5 “Under the Radar” Trends Impacting Cleantech
Nov 18th, 2019
5 “Under the Radar” Trends Impacting Cleantech
(And Why Canada Should Sit Up and Pay Attention)
After decades of talking about transitioning into a low carbon economy, it is finally starting to happen. Change is everywhere. At Foresight Cleantech Accelerator Centre, we’re excited. The explosion of the cleantech industry as a viable, growing economic market opportunity in Western Canada is a result of a lot of hard work by a lot of cleantech innovators (over a lot of years), and it is rewarding to see.
But in terms of a carbon negative future economy, we are still miles away from the finish line and there are significant decisions to make over the next few years about Western Canada's clean energy future and how we’re going to get there.
And in order to make those decisions (where to invest, what to invest in, policy changes, how to adapt to change in socially just and equitable ways, etc), it is important to take a look at some under-the-radar, underlying trends that are impacting cleantech and driving this rapid growth.
Many cleantech technologies themselves are not well understood (they are often highly complex, interconnected and scientific solutions developed by specialized engineers and researchers), and the business models and market analysis driving the adoption of the technology are not well understood either. Nor is the full scope and nature of the cleantech industry in BC fully understood - this is one of the reasons we have embarked on the research and engagement-based Cluster Initiative with the support of the Province of BC, Western Economic Diversification and Vancity (to develop an economy, you first have to know what’s going on!).
Foresight and our partners are not the only ones recognizing this - in the recently published Clean Futures Forum report, participants acknowledged that the diverse clean energy options beyond renewable electricity are not widely understood in the Province. But even as this research continues, as a Province, we must continue to move forward, and decisions must be made. As the saying goes, ‘there’s no stopping an idea whose time has come.”
So given that Cleantech’s time on the world stage is now, let’s take a look at some underlying trends that are driving this transition so we can make progressive, informed decisions over the next few years.
1. Global Demand for Oil is Shifting
The demand for oil is dropping globally, and long term forecasts for the price of oil have also dropped (for example, the U.S. Energy Information Administration's (EIA) 2014 Annual Energy Outlook recently dropped their long term 2040 price forecast from $230 US per barrel to $165 US per barrel- and in a business that plays a long game and needs long term investment, that’s not a good sign).
In fact, many experts suggest that oil industry forecasts may be too optimistic about the dominance of oil as an energy source as we transition into a low carbon economy. The World Economic Forum recently published an article saying “Leading energy industry players and analysts – the energy-forecasting ‘establishment’ – are seriously underestimating the speed and depth of this transition.”
Economists can argue about the details and the actual timing what oil prices will do and when, however, we should also be celebrating how progressive the oil and gas sector has been in areas of their operations and investing in new energy technologies (and that the oil industry is investing in innovations such as carbon uptake, utilization and storage).
2. Consumer Demand for Cleantech is Growing (Fast)
Do you remember when cell phones were a cool new thing that only a small number of trendy people had? Then within a few years everyone had one? And then a few years after that no one could live without them?
That’s called the technological adoption lifecycle. It is a model for how new technologies get adapted into a market. At first it happens slowly, sometimes painfully slow as R&D happens and the ‘kinks’ get worked out - the first cell phone call was actually placed 46 years ago. Then a few early adapters pick it up (the cool people who are ‘into it’) before it moves into what is called ‘the early majority’ phase.
The early majority phase is when enough technologies have been successfully commercialized and brought to market that consumers start to trust in it and are willing to buy - that’s when the rapid growth starts to happen.
Cleantech seems to be following that model, and I believe in some areas of cleantech, we are moving into the early majority. Take a look at the following graph of global electric vehicle sales:
(image courtesy Wikipedia)
Notice how steep the curve starts to become from 2016-2019? That’s the early majority. That’s when consumers start to notice that their neighbour has a plug-in electric vehicle and want one themselves.
The same thing is happening in Green Building technology. When an entire community development in Kamloops goes geothermal, the other people in town are going to start asking why their heating bills aren’t 50% lower too. When your municipality starts supplying neighbourhood based renewable energy services, when you get to go to work in a building that is sustainable, safe, comfortable and looks like this:
(Canada Earth Tower. Image Courtesy Perkins + Will/ Delta Land Development)
…. that’s when consumers step up and notice. Your status quo building starts to seem unacceptable or dated.
Combine cleantech technology such as electric vehicles, green buildings that impact our daily lives and pocketbooks (such as giving consumers real cost savings advantages) with the impact of global warming impacting daily lives (vacations cut short by forest fires in the BC Interior or water shortages in the summer) and market growth starts to skyrocket.
