Faced with increased problems from climate change, cleantech stakeholders believe BC should think bigger still.
The stark impacts of climate change are accelerating around the world, and one of the places these impacts been highly evident in the last year is the province of British Columbia. Scientists have already linked a series of tumultuous weather events experienced across BC in 2021 to a warming planet.
“I think it takes a village to raise the sector up, and there’s a lot of passionate people here that want to see [cleantech] front and centre.”
While BC represents a microcosm of the world’s grim future should it continue on its current course, the province is also home to an ecosystem of tech companies looking to shift that trajectory.
In the last 20 years, cleantech has emerged as a flourishing category in BC’s economy. From carbon capture solutions to water recycling technologies, local cleantech companies are turning heads at home and abroad.
“We’re certainly punching above our weight,” said Jeanette Jackson, CEO of the Vancouver-based Foresight Cleantech Accelerator, which claims to be the largest cleantech accelerator in Canada.
From grassroots organizations to government, BC’s cleantech sector is working to position itself as a truly global leader in the space. While BC cleantech is making a big splash, local stakeholders in the cleantech community, like Jackson, believe the province can think bigger still.
“I think it takes a village to raise the sector up, and there’s a lot of passionate people here that want to see [cleantech] front and centre,” Jackson told BetaKit.
From passing fancy to priority
BC wasn’t always known for cleantech, but it does have a long-held reputation as a “green” province. It was the first Canadian jurisdiction to join the Western Climate Initiative and was among the first to implement a broad-based carbon tax. Today, more than 98 percent of BC’s electricity is generated from clean or renewable resources, and its emissions per capita are among the lowest of all Canadian provinces.
At the same time, British Columbia has historically been a resource-dominated economy, with a heavy focus on forestry and mining. Approximately 64 percent of British Columbia is forested, and that industry alone accounts for 15 percent of the province’s economic activity. Kari LaMotte, managing director of entrepreneurship@UBC, said BC’s history laid much of the groundwork for the emergence of the province’s cleantech companies.
“I think there was the sense of cleantech being a fad at that time.”
“You’ve got this passion for the environment, you’ve got the resources of innovation, and you have the application of that innovation coming together in this really heady mix that has a chance to build something very solid and very strong,” LaMotte said.
Sustainability entered the BC tech conversation in the 1990s and early 2000s, with the emergence of firms like Ballard Power Systems, General Fusion, and Westport Fuel Systems, which all specialize in alternative energy.
Alan Winter, who served as BC’s first innovation commissioner until 2020, told BetaKit that these companies “crystallized a lot of the cleantech thinking in BC” and helped spawn many other cleantech startups in the province.
However, companies like these were “a little ahead of their time” when they first arrived on the BC tech scene, according to LaMotte.
“I think there was the sense of cleantech being a fad at that time,” she noted. “We had a lot of capital infusion that happened around the turn of the century … but a lot of the infrastructure on those solutions wasn’t in place yet. As a result, we had a bit of a delay in getting those companies off the ground the way we wanted to.”
Following the 2008 financial crisis, the global cleantech sector saw a sudden downturn in investment activity. The sector was especially hard-hit due to cleantech companies’ high-risk nature and lengthy development cycles. Following the signing of the Paris Climate Accord in 2016 and the surge of socially-responsible investing, cleantech began to reemerge as a sector of interest globally, including in BC.
In the same decade, new stakeholders and support organizations emerged across BC. These included the BC Cleantech CEO Alliance in 2010, which aims to connect local cleantech startups; Foresight’s cleantech accelerator in 2013, which has supported over 750 companies to date; and entrepreneurship@UBC in 2013, which has built and funded cleantech startups like Acuva Technologies and Ecoation.
“What’s interesting is that in the last 10 years, I think each of those entities was focusing on a specific part of the ‘cleantech problem,’” LaMotte said. “Now we’re in the phase where we’re starting to say ‘Hey, we should be working together.’”
Cleantech startups now a flourishing species in BC
By the late 2010s, BC’s cleantech sector began to galvanize more attention. Companies were growing, and the province’s talent base was flourishing, employing over 16,300 in 2018.
At that time, several BC cleantech companies started reeling in a few big fish. In 2019, Squamish-based Carbon Engineering landed Microsoft founder Bill Gates as an investor in its $90 million equity financing round. General Fusion’s latest funding round totalling $166 million included participation from Amazon tycoon Jeff Bezos.
“There are a few [companies] that may get the spotlight a lot, but there are a significant number of up and comers that are getting real traction, not only with domestic adoption but on the global stage,” said Jackson.
Anchor firms Ballard and Westport gave rise to a strong alternative energy sub-sector, with companies including Corvus Energy, Hydrogen-in-Motion, and Loop Energy. Thanks to companies like Carbon Engineering and Svante, BC is also well-known in the carbon capture and sequestration space. Companies like Axine Water Technologies and Saltworks Technologies have also made water management and recycling a prosperous sub-sector in the province.
A problem of scale
While BC’s cleantech companies appear to be punching above their weight, local stakeholders who spoke with BetaKit indicated the sector is still experiencing its fair share of growing pains.
“You’ve got this passion for the environment, you’ve got the resources of innovation…coming together in this really heady mix that has a chance to build something very solid.”
– Kari LaMotte
The first problem, Winter noted, is that many BC cleantech firms are doing the majority of their business outside of the province. “That’s a real weakness we have,” he added.
