How would you describe the waste challenge in Canada and internationally, and what is the outlook for the waste management industry?
The waste business is clearly at a crossroads because it has been relying on the same binary solutions for decades: landfilling or incinerating. In the western world, and also increasingly in China, there is increasing opposition to incineration. In addition, a trend of the last 20 years or so is that communities are more informed, more demanding and do not want landfills extended or expanded. So what we are seeing is a world and an industry where landfilling is clearly narrowing down in capacity and incineration is being opposed. It is a business that needs new solutions and technology for communities. This presents some challenges, but it also presents some opportunities.
“The waste business is clearly at a crossroads because it has been relying on the same binary solutions for decades: landfilling or incinerating.”
At Enerkem, we are interested in the carbon contained in the waste. In a circular economy, we can extract these elements and use them to make the products we use in our everyday lives, such as glues, solvents, paints, textiles, plastics and biofuels for our cars. This system is perfectly circular. Technologies now exist for this and Enerkem is a global leader that has scaled this technology to a commercial reality. We are now rolling out this new solution in an industry that has merely never evolved.
What is the value proposition of this new technology? What solutions does it offer and what are its competitive advantages?
First and foremost, our technology is cheaper than landfilling or incineration. When you pay to dispose of waste, whether in a landfill or an incinerator, that is called a tipping fee which ultimately is charged back to citizens through their municipal tax bill. We can charge tipping fees that are lower than these existing solutions, and this is by virtue of what we produce as an end product. So instead of just dumping waste in a hole or burning it to produce electricity, our technology recuperates and recycles the carbon in the waste to produce a higher value liquid product – methanol or ethanol – that is 99% pure.
“We are interested in the carbon contained in the waste. In a circular economy, we can extract these elements and use them to make the products we use in our everyday lives, such as glues, solvents, paints, textiles, plastics and biofuels for our cars.”
By creating more value and revenue, we are able to charge less tipping fee at the entry. In addition to being lower cost, it is also more socially acceptable to the community. We are taking your waste and we are putting it back into your car, not just dumping it in a hole or burning it through a smokestack. This innovative process also prevents methane emissions from waste buried in landfills that are over 20 times more harmful than carbon dioxide. The resulting product – methanol or ethanol – also helps reduce greenhouse gas emissions by approximately 60% when compared to fossil fuel production and landfilling.
“The community piece – social acceptability – has become extremely important.”
One thing that I have observed in the last 10 years is the tremendous shift in how societies operate by virtue of social media. Communities get more informed and in return, they are also more demanding. It is not unusual for us to be in places like Rotterdam, Barcelona, or our plant in Edmonton and have the community tell us, “That is what we want to do with our waste; we want to stop landfilling. We want to make sure that the people we put in power understand there are new ways to reduce and recuperate waste to create value while preserving the environment.” The community piece – social acceptability – has become extremely important.
What are the main growth challenges faced by Enerkem and the cleantech sector as a whole? What would you recommend today’s cleantech startups do differently?
It took us about 10 years to get to where we are today. The first and main challenge is cash, as the cleantech industry is capital-intensive. When I started Enerkem, it was one of the first cleantech companies. No one understood business models like ours that require greater capital. So we had to bootstrap our way to all the money we needed until the so-called valley of death was passed. What encourages me today is seeing how the world has changed and how governments and investors have changed. The larger capital requirements place the bar high for competitors to enter effectively placing “winners” in a potentially quasi-monopolistic situation. Investors and governments have started understanding this better in recent years. There is a better understanding of the upside of a cleantech company like ours. In other words, if I started today, I do not think it would take me eight years to cross the valley of death, but perhaps five years, because markets now understand our needs better.
“Government regulations could help all of Canada’s legacy sectors cope with some of their challenges and aid in the emergence of the new industrial platforms of tomorrow.”
The second challenge is the facilities. They are larger assets that make a lot of money, but it takes some time to deploy them. You need to understand this technology from an equipment fabrication standpoint, and so the manufacturing sector also has to evolve to be able to mass manufacture these new industrial platforms.
Challenge number three is that you need bodies, you need brains, you need people. We have more than 200 employees today. We have over 70 engineers that we have had to train around a new technology. There are commonalities with chemical or mechanical engineers at petro-refineries or working on technology that is similar from a mechanical standpoint, but training is still required and the process of hiring and building internally can be long. Having good HR training programs is therefore key.
“Cleantech is a colossal global industry and a trillion-dollar business opportunity, and speaking as a Canadian, we are behind.”
In terms of recommendations for the next generation of cleantech entrepreneurs, I would first make sure to identify the investors that are more familiar with the cleantech industry, because there is a necessary educational process for investors. I would find a very good CFO and a very good financial partner, and I would go straight to these investors. Secondly, I would very quickly try to build what I call my brain trust; my first 5, 7, 10 engineers that will really have the capacity of absorbing the technology and delivering it.
