Cleantech spending crucial, study says

Ontario companies produce some of the best technologies in the world for greening electricity, reducing waste and cleaning up water, but bringing these products to a global market will require up to $1.2 billion in investment over the next three to five years, according to a study released yesterday.

Where will this still-maturing sector find that kind of cash, particularly in a risk-adverse marketplace where capital is drying up and competition south of the border seems to get first dibs?

“We need something to prime the pump,” said Céline Bak, a partner with Russell-Mitchell Group Inc., an Ottawa-based management consulting firm and author of the study, the first of its kind looking into the size and make-up of Ontario’s budding “cleantech” scene.

The study argues that provincial and municipal governments can play a crucial role by establishing “made-in-Ontario” procurement strategies that would showcase local clean technology products and boost investor and customer confidence.

“What companies really need are orders,” said Bak, adding that such a strategy would take government procurement beyond one-off demonstration projects to more wide-scale deployment.

“The opportunity for Ontario’s clean technology companies to compete on a global level has never been more attractive,” according to the report. “At the same time, Ontario’s clean technology companies face intensifying foreign competition, as Ontario, itself, competes with other jurisdictions to attract investment in clean technology businesses.”

Kevin Jones, president of the Ontario Centre for Environmental Technology Advancement, which co-researched the report, cited the measures that individual U.S. states are taking to support their local cleantech markets and create jobs at home.

Their efforts will be further bolstered by the Obama administration’s economic stimulus package, which has committed tens of billions of dollars toward cleantech spending. As it is, U.S. cleantech companies already spend two to three times more on product commercialization than Ontario companies. Meanwhile, the average size of late-stage venture capital financings for U.S. companies is nearly seven times higher.

“They’re taking bold measures, bold steps through government policy and regulations to help grow their industries, and we have to do the same,” said Jones.

The report identified 110 cleantech companies in Ontario, nearly half of which are based in the Greater Toronto Area. They’re mostly small private companies with minimal, if any, revenues, and 55 per cent of them are led by first-time chief executives. Most lack executives experienced in product management, marketing, government relations and sales.

Jones said a lack of capital is part of the reason Ontario cleantech companies can’t hire seasoned executives, and as a result can’t jump to the next level of product commercialization.

“Unless you have those abilities in sales and marketing, product management, strategy, you’re not going to be able to grow that business, create jobs and attract that investment.”

Much of the analysis in the report was based on interviews with the CEOs of 31 cleantech companies, including Toronto-area firms Morgan Solar, 6N Silicon, EnviroTower, Fifth Light Technology, and Regen Energy. Sponsors include Sustainable Development Technology Canada and the Ontario Ministry of Research and Innovation.

Bak said the motivation for the study was to prevent Ontario’s cleantech sector from becoming a research and development farm for U.S.-based companies. She saw it happen already in the information and technology sector. “We just don’t want to see this happening again in cleantech.”

John Wilkinson, Ontario’s minister of research and innovation, said he supports the idea of government becoming an early adopter as a way to kick-start the sector and has pushed to have government procurement part of the upcoming Green Energy Act and provincial budget.

“Given the impetus coming from President Obama, we have the opportunity here to surf their wave,” said Wilkinson.

“The good news is we have a number of burgeoning cleantech companies that have globally significant products.”

Wilkinson said he’s travelling to San Francisco next week for a major cleantech conference, where he’ll be holding some key meetings aimed at promoting local firms.