Consumers are starting to acknowledge the need for change in consumer habits around cleantech and sustainability. It’s no longer a future possibility - it’s mainstream and people are talking about it.
3. Costs of Cleantech/Renewables are Dropping (Also Fast)
While in the graph above, we see the rapid rise of sales numbers, the costs associated with cleantech are going down across sectors and we are seeing polar opposite graphs.
Take a look at the dropping cost of a lithium battery (used in the production of electric vehicles) over the same time period:
The combination of increasing demand, leading to higher sales numbers and lower production costs is basic economics, and that is really what it comes down to in the end - basic economics, dollars and cents. Who and what technology ends up emerging as drivers of this new economy will be driven by private industry and market forces. And once an economic sector reaches that tipping point, change is disruptive and happens fast.
4 Economic Models are Changing
As new technologies emerge, so do new economic and business models. At Foresight, many of our companies are following the global trend away from monolithic, centralized business models to more decentralized, distributed and service-based business models.
From Hydra Energy, who is connecting hydrogen supply and demand through their groundbreaking Hydrogen-as-a-Service (HaaS™) business model, to Inventsys, who are building an innovative, made-in-Canada CO2 marketplace, cleantech companies are challenging how business is done and forging new paths.
And it’s not just industry moving away from a top-down centralized way of business, governments are reacting and responding in the same way. From Natural Resources Canada’s recent investment in a decentralized electricity distribution project in Ontario, to the BC and federal governments’ sponsorship of our cleantech cluster project, and the Vancouver Economic Commission’s Tech Deployment Network, there are many indications that governments across the board understand there’s a change afoot and are willing to play their part in it.
As an organization dedicated to energizing the cleantech industry in Western Canada, it is very encouraging to see.
At Foresight, we’re driving an economic eco-system around cleantech, and in order to do that, to be a catalyst supporting an actual breakthrough economy, we know we need to connect people and break down barriers and champion others who have the same ‘all hands on deck’ cooperative approach. There really must be strong, cooperative geo-political alliances, open dialogue full of honest, research-based communication, and stability in policy.
As these innovative companies grow, new economic models take root, and government policies move away from fossil fuels, the energy industry will become more diverse. It is crucial that we all work together in the transition. We are a team, and our futures are inexorably woven together. As the World Economic Forum puts it:
“If the transition to renewables and low-carbon electricity happens faster than the energy establishment anticipates, the implications for exporters of oil and for the geopolitics of oil will be very serious.
For example, the failure of many oil-exporting countries to reduce their dependence on hydrocarbon revenues and diversify their economies will leave them extremely vulnerable to reduced oil and gas demand in their main markets.”
5. Investment Landscape is Changing
All of these trends, and cleantech’s future, are all intricately interconnected to investment and finances. While our recent research showed some weaknesses in the investment landscape, there is also some good news and interesting trends to note.
Like the disruptive business models (or perhaps in response to them), there seems to be a growing willingness to take on entrenched financial models and be more innovative when it comes to financing cleantech.
Governments are co-operating with industry in de-risking cleantech investments with their Venture Capital Catalyst Initiative. First Nations leaders are seeking an expansion of the Indigenous economy and economic reconciliation in the form of revenue sharing, investments and labour force development. BC based venture capital firms are being recognized for their innovative work in funding cleantech.
Impact investing is on the rise, and funding organizations are not just talking about making a positive impact in their PR pieces, they are making it a funding requirement.
Access to finance is a key component to building a cleantech economy. Western Canada in particular is undergoing a structural change in our economy, as we adapt to global market realities, climate change realities and social/political changes across the globe. At Foresight, we are in the trenches of this economic shift - our Cleantech Cluster Initiative is well underway, and as part of that we’re taking a close look at the funding/investment landscape in BC, and talking to industry innovators across the province.
These under-the-radar trends are exciting to see, as they point to an opportunity to energize cleantech across Western Canada. They are a sign of something to come, a signal beacon magnetizing us toward a clean, sustainable economy - we just need to follow where they are leading, and the sky’s the limit.
Using the best practices of cluster-based economic development, the BC Cleantech Cluster Initiative is bringing together key stakeholders groups including small and medium sized enterprises (SMEs), associations, industry, investors and Federal and Provincial government to put in motion a sustainable model to help advance British Columbia’s thriving cleantech sector.
About the Author
Jeanette is an experienced CEO, entrepreneur and business strategist with broad-based experience in technology, business development, marketing and operations. She is the CEO of Foresight, Western Canada’s largest clean technology accelerator. Since taking on the role, Jeanette has led the organization to secure funding for two new programs around technology development and scale up for member companies. She looks forward to collaborating with all partners from government to industry to investors to secure Canada’s position as a global leader in the cleantech sector.