Do you see opportunities for your technology with other sectors of the Canadian economy?
Absolutely, and that is what is good about the cleantech industry; it crosses many sectors of the economy. If we look at Canada, which is a big oil and gas producer, oil and gas will be a part of our economy for a number of decades. Oil production generates a number of residues, all of which contain good carbon that we can harness through our technology to produce a number of products. For example, we are able to produce hydrogen from these residues, which is needed to upgrade the heavier oils we have in Canada, and which form part of how Canada will enrich itself and will continue to grow as a nation, but continue to offer the same quality of life and wealth. We need to tap into these types of oils but we need to make them cleaner and we need to make them lighter, and there are a lot of residues from these operations that could help us do this.
“If we are to deal with climate change, from a global standpoint, we as a society have no choice but to tackle the issue of transportation fuels.”
Canada’s agricultural sector also generates a lot of residue. Corn stover, for example, is a beautiful feedstock with good carbon and sugars that we can use to produce the fuels of tomorrow. The pulp and paper industry offers the same opportunities. Often these are industries that are looking for growth, looking for new ways of making money, so it is not unusual for us as business developers to interact with large pulp and paper groups, agriculture groups or oil and gas groups.
Government regulations could help all of Canada’s legacy sectors cope with some of their challenges and aid in the emergence of the new industrial platforms of tomorrow. A carbon tax is a very good example of a way government can regulate to bring these industries together. That is why Canada has created a renewable fuel standard, which incentivizes and provides premium prices for an advanced ethanol and for biodiesel.
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What is your vision for Canada’s future economy and its ability to create the cleantech winners of tomorrow?
I am very optimistic about Enerkem because we have opportunities in Canada, but there is also the US and everything we are doing globally now. Since I started this company, we have received over half a billion dollars in investments. We have built assets in Edmonton, Alberta, and we are building out in Canada and Europe. It generally takes an optimistic person and view of the world to accomplish these things.
However, cleantech is a colossal global industry and a trillion-dollar business opportunity, and speaking as a Canadian, we are behind. The Chinese understand cleantech, and many American and European companies, governments, entrepreneurs and financiers understand it. The cleantech industry tackles very complex realities, but climate change is one that is of particular concern for me. 2016 was the hottest year on record since we have been tracking the world’s weather and temperature. And since records started, 16 of the warmest years have been in this century.
If we are to deal with climate change, from a global standpoint, we as a society have no choice but to tackle the issue of transportation fuels. Transportation fuels are among the largest emitters of greenhouse gases globally. The electric car is part of the solution, but even in the best scenario and according to the U.S. Energy Information Administration, by 2040 petroleum and other liquid fuels will continue to be a dominant source of energy, representing 88% of transportation fuel. Society is not adequately addressing the growing concern of global warming and quite frankly, I think the human race is at risk if we do not address this issue.
“In a world where cleantech is a trillion-dollar industry and where we have the brains to create multinationals as well as position Canada in this opportunity, we need the development agencies to play a strong supporting role.”
So we need sustainable alternatives to the liquid fuels we are currently using, alongside electric cars and other non-liquid solutions. As a business leader, this has to be seen as an opportunity. Enerkem is now a world leader in creating a standard advanced ethanol fuel made from waste that can be used in our cars. If you own and drive a gasoline car, its fuel contains 10% ethanol on average, which is all first-generation corn-based. We are now starting to see new advanced non-corn, non-food-based fuels emerge. Enerkem is leading that movement and it is a colossal opportunity. A key milestone for us in this respect is our recent successful completion of all the necessary steps required by the US Environmental Protection Agency (EPA) to sell our biofuel in the US. This makes ours the first ever municipal waste-to-cellulosic ethanol plant to receive approval to sell its end product in the United States. According to the U.S. Energy Information Administration, over 16 billion gallons of first-generation biofuel was produced and blended into the fuel pool in 2016. Therefore, with this EPA approval, we are now able to sell one of the lowest-carbon transportation fuels into the world’s largest biofuels market.
But although such opportunities are clear, these cleantech innovations require capital and they require governments to understand that this business can have a huge impact on their economy and on their manufacturing base. If you take the plant we built in Edmonton as an example, it led to 70 million dollars in contracts for equipment manufacturers in Quebec.
But we cannot do everything on our own. I am optimistic about the new generation; I think they will carry the movement that entrepreneurs like myself have started and continue to push for in trying to guide Canada on an innovation agenda. I am optimistic about the government’s vision. However, I am less optimistic about how their agencies that have to deliver on that vision are set up for creating Canada’s winners in the new world. I think all government agencies are well intended, but they have to ramp up with what is needed to develop and support our high-impact global technology companies in a world that is changing fast. In a world where cleantech is a trillion-dollar industry and where we have the brains to create multinationals as well as position Canada in this opportunity, we need the development agencies to play a strong supporting role.