How fintech Is disrupting Canadian clean energy: insights from RadicleFinTech
The world’s population has acquired a taste for carbon-fuelled living. Convincing it to live otherwise is a tricky undertaking. But it’s essential for addressing long-term climate change according to one company in Alberta.
“Energy producers are just meeting consumer demand,” says Andy Harris, Director of Strategic Engagement at Radicle. “This means there needs to be a shift in consumer behaviour to reduce demand.”
To some, this may sound like a pipe dream. While 65 percent of consumers express interest in buying “purpose-driven brands” only 26 percent of them put their money where their mouth is. Meanwhile, environmentally conscious individuals aren’t necessarily abandoning environmentally-unfriendly activities – they’re just looking for ways to mitigate their impact.
An illustrative example is the number of millennials trying to balance their love of travel by using micro sustainable travel tactics such as picking an environmentally conscious airline, travelling light, or buying carbon offsets.
“Companies exist to be profitable,” explains Harris. “So if energy producers are to change ahead of consumers, who account for some 85 percent of emissions, they need incentives.”
How fintech can disrupt the Canadian clean energy industry
Fintech sounds like an unlikely partner to the cleantech industry. When people think of cleantech, they imagine deep technology investments into hardware like solar panels or wind farms. While these technologies play an important role in the widespread adoption of cleantech, they are capital intensive.
This creates a persistent problem for Canadian cleantech innovators and entrepreneurs: inconsistent investment from venture capitalists whose model makes it difficult for them to understand how long they’ll have to wait for returns within self-imposed deadlines or how to measure the returns with metrics in addition to dollars.
A fintech and cleantech partnership could also help Canadians generate electricity closer to home. Decentralized energy has long been considered a promising, if elusive, dream not just in Canada, but around the world. Microgrids can allow localized energy producers to meet local needs and preserve energy for high-demand days and ensure more reliable power in the event of extreme weather.
A few key elements stand in the way of these disruptions: information. The backend of today’s energy industry is slowly moving away from a tangle of centralized processes. If we’re to re-imagine the energy industry at a large scale, there needs to be real-time information available to support local decision-making
Consider the case of carbon offsets. If companies and people wish to purchase carbon offsets to mitigate their emissions that aren’t economically reduced by technology (or sell carbon offsets when they reduce CO2 emissions) they need access to reliable, real-time information.
“Where eligible, producers capture data for emission reductions, verify that data, allow it to be audited by a third party, and then have it ‘converted’: One ton of CO2 emission reduced equals one carbon credit,” explains Harris.
The incentives can extend beyond the commercial world to the consumer world, too. Today, consumers are educated about everything from their fitness to their finances using apps on their phones. At the same time, they have a limited understanding of where their power comes from, why it costs as much as it does, and what they can do to offset or reduce those costs.
The problem is that there are limited mechanisms for collecting, interpreting, and visualizing energy data in a consumer-friendly way. If there were – and it’s certainly possible – there would be countless exciting possibilities.
“Today, you have apps or software that tell you how much you’re spending or where to find deals,” says Harris. “Imagine having real-time information about what your own power consumption is and when or how you offset unavoidable emissions. This is available.”
Using financial data as the jumping off point for future innovation
This is what Radicle is aiming to do on a large scale for companies. Founded in 2008, Radicle developed one of the world’s first software platforms to measure, qualify, and aggregate greenhouse gas emissions. This helps deliver two of the key ingredients for Canada’s energy future: trust and hard data.
If companies and investors have the financial data to properly price and understand the value of carbon offsets or data-driven innovations, they can use this information to support future investment decisions and generate revenue, to help pay for emission reducing technologies, or in anticipation of more capital-intensive, deep technology investments.
One of the reasons investor interest in the cleantech industry fizzled after the great recession is that companies didn’t understand the financial models and timeframes around cleantech investment.
Fintech-enabled cleantech platforms, like Radicle, can help provide the data that backs up good work.
“Sustainability needs to be profitable and vice versa. With carbon offset revenue, finance can be generated to support business’ shift towards planet-positive solutions or an increasingly de-carbonized way,” explains Harris. “We talk about balance and call ourselves Radicle Balance because we truly believe the balance between being profitable and being sustainable is possible.
The more profitable you are, the more sustainable you can afford to be, and the more you must share that knowledge with others to affect further change.”
Learn more about how Radicle is simplifying the data collection and management process for clean tech innovation and investment on their website.