Successful Energy Transition: We need to cut costs and we need to cut carbon
Emissions Reduction Alberta
Emissions Reduction Alberta (ERA) works with government, industry and innovators to accelerate the identification and development of innovative technologies that reduce greenhouse gas (GHG) emissions. The organization is helping Alberta transition to a lower carbon future with a stronger, more diversified economy.
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1- When it comes to the cleantech industry, Canada is a global leader in public policy but is middle-of-the-pack in innovation and is lagging behind in scaling up and commercialization.
2- There is a paradigm shift in the energy sector, as it recognizes that collaboration is the only way to keep up with the fast pace of technological innovation and disruption.
3- The oil and gas industry needs to diversify beyond using hydrocarbons as fuel for combustion. It can use its technological expertise and experience in hydrocarbons to grow while reducing emissions.
Considering the abundance of natural resources in Canada and the concentration of industry power in the hands of a few large players, Canada cannot blindly follow Silicon Valley, Israel or Singapore as models for innovation. It needs to leverage its expertise in oil and gas and strong connections between industry and academia to build a robust cleantech sector.
The cleantech industry is said to be worth over $1 trillion globally. Where is Canada in this global race?
The challenge is the race is happening on a number of tracks. Canada is a public policy leader in its commitment to carbon pricing, getting off coal, and ambitious GHG reduction goals. Alberta in particular has done much to create the conditions for success. However, we are maybe middle-of-the-pack in our level of commitment to innovation, and are falling behind in the race to get companies commercializing products at a global level. In terms of the ultimate transition to a lower carbon economy and creating a strong global presence, Canada has challenges. You often hear people say it is a marathon not a sprint. Unfortunately, I think the pace of disruption and technology is changing to a sprint. We do not have a lot of time to change direction; we have to find early successes coming out of the blocks.
“In terms of the ultimate transition to a lower carbon economy and creating a strong global presence, Canada has challenges.”
From a global perspective, our natural resources are both a blessing and a curse when it comes to innovation. If you look at a country like Israel, its lack of natural resources and small size mean it must gravitate towards international markets to meet its needs. I am not convinced – beyond us looking to the south – that we have that same culture or mentality in Canada. The other reality is the concentration of a few large companies in Canada. That level of concentration creates some challenges for innovators trying to grow, even where investment is flowing. If you look at the energy sector, for example, there is an incredible pull created by the demands of growing that industry.
People refer to Sweden or Silicon Valley or Singapore as global examples for Canada to follow in the cleantech industry. To me, we have to make choices and create an amalgam of what makes sense for Canada. One example within Canada is the work in the Toronto-Waterloo Region Corridor. This tech space is ensuring that there are strong linkages between the needs of industry and the new knowledge created in academia. It is a model that we need to emulate. There are pieces of the puzzle that we can take from others, but we need to build a puzzle that takes into account the advantages here in Canada.
How effective has ERA been so far and what are some of the most promising initiatives that the organization is working on?
If you look at our core mandate to identify and accelerate promising technologies, reduce emissions, and allow Alberta, Canada and the world to be more successful in a lower carbon future, I think we have done a good job. ERA has funded more than 120 projects and leveraged private money so that our $327 million in investments generated over $2 billion in total capital investment. Job creation is so important to the province right now and our modelling suggests that capital investment will generate around 15,000 person-years in jobs by 2021. In terms of GHG reductions, we estimate a cut of about 8 megatonnes by 2020 – and that is cumulative, not annual. By 2030, we are estimating that number will grow to about 27 megatonnes.
“There is not necessarily a shortage of funds in the early innovation stage. The ability to attract smaller dollars to demonstrate that a technology works is there – but the need for large capital funding sources to scale up and deploy projects is a major barrier.”
However, not all the companies from those investments have been commercialized and globalized. ERA came into existence in 2009, so the business lifecycle has not had time to work to maturation, but I think that is the vulnerability. If you are investing in technologies that are not being commercialized into products for global deployment, you cannot say that you have been totally successful. That is an area that ERA and the entire innovation ecosystem of Alberta is now focused on: how do we integrate and align all of those mandates to make sure we achieve commercialization and the deployment of greener cleantech technologies? One thing that we always talk about at ERA is the equal importance of the economic and the environmental outcomes of our work. We need to cut costs and we need to cut carbon, we need to create jobs and we need to reduce emissions. A successful transition means a strong, sustainable economy.
