What it will take to speed up cleantech development

Photo illustration by Kelvin Li

To take new climate solutions from the lab out into the world can take hundreds of millions of dollars in investment. But as the pressure intensifies to hit our climate targets, the rapid commercialization of clean technologies is critical. On this special bonus episode, guest host Lara Torvi sits down with cleantech investor Susan Rohac to discuss the opportunities and challenges Canada faces to commercialize climate technologies at full scale.

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Susan Rohac: Unfortunately, CO2 is an odourless, colourless gas, so it’s really hard to see it as the enemy. If it was some green, smelly gas, we’d all be 100 percent aligned and we wouldn’t have a CO2 problem.

Lara Torvi: Susan Rohac is trying to combat the effect of that invisible gas, by helping companies scale climate technologies. She’s VP of the Cleantech Practice at BDC, the Business Development Bank of Canada. That means, she knows a lot about the business of saving the planet. Now when scaling a startup, speed is critical; you need to move fast. But when it comes to ventures that are working to avert the worst effects of a warming climate, it’s even more urgent.

Susan Rohac: I think the next few years are critically important. We have the right technologies and innovation now, to have significant impact if they were commercialized. So it’s just a matter now of rallying the right people, the right money and the right policies to make sure that the commercialization happens.

Lara Torvi: Having a solution is one thing. But without customers, even the greatest and greenest solutions ever invented won’t have much of an impact. And many of the technologies we need to solve for net zero aren’t yet on the market. To take them from the lab to the real world takes both time, and money. The multi-billion dollar question is: how can we speed that up?

I’m Lara Torvi, a producer at Solve for X: Innovations to Save the Planet and this week I’m filling in for host Manjula Selvarajah. On this podcast, we explore the latest ideas in tech and science that could help us tackle climate change. But I was curious to find out more about the element that’s absolutely crucial in bringing those ideas to fruition: money.

Cleantech is going to be a huge industry. According to the International Energy Agency, the size of the global market for cleantech will surpass the oil market, rising to $870 billion by 2030. But it’s not there yet. To develop a product that could capture a small slice of that market — whether that’s a new method of generating energy or building a more efficient battery — takes a lot of investment. You want to make sure you are picking winners.  I reached Susan at her home in Ottawa to talk about what it will take for Canada to succeed and how she places her bets.

Lara Torvi: Ok great! Well thank you so much for doing this, Susan. BDC has invested more than $500 million in cleantech companies. Tell me, what do you look for when trying to predict who might be successful?

Susan Rohac: Hi Lara. There’s a lot of challenges for cleantech ventures to scale, and we want to support the ones that we think have the most likely chance of success. And so cleantech firms (like every other startup) need a solid business plan; but cleantech companies have some unique challenges that make it a little bit more difficult to invest in. Most of these technologies are very capital intensive; to go from the lab, to demo, to full scale, takes hundreds of million dollars for some of these technologies. And the other thing is, it’s a long gestation; the time from when this is an idea in a lab, to full-scale commercialization can take many, many years. And if you combine this with policy and regulatory and market barriers, you see that it becomes less and less attractive for a traditional venture capital model to invest in these types of companies; and you combine that now with what’s going on in the market with respect to supply chain disruptions and talent shortages, and it is difficult to pick which companies are going to be able to succeed. So what we look at is, we look at companies that have a GHG impactful technology. They have the right business plan, the right management team; have been able to prove their technology — even at the demo or early stage. And then the key to what we do in our fund is, we support those companies all the way along their growth projectory. So it’s very important that we invest early in these companies and to continue to invest in them, because they will need follow-on money as they continue to grow and scale.

Lara Torvi: Now, clean technology spans so many areas, from water to battery technologies. Which ones do you think should be more of a priority in the next five to 10 years?

Susan Rohac: So if I look at our portfolio of companies — which is almost 50 companies now — there’s some amazing technologies in there that are reducing the carbon intensity of so many things. So the way we build our homes, the way we heat our homes, the way we grow our food, the way we eat our food, the way we drive and move around; and the way we work and the products we buy. There’s so many different types of technologies and I think all of them have to be commercialized for us to be able to hit our targets. I think Canada has the ability to win in the battery space. We’ve got some interesting long duration battery technologies, as well as other battery technologies that are scaling now — so that’s an exciting area that we’re investing in. The worldwide demand for hydrogen is increasing and the global markets could reach 11 trillion by 2050. And Canada has all the ingredients necessary to be competitive in this space. For example — for the production of green hydrogen — we’re a country that’s rich in water and electricity, two of the ingredients that go into making green hydrogen. For the production of blue hydrogen, we also have an abundant amount of natural gas and we’re a global leader in carbon capture technologies like Svante. I also think Canada has a role to play in (what I call) is the plate of the future. I think our protein and our food sources are going to look very different. Canada is a trusted global player in the food sector and we have the ability to commercialize and bring to the world really interesting alternative proteins that are much lower GHG than our traditional meats that we’ve been eating for many years.

Lara Torvi: Right, that’s so interesting — the connection between food and emissions isn’t always obvious. I’m curious, why is food such an important area when it comes to tackling climate?

Susan Rohac: There’s a statistic I read recently that it takes 100 calories of grain to feed a cow to get three calories of beef. That’s just not sustainable. It’s not a good use of our grain to be having what I call “the middle man” in the cow. So how can we develop alternative plant based proteins that reduce the amount of carbon, and are probably healthier for Canadians as well. I think that’s an interesting space and there’s lots of really interesting companies in Canada working on that. We have a portfolio company called Mara Renewables based out of Nova Scotia that has technology that can produce omega-3 fatty acids out of a microalgae, at a really cost effective and low GHG manner. We also have a portfolio company, NobleGen — that’s based out of Ontario — that’s using a microorganism called Euglena to produce nutrient rich ingredients with minimal processing, no genetic modification. And this is being done at industrial scale in a real cost effective manner. So replacing traditional food ingredients like meat and palm oils — that have a high carbon footprint — are in sight.

