Evidence of meeting #42 for Industry, Science and Technology in the 39th Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was funding.
Associate Vice-President, Research, University of British Columbia
I would like it looked at in a more realistic way. It isn't that suddenly the genome research is free. It still hurts, and it's a federally funded process. Why not be consistent? That's my concern.
Conservative
The Chair Conservative James Rajotte
Okay. I appreciate that.
I'm sorry to end this excellent discussion. I want to thank you all for your time and your presentations. If there is anything further you'd like to submit to the committee, please do so and we will ensure that all the members get it. We will look at hopefully coming back again. It's been a very good visit.
We will suspend temporarily, members. I know that three of you have to catch a flight. Then we will bring the second panel forward and resume.
Thank you.
Conservative
The Chair Conservative James Rajotte
I'll call the second panel to order. I'll ask members and witnesses to take their seats for the second panel.
Again, it is a very tight timeline. We have an hour for both presentation and discussion. We have three organizations presenting here. First of all, from ASL Environmental Sciences Inc., we have the president, Mr. David Fissel. Second, from Day4 Energy Inc., we have the chairman and CEO, Dr. John S. MacDonald. The third organization is Hydrogen & Fuel Cells Canada. We have the president and CEO, Mr. John Tak, and the manager of the hydrogen highway project, Mr. Gary Schubak. Welcome.
We will allow up to five minutes for an opening presentation from each organization. We'll start with you, Mr. Fissel, and then we'll go to Dr. MacDonald and Mr. Tak, and then we'll go to questions from members.
Okay.
David Fissel President, ASL Environmental Sciences Inc.
Mr. Chairman and members of the committee, thank you for the opportunity to speak to you today.
I'd like to raise three issues that are important to Canadian small and medium-sized enterprises, SMEs, in the science and technology area, such as my own company, ASL Environmental Sciences, of Victoria, B.C.
Science-based SMEs represent the great majority of companies conducting research and development in Canada. In my industry sector of ocean science and technology, our companies are well established, very active in global markets, and focused on particular science and engineering niches.
Ocean high-tech companies in British Columbia provide a very substantial contribution to our economy, with annual revenues of $1.1 billion and total employment of nearly 5,500 people in this province. This science sector represents about 10% of the total economic activity of the ocean and marine sector in B.C., accounting for annual economic activity of $11.6 billion per year.
To be globally competitive, ocean high-tech companies are continually developing products and services. Science and technology SMEs represent a vital conduit for development and commercialization of Canadian research, whether conducted in universities, such as the VENUS and NEPTUNE projects at the University of Victoria, or government labs, or in their own in-house R and D programs. SMEs have greatly benefited from the major funding program of scientific research and experimental development--SR&ED--and tax credits provided by the Canadian government, supplemented by British Columbia and other provinces.
The SR&ED program was recently improved in the 2008 budget through raised expenditure and revenue ceilings, yet more needs to be done. Specifically, the administration of the SR&ED program should be improved by simplifying and expanding the eligibility of qualifying activities, reducing processing time for claims, and expanding the awareness of SR&EDs among start-up companies, which often do not fully utilize this very important program.
Bringing new science-based products to global markets requires considerable funding for the later stages of R and D. While most other developed countries provide a strategic first-adopter market and/or direct funding for such development activities, Canada is rarely an early client and no longer provides funding for the later stages of R and D since the demise of NRC's IRAP pre-commercialization program in 2005. A replacement program is urgently required to provide partial funding to supplement company investment, with the funding being fully repayable starting when the products reach the marketplace.
The second issue is that we have an extraordinary new opportunity in the combined economic, environmental, and energy wins offered by renewable ocean energy. We anticipate that as much as 5% to 10% of Canada's electricity can be generated from ocean and river currents and ocean waves, representing a very substantial new source of green energy. However, a considerable amount of science and technology must be developed and tested, which will require 10 to 20 years and very large funding investment.
Canadian resources and approaches to date give us the prospect of making Canada a world leader in commercializing this important new technology and power production opportunity, with enormous world markets. To be successful, government programs are required for funding of prototype intercomparison sites for testing new technologies and providing funding assistance for R and D, as I have already mentioned.