The report that ERA co-developed, Cleantech Directions, details the challenges with identifying demand in the industry. How can we solve those challenges?
ERA cannot by itself deliver the outcomes that Alberta and Canada need. It really is about partnerships. We view part of our role as helping to make those connections, to look at the entire lifecycle of innovation and make sure that we are aligning all the pieces to ensure there is success. For example, Sustainable Development Technology Canada (SDTC) and ERA have very similar mandates. So we did a joint call to make it more efficient for both the entrepreneur and our own organizations to identify projects and fund them. We learned from each other as we have simplified processes for the entrepreneur, the innovator, and the project manager.
Based on that experience, ERA has focused on building a network of trusted partners in the ecosystem. A great example of the trusted partner model is the one we are developing with the post-secondary system. Institutions like University of Alberta and University of Calgary are in early stage innovation. We have reached out to them to share promising projects that have gone through their adjudication process and met the institutions’ high standard of research, accountability and transparency. As the ideas coming out of these institutions get to the stage where they are ready for that first demonstration or scale-up opportunity, they can pass those projects to us. By talking early, we can make sure that the right information, partnerships and documentation are available so we can fast track projects and make the process as seamless as possible. We have that same relationship with Alberta Innovates. We use their scientists and technical experts to help us review projects and try to create a seamless handoff between our organizations.
“If you are investing in technologies that are not being commercialized into products for global deployment, you cannot say that you have been totally successful.”
What we are working equally hard on now is building a link to capital markets. There is not necessarily a shortage of funds in the early innovation stage. The ability to attract smaller dollars to demonstrate that a technology works is there – but the need for large capital funding sources to scale up and deploy projects is a major barrier. We have to strengthen that capital linkage because technology readiness is the space ERA plays in. However, equally important is an organization’s commercialization readiness: do they have a good CEO? Do they have a marketing plan? Do they have their first customer? That is where the capital markets have expertise and can help us when, as an example, an oil-focused product works at 500 barrels a day but it now requires $300 million to scale it up to 50,000 barrels a day. I would say we have made good progress as a facilitator of such partnerships.
One recent trend in the oil and gas industry is people discussing issues with a more holistic, collaborative approach rather than looking at issues in isolation within their companies or sectors. Are we likely to see more collaboration in the energy sector?
I think that is the case, and SPARK – a business conference cohosted by ERA and Alberta Innovates in November 2017 – was a good example of it. When you get all of the customers, innovators, financers and educators in a room, you generate creative collisions and opportunities to learn from each other and accelerate the work.
“Industry and governments recognize that we need to be more nimble. We need to create those critical masses that will accelerate the way we identify and adopt new technologies. If we do not, we are going to be left behind.”
Another example, is the work being done through the Clean Resource Innovation Network (CRIN). This collaboration of industry, post-secondary institutions, accelerators and funders is actively working together to increase competitiveness and reduce the environmental footprint of the oil and gas sector.
There is a paradigm shift occurring and I think it is necessary because the rate of disruption and technological change is so rapid. Industry and governments recognize that we need to be more nimble. We need to create those critical masses that will accelerate the way we identify and adopt new technologies. If we do not, we are going to be left behind.
Do you believe Canada can grow its oil and gas industry while simultaneously reducing its total emissions?
If you do not believe that, you should not be in the cleantech business. There has to be a transition and that transition is only going to be successful if we can identify, de-risk and deploy new technologies. I absolutely believe that is possible. There is an opportunity to cut both costs and carbon at the same time. To set it up as a choice of one or the other pushes us to debate rather than taking action.
“There is an opportunity to cut both costs and carbon at the same time. To set it up as a choice of one or the other pushes us to debate rather than taking action.”
A significant portion of the oil and gas industry is not even focused on burning fossil fuels for transportation or heating, but the products and services that come out of the hydrocarbons. How can we move to carbon beyond combustion, take it out of a waste stream and turn it into asset? That is where my mind goes as opposed to how can we continue to do exactly what we have done in the past and still be successful. We must develop technology that addresses the issue of emissions so we can have an oil and gas industry that is fit for a lower carbon future. That is what I believe and I think that is the most productive conversation we can have.