Lara Torvi: So what would you like to see more of in Canada when it comes to either the solutions or the market?

Susan Rohac: So it’s funny because we have seen record-breaking investment in cleantech globally, but believe it or not, cleantech only represents about 14 percent of all the global VC dollars. And in Canada it only represents about 5 percent of the VC dollars flowing into cleantech. It still is a small percentage of the overall venture capital that is being deployed. The debt players are there — there’s not many of them — but they’re there. But what seems to be missing in the gap right now in the Canadian market is the project equity; so I would like to see that there’s more project equity in the future. I think there’s a lot of companies that have (what I would consider) “shovel-ready projects” and “shovel-ready technologies.” And it would be a shame if we see these Canadian companies go to foreign soil to build out their first commercial-scale plants because of the lack of capital in Canada.

So we still have to figure out that piece of the puzzle as Canadians; how can we make sure that these full scale commercial plants are built on our soil and make sure that investors are rewarded for stepping up and investing in this space.

Many of these technologies are going to take huge amounts of dollars — for some of them that are (what I call) capital-intensive clean tech. We’re very good at developing the technologies and supporting these companies through commercialization — but we’ve got to make sure, as a nation, we are there at the table to invest in the projects at the project level. And there’s just very few people in Canada writing these big $25-million to a $100-million cheque sizes; and really that’s what it’s going to take to commercialize some of these at full scale.

Lara Torvi: I was surprised by Susan’s statement that only 5 percent of VC funding goes to cleantech — that’s super low, so much progress is needed. So I double-checked it, and unfortunately it’s not an understatement; cleantech is dwarfed by investment into finance, software and health tech. But it’s estimated that the transition to net zero will require a global investment of over $100 trillion. I asked Susan if we might start to see a ramp up of climate investment here in Canada. Here’s what she had to say.

Susan Rohac: So despite Canada, and quite frankly cleantech in general, not getting its fair share of cleantech investment dollars,  I think we’re going to see that slowly climb over the next couple of years. I know in Canada for every dollar that we’ve invested, $6 of private sector investment has come in at the same time as us or after us; that’s over $2.7 billion coming in after us or with us since 2018, into our portfolio companies. And so the companies (I think) that are going to succeed in raising this money are very broad and very diverse. Everything we talked about from the food and ag-space, to hydrogen; but carbon capture and battery technologies and electrification, advanced materials, bioplastics. All of these technologies are needed for us to get to our net zero commitment. So you’re going to see more countries and more large corporations needing to commercialize these types of technologies; and therefore you’re going to see the VCs invest in them because the markets will be there to adopt them and buy from them. So, Canada’s proving out to be a great place to invest and grow these companies.

Lara Torvi: So I’m just thinking about the fact that in the US, the climate plan is quite a mess. What does that mean for Canadian companies who are looking for global expansion? Are they looking elsewhere?

Susan Rohac: They are looking for global expansion. The good news is that — even though as a broad statement, the U.S. might be a mess — there are some states that are really getting it, and they’re very large. For example California, same size as Canada, is a great market for clean tech companies. They’ve got a really strategic plan on how to change to renewables and how to conserve water. Even though things in the U.S. are difficult, there’s still opportunities there in certain states and we’re seeing our companies make inroads.

Lara Torvi: So, I’m curious. You spend your days researching the latest clean technologies and exploring the impact of potential solutions. How does that affect you? Does it change the way you live your life? 

Susan Rohac: It does. It absolutely changes the way I live my life. I just bought my first full electric vehicle this fall and I’m loving it! And you know, that was certainly based off of some of the data and research that I’ve done in my job. My family and I are also vegetarians; you know you can cut 70 percent of your household carbon out by just being a vegetarian. So we are vegetarians, we do drive an electric car, and we examine our choices before we consume something or purchase something very carefully. I think we’ve always been conscious of that; but now that I’m exposed to what’s going on in the world and how important of an issue this is, it’s even augmented more.

Lara Torvi: So you look at these incredible innovations everyday, but how realistic do you think it is that we will hit our net-zero targets?

Susan Rohac: I am an optimistic person and I do think Canada can and will get to a net zero target. I think we’re going to get there in time — because there’s enough nations and enough corporate companies that feel the pressure that they have to hit the targets that they’ve set. And we are starting to see some of our technologies roll out at full scale. For example, another portfolio company called Hydrostor — it’s a long-duration battery technology — right now is building a full-scale plant in California and was able to receive significant project equity financing from Goldman Sachs. So these technologies (I’m picking out one but I can probably give you four or five other examples), the technologies that are going to help us get to a clear net-zero path are able to get the funding, it just takes a little bit longer than we anticipated.

Not sure we’ll get there by the date that we want, but I think we will definitely get there. It’s going to take not only the commercialization of many of the existing innovations and technologies that are right now being developed, but it’ll also take really good policy and regulatory framework to make sure that people are encouraged to continue to do the right thing and invest in this space.

Lara Torvi: I wish we had another half an hour, thank you so much for your time Susan.

The Mission from MaRS initiative was created to help scale carbon reducing innovations by working to remove the barriers to adopting new technology. Mission from MaRS thanks its founding partners, HSBC, Trottier Family Foundation, RBC Tech for Nature and Thistledown Foundation. It has also received generous support from Peter Gilligan Foundation, BDC, EDC and Mitsubishi Corporation Americas.

Learn more about the program at missionfrommars.ca.