With the United States launching a full-court press to fuel green energy growth south of the border, the co-founder of a rising Ottawa cleantech firm hopes new incentives announced in the 2023 federal budget help trigger the development of more companies like hers in Canada.
In the government’s spending plan released Tuesday, the feds outlined plans to pour nearly $21 billion in fresh money into spurring growth in the “clean economy.”
The measures include more than $16 billion in tax credits over the next five years for cleantech manufacturing; clean electricity such as wind, solar, hydro, tidal and nuclear; and investments in clean hydrogen production.
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The federal Liberals also pledged to boost the $4.1 billion in tax credits for carbon capture, utilization and storage projects announced last year by an additional $520 million. Meanwhile, Finance Minister Chrystia Freeland’s budget document included a $500-million top-up to the government’s Strategic Innovation Fund over the next 10 years to support the development of additional clean technologies.
Heather Ward, co-founder and president of Ottawa-based Hyperion Global Energy, says the Liberal’s new green investments are a “strategic response” to the U.S. Inflation Reduction Act, which the U.S. Congress passed last August.
The legislation contains an estimated US$369 billion in clean growth incentives for U.S. industries.
Tuesday’s federal budget document says Canadian companies stand to benefit as the act triggers a tidal wave of new public and private investment in green technologies that could bring new opportunities to suppliers on this side of the 49th parallel.
But the budget document also notes that the U.S. legislation puts pressure on foreign governments to respond.
“Canada has all of the fundamentals required to build one of the strongest clean economies in the world,” the document says. “However, without swift action, the sheer scale of U.S. incentives will undermine Canada’s ability to attract the investments needed to establish Canada as a leader in the growing and highly competitive global clean economy. If Canada does not keep pace, we will be left behind.”
Ward’s company is pioneering an energy-efficient process to convert waste carbon dioxide into minerals that can be used in everything from toothpaste to building materials. The firm has raised more than $2 million in seed capital so far from backers such as Shopify CEO Tobi Lütke’s Thistledown Capital, which finances decarbonization solutions.
Ward applauds the new tax credits, saying they’ll help unleash “critical cash flow” for fledgling Canadian cleantech enterprises like Hyperion.
“These kinds of tax credits are very advantageous for us to get our technology off the ground and get it to market,” she explains, pegging global demand for minerals like those produced by Hyperion at US$44 billion annually.
The budget proposes a refundable tax credit equal to 30 per cent of the cost of new machinery and equipment needed to manufacture clean technology and process, extract or recycle “key critical minerals.”
The new incentive, which is expected to cost the government up to $4.5 billion over the next five years, is music to the ears of Ward, who says it could be a key to retaining Canadian startups that otherwise might have left for greener pastures in the U.S.
“It becomes easier to stay in Canada,” she says. “We are pretty determined to stay in Canada and to continue to manufacture in Canada, so this really tells us that there will be significant support available here.”
Peter McArthur, RBC’s Ottawa-based national cleantech lead, says the new tax credits will help reduce capital costs for growing enterprises like Ward’s, smoothing their path to global markets.
“It’s a huge step forward,” says McArthur. “In 2017, the cleantech sector was ecstatic when a billion dollars was directed toward cleantech (in the federal budget). In this budget, you’ve got $21 billion. That’s pretty darn transformative.”
According to the budget document, the International Energy Agency estimates the global market for clean technology manufacturing alone will triple by 2030, to US$650 billion per year. Ward, whose firm uses local contractors such as Smiths Falls-based Kilmarnock Enterprise to manufacture and commission its modular system, says spurring green technology growth will generate spinoff effects across the entire Canadian economy.
“Because of COVID, we did largely try to stay in our own backyard, but now that’s actually becoming part of our commitment to reinvesting back in our community,” she says. “We have everything we need here in Canada. There is kind of a domestic manufacturing renaissance that’s happened since COVID. I think you’re going to see more domestic supply chains being built out.”
Still, McArthur says more could be done. He says future budgets must have “broader parameters” for technology that qualifies for federal support.
While the budget document suggests that projects “storing CO2 in concrete” are eligible for the expanded carbon capture credits, for example, McArthur says the government should open the door for emerging technologies to be covered as well – something that’s not spelled out in the current spending plan.
“Innovative technologies aren’t as well captured by this budget,” he says. “There’s still room for improvement.”
Veteran Ottawa cleantech entrepreneur Devashish Paul agrees that encouraging green innovation is laudable. But he says the government also needs stronger policies to encourage organizations such as transportation companies to adopt electric power and other environmentally friendly technologies.
“There’s a lot of stuff that has to be done to basically onboard these green technologies into the economy,” says Paul, the founder and CEO of green energy monitoring firm BluWave-ai.
“Otherwise, I think what’s going to happen is all the naysayers, they’ll say, ‘I told you so.’ You’ll spend all this money and it won’t be properly utilized.”
At the same time, Paul applauds measures such as the additional money for the Strategic Innovation Fund, which has helped BluWave expand to more than 40 employees and land contracts around the world.
“We’re trying to build Canada-based world champions,” Paul says. “The path to do that is having access to capital to scale our companies. At the end of the day, Bay Street can’t compete with Wall Street. These (funds) are helpful to get Canadian innovation deployed around the world, for sure.”