If we are to realize the economic opportunities, it is critical that all governments come together with ratepayers to create the early marketplace for marine energy by providing higher green-premium rates for energy delivered to the electrical grid during this extended development period.
Finally, I'd like to raise one more issue, the issue of delays in the regulatory process for new ocean and river energy projects in Canada, whether renewable or non-renewable. Over the past 15 years, cutbacks have reduced the science-based capacity of Canada's major line departments, including the Departments of Fisheries and Oceans, Environment, and Natural Resources. The regulatory review of new developments is a science-based process, but the diminished scientific capacity in the government departments can delay or stop important new energy developments. More funding, focused on expanding the science capacity of the line government departments, is urgently required.
Conservative
The Chair Conservative James Rajotte
Thank you very much, Mr. Fissel.
We'll go now to Mr. MacDonald, please.
Dr. John MacDonald Chairman and Chief Executive Officer, Day4 Energy Inc.
Good afternoon. Thanks for the opportunity to talk to you.
I'll tell you a little about Day4 Energy to begin with, and then make some other comments.
We're in the business of manufacturing a new type of solar panel. It performs better and opens the door to new innovations in that field. We're evolving into a supplier of solar electric generation systems. The technology is a new way of interconnecting two photovoltaic cells to make a marked improvement in the performance of the panel. But more importantly, this technology also allows us to take the next step in cell design to make the cells perform better.
The company's major objective is to move solar energy toward cost parity with the grid. This is an important issue, because, as we all know here, we are now living in what will become known as the energy century. Human beings will change the way they generate the energy that sits at the basis of their economy.
We started in 2002. We began this year with a capacity of 12 megawatts annual output. We will be at 40 megawatts by the middle of July, and at 90 megawatts by the end of the year. We're sold out for this year.
Our major market is in Europe, with 90% of our business there, dominated by Germany. We already have an order booked with 55 megawatts for 2009, and one for 66 megawatts in 2010. The company is obviously growing very fast.
Since I joined the renewable energy business--I came from aerospace, as some of you may know--I've learned that here in British Columbia we have a very strong knowledge base in renewable energy, but it's all located in pretty small companies. Zantrex, Carmanah, and Day4 are the big ones. The rest are pretty small. If you look at renewable energy and the markets that'll be created for it, I think it's a huge opportunity for Canada. We can discuss ways the government can influence that during the question period.
I have been for around a while, as most of you probably know. I served on almost all of the science and technology advisory gizmos that various governments have dreamed up over the years--mostly during the Trudeau and Mulroney administrations. I gave up in the early nineties, saying “I've done my bit, and nobody listens anyway”.
I saw some good policies come, and I also saw them go. I saw some schemes that were good, and some that weren't. I saw some good ones get wrecked, and I saw some not-so-good ones persist. They change names every once in a while.
I'm an engineer by training, and over the years I've learned that Canadians are the best engineers in the world. I think the reason for it is that our resources are so small. You have to be clever to do anything with small resources. But as a group of people, our ability to exploit that talent is dismal. We don't seem to be able to generate much wealth from the wonderful things we can do.
With that, I pass the floor back to you.
Conservative
The Chair Conservative James Rajotte
Thank you very much, Mr. MacDonald.
We'll go now to Mr. Tak. I understand Mr. Tak has a presentation. Mr. Schubak has a presentation as well. I incorrectly put them in the same organization, but they were invited separately.
Mr. Tak.
John Tak President and Chief Executive Officer, Hydrogen and Fuel Cells Canada
Thank you very much, and thank you for the invitation to speak today.
I'm going to be referring to the hydrogen fuel cell sector of Canada. It's interesting, because I think the hydrogen fuel cell sector represents a direction the government is trying to push the industry towards in science and innovation. I'll give you a few statistics.
