Every few years, pundits claim the green sector is the place to be for growth-hungry entrepreneurs. Then the economy slides and environmental concerns wither — as does political and public support — before the cycle begins again. Which is why many smart minds suggest the area to target isn’t green tech but cleantech: dramatically cleaner processes for, say, managing power grids or industrial water use.
“Cleantech is about doing more with less, which increases the economic return,” says Nicholas Parker, a Canadian venture capitalist who coined the term and co-founded San Francisco-based Cleantech Group LLC around the concept.
Take water. From dialysis treatments to heavy manufacturing, ultra-pure water is a necessity just about everywhere. “Assembling electronic parts now requires water 15 times as pure as was needed just a few years ago, to ensure that no dissolved elements sabotage their workings,” says Neil Berlant, Los Angeles-based portfolio manager of PWF Water Fund. Firms such as Oakville, Ont.-based Zenon Environmental and Trojan Technologies of London, Ont. have already given Canada a reputation in this space. And opportunities abound for better and more specialized cleaning membranes and filters for everything from industrial to home use.
They also exist to take knowledge from operating — and detecting leaks from — oil and gas pipelines and apply it to water systems. Historically, water has been so cheap that the cost of leaks was trivial. But dozens of cities are now hiking rates sharply to pay for the hefty cost of servicing sprawling suburbs or replacing decrepit pipes in older districts. And rates will rise even further as climate change shrinks water supplies and makes them less predictable, spurring demand for technologies to limit seepage losses that range from 20% to 80%. The U.S. Environmental Protection Agency estimates the global cost from 1995 to 2030 to upgrade the world’s water infrastructure at a stunning US$22.6 trillion.
Alberta’s oil-sands producers, which use vast quantities of steam to force the oil out of the ground, are another major cleantech prospect. Ashortage of permits to draw water from the Athabasca River has created a huge need for new methods to recycle water or use less of it, says Rick Whittaker, vice-president of investments at Ottawa-based Sustainable Development Technology Canada. “Creative entrepreneurs with interesting technologies and products are getting margins of 20% to 25%.”
This notion of transferring know-how from other fields to cleantech runs through the sector. For example, says Parker, “the East Coast’s expertise in offshore oil rigs could easily be applied to offshore wind farms.”
Besides renewables, the big trend in energy is “smart grids”: technologies such as two-way communications that make power transmission and distribution more cost-efficient and reliable. Consider a food-processing plant with acres of processing machines and refrigerators. The latter might cycle on a set schedule of one hour off, then 15 minutes on. But as utilities start charging by peak demand rather than total usage, the plant could save big if its refrigerators came on when power demand from its processing machines was at its lowest, such as before workers start in the morning. While the systems needed to do this aren’t brand new, says Whittaker, “the big opportunities lie in making them easier to install and making them work seamlessly with little hands-on management.”
Parker points to another ripe area for crossovers: the “electrification” of transportation. He advises building on Canada’s knowledge of power generation and storage — thanks to our fuel-cell expertise — to make high-powered batteries. And John Ruffolo, leader of Deloitte Canada’s technology practice, says that, though most firms in this sector are still early stage, “their top lines are growing like crazy.”