According to Jackson, 80 percent of local companies look for a first customer outside of Canada, which she said ultimately disadvantages Canada’s ability to meet its climate targets. Winter noted that many younger cleantech startups often struggle to find a customer willing to take a risk on an unscaled product, particularly when those customers are older, risk-averse corporations.
“[These customers] are going to spend $100 million on something that’s already well tested out, and many of our small companies haven’t got to that scale,” Winter added.
The challenge of scaling local companies is not unique to the BC cleantech sector. In recent years, BC’s wider tech sector has rallied around the need for more scale-up support, lobbying the federal and provincial governments to bring the Ontario-focused Scale-Up Platform out west.
The provincial government has made recent attempts to address this gap, creating a $500 million InBC fund last year to help BC scale-ups and startups grow and stay in the province.
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The federal government has also played the role of financier for many BC cleantech companies. According to a 2019 report from KPMG, 73 percent of cleantech companies surveyed said they file SR&ED claims, with others relying on programs like IRAP and Sustainable Development Technology Canada to get funding.
CleanBC, a provincial government program aimed to promote the use of cleaner energy and reduce emissions, also helped spawn many other cleantech-related initiatives.
Last year, the province also created the Centre for Innovation and Clean Energy (CICE) to support the development and commercialization of cleantech in BC. This year, the province committed to providing one-time funding of $25 million in 2022-23 to support clean energy, tech investments, and partnership opportunities with the federal government.
The path to scaling a cleantech company is often far different from that of a typical SaaS or FinTech startup. Due to the high degree of research and development needed to get a solution off the ground, cleantech companies often require more funding before getting to market.
Jackson believes this has left many BC cleantech firms stuck on a hamster wheel of government grants. She said getting off that wheel and on a path to paying customers and steadier capital requires a “mindset shift.”
“We still think too small,” she said. “Compare it to an American cleantech company that gets $1 million to $2 million at their angel stage; we’re floating $250,000 and trying to leverage it with government.”
Another critical function of government is procurement. By using its buying power, the government can help companies find their first customer, validate their technology, and ease their entry into the market.
However, federal procurement is a longstanding challenge for the cleantech sector in BC and across the country. According to a 2019 report, revenues generated by federal procurement deals over the previous 11 years represented only 3.6 percent of what Canadian cleantech startups generated that year. The painpoint is one felt across a variety of sectors by Canadian startups.
Winter noted that the government’s historically risk-averse posture has made procurement an untenable path to growth for not only cleantech startups, but also startups in other sectors, such as healthtech. He said while the government’s desire to work with startups is there, procurement is still the “one thing” the government has never managed to get right.
“I think COVID has done one thing, and that is we’ve become more sensitive to the fact that … we need to make sure we get value from [essential] products by building them and distributing them here in Canada,” Winter said. “I think that governments have genuinely begun to understand that.”
Clustering BC’s cleantech sector
Ecosystem advocates that spoke with BetaKit indicated many of the roadblocks faced by cleantech startups stem from the fact that everyone is working in isolation. Some, like Jackson, believe a cluster approach could help BC’s cleantech sector tackle some of these complex roadblocks.
Jackson described a cluster as a geographically-specific critical mass of companies in a particular field that compete and cooperate, where knowledge is easily shared and common goals are advanced by a network of entrepreneurs, investors, and researchers.
“Once you, as a region, say ‘we want to build a cluster focused on this sector,’ it really sets the tone to attract international industry, academia, entrepreneurs, innovators, capital, and alignment on policy within that region, so that there’s a lot more collective collaboration and connectivity to accelerate the impact of that specific clustered sector,” Jackson said.
Jackson cited South Africa and the Netherlands as two countries that have successfully implemented a cluster collaboration model. The Canadian government has also taken a nationwide clustering approach through its Innovation Superclusters Initiative. Of course, the Silicon Valley tech cluster is a model that led to much success.
Over the last two years, Foresight has worked with the federal government, the BC government, and Vancity on a cleantech cluster strategy for BC, aimed to accelerate the growth of the province’s cleantech sector.
Jackson said the strategy involves launching a series of regional cleantech clusters that would look to fill some of the ecosystem’s existing gaps and facilitate wider collaboration between startups, government, academia, and industry. Though the overall strategy is still being worked out by the initiative’s partners, Jackson said she hopes to launch the first three cleantech-focused innovation clusters in the spring of 2023.
“Holy crap, this is real. We need to take action.”
The province-wide push to elevate its cleantech sector is not purely driven by economic prosperity. “Living in BC, it’s very hard to get away from nature,” said LaMotte. “We’ve got mountains and forests and water. When things aren’t quite right there, we know it, we feel it.”
In June of last year, a record-breaking heatwave blanketed much of the province. Temperatures exceeded 50 degrees Celsius (the highest ever recorded in Canada), leading to nearly 600 deaths. The summer that followed was ripe with devastating forest fires that razed over 8,600 square kilometres of land.
In the fall, a series of atmosphere rivers inundated the west coast with widespread flooding, severely damaging highways, bridges, and other infrastructure. Finally, in the winter, an Arctic outflow pierced the Pacific Northwest, plummeting temperatures to rare lows.
All of these disasters have been linked to climate change, and Jackson noted this has heightened the sense of urgency across the province. “More people are saying: ‘Holy crap, this is real. We need to take action,’” she added.
At a time when the forces of climate change are already having a profound impact, BC’s cleantech community believes the time to build an ecosystem of world-class startups that accelerates the transition to a cleaner future is now.
Feature image source: General Fusion.