In 2005 the private sector in Canada invested over $200 million in research and development. The total energy R and D in Canada in 2005 was $680 million. That's the oil and gas sector, everybody. So the investment by the hydrogen fuel cell sector of over $200 million represents about a third of total energy R and D in Canada, according to NRCan stats. That makes the hydrogen fuel cell sector the number one clean-energy R and D investor in Canada. It's pretty significant.
The rate of that investment has continued over the last five years. There has been over a billion dollars of R and D investment. Keep in mind, this is a next-generation clean-energy technology that we're focusing on here, so that rate of investment is extremely high. The Government of Canada over that period invested about $170 million. That means that 85% of the R and D in this sector is being done by the private sector--not by university labs, not by government labs. It's pretty significant. For every dollar that's invested by the private sector, there's about 15¢ of public money backing it up. In the biotech sector--this is an Industry Canada statistic--for every dollar that's invested, there's more than a dollar matching it. So there's a bit of an imbalance there, but what we've done is we've created over 2,000 new jobs. We have technology that addresses economic development, clean air, and GHG reduction.
Canada, globally, is a leader in this technology. We are not “the” leader any more, but we are a leader. So what's happening with that?
Well, it's great to do R and D, but I want to point out that product is selling now. That's something we didn't have five years ago. We said it was going to come. The prediction with cars was overstated, but other technologies.... We don't know exactly how this is going to roll out.
What has happened is that strange products, like fuel-cell forklifts, are starting to sell today. You may have heard that Wal-Mart has started purchasing them. Because of what happened in New Orleans when their power system went down, backup power systems for telecoms are starting to sell. The FCC last year introduced a regulation that you must have a minimum eight-hour backup power. Batteries are challenged to meet that, and fuel cells are filling the gap. Companies like Hydrogenics, Ballard, Hyteon in Quebec, and QuestAir are selling those products. In Japan, residential cogeneration systems are used in homes, and 2,300 units have sold.
So these products are starting to sell. That's the key message.
From 2003 to 2008 Canada had the hydrogen economy project, $215 million, and the impact from that created a lot of this innovation and commercialization. That $215 million was cut in 2006 to about $170 million, and it ended in March of this year. We now have the ecoENERGY fund, which is helpful, but it's $240 million over five years, and we're not clear exactly how much of that is going to hydrogen fuel cells. There's FCTC money, and we're not exactly sure how much of that is going to....
The challenge is in how we can raise more private sector capital when it's not clear what the government partnership is. That's challenging. We live in a world where government does pick winners and losers. We have $2.2 billion towards biofuels and ethanol, and approximately $20 million to $50 million going to hydrogen fuel cells. I think we do have a world where we do that.
My recommendation is that Canada pick five or six of the top technologies that we are leaders in and focus on those technologies. It's not a silver bullet, but it's not an everybody-is-equal kind of situation either. That's one of our recommendations.
This is happening globally now, so that's good news for Canada. We're not the only ones doing this. Japan's annual federal budget is $380 million for their fuel cell program. Denmark is the leader in wind technology. Thirty years ago, if you'd said Denmark is going to be the leader in wind technology, people would have laughed. Thirty years ago, if you'd said Finland is going to be the leader in cell communications, you would have laughed. Nokia now is the biggest cell company in the world.
We can do it; we just need to have a national program. Investors are coming. They can invest anywhere. Capital is going to follow where there is a balance between government incentives and it helps the investor to evaluate the risk.
I'll close my comment by saying we hope there will be a national strategy for hydrogen fuel cells. It will make clear what the government policy is, and it will allow us to continue raising the significant amount of capital that I introduced to you earlier.
The office of the U.S. President just issued a letter two weeks ago saying the hydrogen economy is one of the three top manufacturing R and D priorities. That means they are going beyond R and D, and now they're asking, how do we manufacture these things in volume? It's a significant statement, and I hope we can engage the government in that approach.
Thank you.
Conservative
The Chair Conservative James Rajotte
Thank you very much, Mr. Tak.
We'll go now to Mr. Schubak, please.
Gary Schubak Manager, Hydrogen Highway Project, Hydrogen and Fuel Cells Canada
Thanks very much for having me today. I appreciate being here.
