The Alberta Cleantech Report 2021 is based on research conducted by Foresight Alberta and MaRS Data Catalyst. Read an overview in The State of Cleantech in Alberta, and learn about Funding and Growth. In this post, we explore primary challenges faced by Alberta cleantech ventures and the major risks they face, starting with what could have been the biggest of them all - the pandemic.
Impact of Covid-19
While most Alberta cleantech ventures were able to access government funding during the Covid-19 pandemic, many also report a reduced ability to raise capital and decreased revenue.
- Of the 39 ventures that responded, more than half (56%) experienced a greater than 50% reduction in fund raising due to the pandemic.
- 54% reported having lost private debt or equity investment deals as a result of the COVID-19 pandemic
- 77% received funding from pandemic-specific federal or provincial funding programs, mostly from the Canada Emergency Business Account Program (CEBA)
- 40% experienced a 25-50% reduction in revenue year over year and a third experienced a greater than 50% reduction in total revenue due to the COVID-19 pandemic or the associated political and economic actions in 2020.
- 80% of responding ventures reported a reduction in export revenue as a result of the pandemic. The most anticipated exporting challenges by companies are a lack of financial resources to maintain international activities and loss of customers, suppliers or distributors.
- 22% of ventures either temporarily or permanently laid off staff, and 42% of ventures employed fewer staff than planned due to the pandemic.
Barriers to Success
Commercialization and accessing capital are the top two most significant barriers to success identified by Alberta cleantech ventures, followed by lack of regulatory drivers for adoption and corporate partner red tape.
Financial commercial pilots/proving technology at commercial scale
- “Our challenges have been in getting a partner committed to a pilot test with us, and then to secure the financing from the public markets or other sources to provide the backing we need to complete the test properly.”
- “Government views [that] it is up to the developer or investor to take the risk as in other exploration industries like oil, gas or mining. But they are comparing our industry to well established industries that have had systemic assistance for decades.“
- “We have spent $130 million getting past pilot stage. We have a lot of customer interest post [demonstration]. However there is no available ...large scale capital for a demonstration.”
- “Financing commercial pilots is tied to securing a corporate/industry partner. It is like the chicken or the egg dilemma. Both sides want to see the other side committing first.”
Identifying and accessing investment capital
- “For the clean tech sector, and in particular any industrial clean tech, the lack of access [to] capital presents a significant caveat to continued commercialization efforts. Most private equity firms, in our experience, are still unfamiliar with this space.
- “Canadian VC's and Seed and Series A investors often want a proven track record of revenue generation. Very difficult in this environment (potentially) to show that before investment arrives.”
- “Angel and VC funding for products seems abundant but nothing bridging the gap for project development and deployment of clean technologies.”
Lack of regulatory drivers for adoption
- “Canada is a difficult place for cleantech companies. We are having much more success selling into the US, where energy efficiency programs are established and consistently funded. Not a great place for energy efficiency to thrive. We would likely do better by moving the company to the US or Europe.”
- “We need regulatory frameworks that will reward implementation of renewable energy, including those that are not commoditized like solar and wind. The low cost of electricity discourages adoption of renewable energy and therefore innovation and GHG abatement opportunities are forced to move elsewhere.”