Cleantech is a trillion-dollar global industry, and it’s expected to surpass $2.5 trillion by 2022. Today, Canada is a global leader in cleantech innovation and commercialization, ranking number 1 and number 16, respectively. There are opportunities for Canada to go further; the global export market for cleantech products and services is $1.15 trillion. There is a massive opportunity for Canada to become a global market leader. One of the biggest challenges is that while Canada has an impressive talent for developing cleantech, it lags behind other countries when it comes to commercializing cleantech and bringing it to market.
- Cleantech investments are heating up again. Global investment into cleantech doubled between 2005 and 2007 before the market cooled down. Meanwhile, over half of the $25 billion that flowed into the industry between 2006 and 2011 was eventually lost. In the past couple of years, private capital has turned its attention back to the cleantech sector. Meanwhile, there have been headline-grabbing investments into cleantech that demonstrate the industry has regained its lustre.
- Direction of funds has shifted. After the cleantech market cooled following the Great Recession, the direction of cleantech investments has shifted. Over the past decade, $8 billion has flowed into “Renewable Power Development”, which Cambridge Associates defines as the “financing, management, operation, and ownership of clean power generation projects” while only $0.1 billion has been invested in “Renewable Power Manufacturing”.
- Clean energy venture funds are emerging, and they are focused on the value chain. In 2019, Clean Energy Ventures announced that it had raised $110 million for a fund focused on providing seed and early-stage investment capital for cleantech companies. This represents a departure from the status quo – 72.5 percent of capital invested in clean tech goes towards late-stage companies. They plan to do this by focusing on companies that want to improve existing companies (e.g. providing a better material for automakers) than disrupt entire industries (e.g. re-thinking the auto manufacturing industry.
- Focus on streamlining downstream processes. After a VC-funded cleantech bubble between 2006 and 2011, VCs have shied away from the high capital costs and low ROI of the industry. The cooling period is ending. Today, private capital is turning its attention back to cleantech, but this time it’s shifting its focus from hardware intensive, deep technology investments to downstream tools that simplify clean energy processes and data management.
- Build relationships with incumbents. Energy industry incumbents offer the best market and support for disruptive clean energy companies. They become these startups’ first customers by helping them streamline their current business practices. Developing a relationship with incumbents can also serve as an attractive feature to investors who want to know there are potential companies interested in acquiring the startup.
Watch out for
Companies that quantify the data needed to ensure carbon trading and inform future innovations in deep technology. Radicle Balance in Alberta offers one of the world’s first software platforms to measure, qualify, and aggregate greenhouse gas emissions. Companies like this will serve as the foundation for future commercialization of Canada’s cleantech innovations.