My name is Gary Schubak. I manage the Hydrogen Highway here in British Columbia. I work with John. John is my boss.
My intent is just to take five minutes and explain what we're doing in British Columbia on the Hydrogen Highway and emphasize the importance of government partnership to our effort.
What is the Hydrogen Highway? I think I'll begin with that.
The Hydrogen Highway is a practical demonstration program of hydrogen and fuel cell technology. Its aim is to accelerate the commercialization of these technologies, get them out in the public, and provide an infrastructure for vehicle companies, bus companies, and other technology providers to deploy in British Columbia. It's about environmental stewardship. It's about growing the economy and homegrown Canadian technology companies.
We're a leader, as John said, and we want to maintain that lead. We look at the Hydrogen Highway as a practical program to build that lead and maintain it.
There are a number of factors that are important to mention. One is the infrastructure, and I'll speak quickly about that.
In British Columbia today we have a good, budding growth of hydrogen infrastructure. We have five filling stations in the lower mainland, in Victoria, that fuel hydrogen vehicles for demonstration programs. Our goal is to have seven by the time the 2010 Olympic Games are being deployed in Vancouver-Whistler. Not a lot of people know that, but that's something about which we're trying to get the message out.
These are stations that are active and functioning. Vehicles are being deployed and filled every day by these stations and are being driven every day on the roads of Vancouver and Victoria.
In partnership with the fueling stations, we have a number of demonstration programs in the city and in the southwestern province. We have a fleet of Ford Focus fuel cell vehicles in Vancouver and Victoria. We have a number of shuttle buses and hydrogen-powered pickup trucks. We have four transit buses in Port Coquitlam that operate on a blend of natural gas and hydrogen that reduce emissions and improve efficiency. All these vehicles are operating around the network of fueling stations we've installed in partnership with the government over the last five years.
Our goal now is to move from demonstration to commercial deployment, and we're starting to see that. We've maybe all heard the announcement that B.C. Transit will be putting 20 fuel-cell-powered buses in Whistler for the 2010 Olympic and Paralympic Winter Games. That's fantastic.
It's another node on the Hydrogen Highway where the world's largest fueling station for hydrogen will be deployed in Whistler. The world's largest fuel cell vehicle fleet will be deployed in the community of Whistler. These are Canadian technologies. This is a New Flyer bus, the chassis provider. Ballard Power Systems is the fuel cell provider.
Who am I forgetting?
Dynatek provides the fuel tanks, and Air Liquide Canada is providing the hydrogen. This is a Canadian solution that we get to deploy and showcase in front of the whole world through the Olympics. This is one growth idea that the Hydrogen Highway can promote.
There are others that we want to promote, with shuttle bus fleets that could take people from the airport to important venues, or the deployment of hubs of hydrogen for material-handling warehouse applications that are on the cusp of commercialization right now. We can get behind that and accelerate it here.
That's what the Hydrogen Highway is about, and the reason we're here is that it's also about partnership and having the opportunity to talk to you and express our gratitude for the past partnership we've had with government to get where we are today. But to reinforce that to go forward, we need that partnership to be even stronger and more robust.
It's about growth, and we are at a point now where we see a lot of exciting growth opportunities for building these fleets, building the infrastructure, attracting the companies that are leaders in this area to come to Vancouver, to come to British Columbia. That's certainly something that I, as the manager of the Hydrogen Highway, would love to see.
Thank you very much for your time.
Conservative
The Chair Conservative James Rajotte
Thank you, Mr. Schubak.
We'll now go to questions from members. We'll start a six-minute round with Dan McTeague.
Liberal
Dan McTeague Liberal Pickering—Scarborough East, ON
One word--fascinating. I'm thinking of the four of you who have presented here, and if tomorrow I could wave a magic wand, everyone would live in a zero-emission environment--whether I took my bus or my car, or had electricity generated in my home or off the shores.
Most of us would not have considered these things to be absolutely pressing, certainly in the area of energy, until the past couple of months, with the way the price of energy is going and where it's going. As politicians we're extremely sensitive to where those failures may very well lead us, and that there are consequences for all of us in not moving in those directions.
