A Clean Tech Case Study
Canada’s clean technology sector is nearing a tipping point that will tilt it toward transformative, sector-wide critical mass, but we need more made-in-Canada clean technology success stories to grow and scale-up. How do we get there? As many leaders in government and the private sector can attest, money is only part of the formula for a breakthrough.
In a recent letter to Canada’s first ministers signed by more than 100 business and civil society leaders that comprise the Smart Prosperity Initiative, the gauntlet was thrown down for nothing short of a homegrown clean technology revolution. “Targeted public funds are needed to spur breakthrough clean technology research, development and deployment across all sectors, leveraging private capital,” the letter declared. It’s a call to action these ministers would ignore at their peril, given that its signatories included the Business Council of Canada’s John Manley, NRStor’s Annette Verschuren and McKinsey’s Dominic Barton—the latter the chair of the Prime Minister’s Advisory Council on Economic Growth.
Indeed, the Government of Canada has responded in kind. The Pan-Canadian Framework on Clean Growth and Climate Change included recommendations for new action to support the clean technology sector and advance the commercialization of clean technologies. The Trudeau government stepped up, turning words into action by setting aside $2.3 billion for investments in clean technology with matching tools and new mandates for established funding partners including the Business Development Bank ($950 million), Export Development Canada ($450 million), and Sustainable Development Technology Canada ($400 million). With political will and capital firmly in place, it would appear that Canada is well positioned for a breakthrough to transition to a low carbon economy via the creation of high-skill, high-wage, knowledge-based jobs in a rapidly growing clean technology sector. But we are still very much at the starting gate to fulfill our promise, achieve critical policy objectives, and deploy made-in-Canada clean technology in a material way to diversify our economy. Canada’s innovation strategy has slowly shifted from ideas and startups to market creation and scale-up. We have funded many promising clean technologies to varying degrees of success, resulting in a diverse ecosystem of companies at different stages of their development cycle. Canada features a handful of market leaders who have commercialized product globally and managed to scale-up. We also have a larger number in the pre-commercialization stage with promising technologies, and many more start-ups pursuing disruptive technologies that we need to keep a close watch on.
To the credit of the current government, there is widespread recognition that we have an opportunity to continue to not only invest in but actively support companies in the clean technology sector. We need a lot more of our made-in-Canada clean technology success stories to grow and scale-up. This will in turn lead to a much more mature sector, reflected in commercialized product, established sales, revenue, profitability, market share, and a compelling size of the prize. But how do we get there? As many leaders in government and the private sector can attest, money is only part of the formula to drive change and growth.
There is a complex relationship between regulation and innovation, and the challenge of technology advancements outpacing current regulatory frameworks is well documented. There are many examples of the ways inefficient regulations can block innovation, strangle the flow of capital, and reinforce a status quo that doesn’t allow companies with new technology solutions to emerge as markets demand.
Stakeholders from the Government of Canada’s six Economic Strategy
We are still very much at the starting gate to fulfill our promise, achieve critical policy objectives, and deploy made-in-Canada clean technology in a material way to diversify our economy.
Tables have spent the summer finalizing their chapters and refining the signature recommendations specific to their sectors. I had the privilege of serving on the Clean Technology Economic Strategy Table for the past nine months. This table, along with those focused on resources for the future, advanced manufacturing, agrifood, health/biosciences, and digital industries were wisely chosen for a key reason; their ability to transform our economy. However, it is not surprising that there is an emerging consensus among them that regulatory challenges represent the most significant roadblock to accomplishing that very transformation.
For many Canadian businesses, the repercussions of these regulatory roadblocks only come into focus when they impede real-world market opportunities. At Westport Fuel Systems, we have learned just how difficult it can be to navigate a regulatory environment that wasn’t designed to accommodate new technologies in existing frameworks.
Our flagship and proprietary highpressure direct injection technology, Westport HPDI 2.0™, enables heavyduty trucks to operate on natural gas with reduced fuel costs, reduced CO2 emissions, and diesel-like performance. It has been successfully commercialized and launched in Europe with our engine manufacturing partner. Two 13L engines (rated at 420 and 460 horsepower), certified to stringent Euro VI regulations and suitable for demanding Class 8 longhaul applications are currently being deployed in key European markets to leading fleets seeking comparable diesel performance and deep greenhouse gas emission reductions. One of our greatest challenges, however, is deploying products in the domestic market.
Given the long lead time associated with heavy-duty engine development programs, the lack of costcompetitive, market-ready solutions for the long-haul commercial freight sector in North America with engines 13L and greater—and the urgency of greenhouse gas emission reduction targets from heavy-duty transport—we see a market opportunity to deploy these engines in Canada. But given the distinction between the Euro VI standard and the North American EPA standard and different engine testing cycles, our current options are to seek a neverbefore-granted exemption under the Canadian Environmental Protection Act (CEPA) to import a number of Westport HPDI 2.0™ trucks or to explore a separate regulatory harmonization pathway.
The success of our endeavour will depend on our ability to navigate a complex and lengthy regulatory process that appears opaque, with an investment of time and resources that balances our appetite for risk. As a made-in-Canada clean technology success story headquartered in Vancouver, it is difficult to fathom that we would face so many challenges in bringing to Canada a technology that was invented in the University of British Columbia’s Department of Mechanical Engineering in the 1980s.
Ultimately, we will need as much innovation in our public policy tools as there is in technology to ensure progress on critical economic and environmental objectives. How do you create the right regulatory environment to allow for the rapid adoption of clean technology? A new approach focused on regulatory agility that enables and allows newcomers and solutions providers to challenge incumbents should incorporate the following elements:
1 An enhanced working relationship between regulators and industry that encourages early and frequent dialogue and guidance on new and evolving clean technologies,
2 A framework that can adapt to the pace of change of new technologies,
3 A timeline and degree of certainty that provides companies and investors with the confidence needed to continue investing in projects at
various stages of development and risk,
4 An initiative to educate solution providers on the real hard boundaries of the regulatory environment,
5 A system that is designed to scale solutions, not just specific technologies or companies,
6 The provision of safe harbours to allow for the demonstration and testing of clean technologies that includes mutually agreed upon milestones leading to an exemption,
7 A stage-gated process that identifies what could be accomplished quickly to deploy clean technology versus longerterm requirements, while ensuring that critical health, safety, and environmental objectives are met, 8 A process or methodology for determining best available clean technology and an expectation that solutions providers “show their work,”
9 A mechanism to build and nurture stronger relationships between regulators and the vast technical expertise in the clean technology sector, and
10 A commitment to accountability to ensure best-in-class regulatory performance and leadership.
Like so many in our sector, we are writing the next chapter in our corporate story with an eye to those jurisdictions enacting stringent regulations specific to urban air quality and public health, improved fuel economy, and reduced greenhouse gas emissions. The opportunity to further develop our technologies and expand our footprint in Canada has never been better, and the political will is readily apparent—and greatly appreciated. And yet we know that without a concerted effort by government and key stakeholders to address regulatory roadblocks, this promise could readily evaporate.
The Government of Canada has already conducted the heavy lifting of setting aside valuable capital. What is needed now is a comprehensive, coordinated, and collaborative approach to regulatory agility. This can be the kind of strategy that will truly spur innovation through the deployment of clean technology and support the ability of companies to scale up. We can see the way forward and are ready to work together, with government and our key partners, to make it happen.
Karen Hamberg is Vice President of Industry and Government Relations at Westport Fuel Systems in Vancouver.
The light bulb has always symbolized ideas, which are driving clean tech.