of starting on one scale and mov­ing to ex­pan­sion by adding mod­ules.

It would have seemed like sci­ence fic­tion a decade ago but the tech­nol­ogy ex­ists to­day to de­liver these op­tions and will only im­prove as in­no­va­tors and en­trepreneurs con­tinue in­no­vat­ing. The role of mu­nic­i­pal, provin­cial/ state and na­tional gov­ern­ments is to fa­cil­i­tate change and en­cour­age the right choices. In­cen­tiviz­ing re­search, demon­stra­tion projects and com­mer­cial­iza­tion of new tech­nol­ogy in­creases our com­pet­i­tive­ness and im­proves our living stan­dard.

So, how does Canada stack up? It will sur­prise few to learn that Den­mark, Fin­land and Swe­den take the gold, sil­ver and bronze medals on clean tech in the WWF 2017 In­dex. Canada and the U.S. com­plete the top five. Canada and Nor-way do get fa­vor­able men­tion as com­ing from 18th and 25th re­spec­tively to amongst the top four for im­prove­ments in driv­ing their na­tional clean tech ecosys­tems for­ward.

As an ex-board mem­ber of Sus­tain­able De­vel­op­ment Tech­nol­ogy Canada (SDTC) I was for­tu­nate to see over a decade the evo­lu­tion in how we or­ga­nized our­selves and came to grips with the chal­lenges around in­no­va­tion, re­search and com­mer­cial­iza­tion of promis­ing en­ergy tech­nolo­gies. SDTC clean tech com­pa­nies now em­ploy more than 180,000 Cana­di­ans and gen­er­ate some $26 bil­lion in goods and ser­vices. When com­bined with other agen­cies and providers, it is a wel­come re­al­ity that at fourth in over­all scor­ing, Canada has strong re­sults for clean tech.

We need to con­tinue to cre­ate clean tech funds, pro­vide pub­lic fund­ing to sup­ple­ment pri­vate sources from all lev­els, and en­cour­age and fa­cil­i­tate early en­trepreneur­ship. Our weak­ness is our lim­ited num­ber of clean tech or­ga­ni­za­tions and clus­ters. My take-away from look­ing at many suc­cess sto­ries in this sec­tor is that we have the abil­ity, the brains and the en­trepreneurs. We need to in­crease our ef­forts and in­crease our abil­ity to com­mer­cial­ize the of­fer­ings of our in­no­va­tors and en­trepreneurs.

The 2018 SDTC Clean tech Lead­er­ship Sum­mit Re­port says it elo­quently: “A record 13 Cana­dian clean tech com­pa­nies made the 2017 Global Clean tech In­no­va­tion In­dex, earn­ing the coun­try a top-four rank­ing. Those achieve­ments in a highly com­pet­i­tive global mar­ket­place are tes­ta­ment to the in­no­va­tion power of clean tech firms and to the gov­ern­ment’s as­ser­tion that there is no choice to be made be-tween a healthy en­vi­ron­ment and a healthy econ­omy—both of which de­pend on well-de­fended and man­aged IP.”

While poli­cies and reg­u­la­tions can set the stage for new or bet­ter choices re­gard­ing how we use en­ergy, trans­port and house our­selves, in the fi­nal anal­y­sis, con­sumers have to ex­er­cise their pre­rog­a­tives. Tech­nol­ogy and ap­pli­ca­tions that turn our home ap­pli­ances, light­ing at a dis­tance and in­tel­li­gent se­cu­rity sys­tems are an easy jump for a pop­u­la­tion on tablets, smart phones and com­put­ers. Busi­nesses and in­sti­tu­tions push us into in­ter­net bank­ing and us­ing our tablets/phones to pay for goods, ser­vices and even for pro­cess­ing our cheques and re­ceiv­ables. As a ma­jor­ity of peo­ple sign on, dis­rup­tion will im­pact the poor, el­derly and other mi­nori­ties who ex­ist off these sys­tems. There are al­ready two types of peo­ple left be­hind by dis­rup­tion: Those who have prob­lems grasp­ing and adapt­ing to tech­nol­ogy, and the eco­nom­i­cally dis­ad­van­taged who can­not af­ford to­day’s tech­nol­ogy, never mind fac­ing fast-paced in­tro­duc­tion of new ap­pli­ca­tions. With in­equal­ity al­ready a grow­ing prob­lem, the is­sue of tech­no­log­i­cal dis­en­fran­chise­ment will likely only ex­ac­er­bate it.

IEA projects the share of re­new­able en­ergy in the world’s elec­tric­ity mix to rise from about 24 per cent in 2016 to 29 per cent by 2022. This is still big­ger than the en­tire elec­tric­ity con­sump­tion of China, In­dia and Ger­many com­bined.

As we move through the next decade the in­tro­duc­tion of more and more im­pres­sive clean tech­nol­ogy har­nessed by en­trepreneurs and ven­ture cap­i­tal­ists will pro-vide new, bet­ter and more nu­mer­ous choices at dif­fer­ent price seg­ments. How Cana­di­ans ex­er­cise choice will cre­ate busi­ness op­por­tu­ni­ties and drive in­vest­ments. In our reg­u­la­tory world leg­is­la­tors will have a chal­lenge keep­ing up. Con­sumer con­sump­tion and pur­chas­ing de­ci­sions will de­ter­mine the pace of that di­rec­tion as well as its eco­nomic un­der­pin­nings.

Dan Gag­nier was a deputy min­is­ter as well as a chief of staff to Lib­eral pre­miers in On­tario and Que­bec. He was also Se­nior VP of Al­can for En­vi­ron­ment, Health and Safety, a board mem­ber of SDTC (Sus­tain­able De­vel­op­ment Tech­nol­ogy Canada) and ex-chair of the IISD (International In­sti­tute for Sus­tain­able De­vel­op­ment).

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