I'll start with you, Mr. MacDonald. I was very interested in your comments, because I had written here that you had done so well in Germany, so why not in Canada? Yet your comment at the end was more why aren't we doing as well overseas compared to Canada?
I don't see a problem if we're doing well internationally, but it seems to me you're saying we can't create the wealth or interest, or generate an adequate and comprehensive policy in Canada to ensure that all of you in ten years will be able to make me live in a zero-emission environment.
Chairman and Chief Executive Officer, Day4 Energy Inc.
Germany has become the world leader, and there's a very simple reason for that. When I first entered this industry in 2002, the Japanese were the leader. Then the Germans invented something called the feed-in tariff. Almost all the renewable energies--with the exception of big hydro, which has been with us for a long time--are supported by subsidies these days. They're all developing, and the costs don't yet meet the kilowatt-hour crisis on the grid, except in very special circumstances.
The feed-in tariff type of subsidy is a very interesting way of supporting this kind of thing. It's basically purchasing. The Bundestag passed a law and it had three characteristics. First, if you're a utility and somebody offers you renewable energy you must take it. Second, you must pay a certain tariff for it. I know the numbers for solar, and there are others for wind, biofuels, and all the rest of it.
The tariff for solar started at 55 euro cents a kilowatt-hour, which is about four times the regular rate of electricity in Germany. It comes down by 5% a year, and they're now starting to talk about accelerating the fall. The utility is obliged to pay that. The third thing that really makes it work is they're going to guarantee that rate for 20 years. That makes it financeable.
This is a way of transferring the subsidy from the taxpayer to the ratepayer. Like all utilities, the old utility goes to the regulator to increase their rate. It costs the average German ratepayer about 1.5 euros a month--which is about the cost of a cup of coffee in Munich. It works like a hot damn. The Italians are adopting it. The Spanish have adopted it. The Greeks are talking about it. That one thing has led to Germany just rocketing past Japan. Germany is now the leader in this technology.
Ontario's standard offer program has a similar arrangement. The problem with the program is that at 42 cents Canadian a kilowatt-hour it's quite marginal.
Liberal
Dan McTeague Liberal Pickering—Scarborough East, ON
You said we're not generating enough wealth in Canada with what we can do.
Liberal
Chairman and Chief Executive Officer, Day4 Energy Inc.
I've repeated this so often I could do it in my sleep. A government has three levers to encourage industry: procurement, fiddling around with the tax system, and granting, in that order of priority.
I guess all of you know I was one of the founders of MacDonald Dettwiler, which had something to do with the design of Radarsat-2. But I'm not talking about that today. We'll talk about that offline.
Chairman and Chief Executive Officer, Day4 Energy Inc.
We built that company because we were in the level of technology most of your customers or governments are in. It's just the level of technology that does that. We diversified our marketplace by quickly becoming an exporter.
But we used to do the first system--we still do, I guess--by having it procured by the Canadian government. We developed the technology, and the thing that happens.... It was part of what was in those days called the unsolicited proposal program, which got shot in the head at some meeting of bureaucrats at some stage.
The beauty of that program was that you could make a proposal to the government and the government would say “Yes, we want one of those. We'll buy it from you.” In effect, they were a friendly customer. We then adopted the paradigm of taking that and exporting it. We became the world's leader in remote-sensing ground stations. Ultimately, as you know, it became a space company.
The R and D takes place in the corporation. You develop the knowledge base inside the company, so it can respond to changes in the marketplace more quickly. That's extremely important for all of these science and technology-based industries, because we live in a world where the technology changes very rapidly.
I think it's important to understand that policies that put the knowledge development next to the market are important. Canada's done a pretty good job in the tax system area. The SR&ED arrangement works pretty well. We even took a little bit of advantage of that at Day4.
Finally, regarding the granting system, grants have their place, but I'm not a big fan.
Conservative
Conservative
Colin Carrie Conservative Oshawa, ON
Thank you very much, Mr. Chair.
I'd like to say I'm a little disappointed we have only an hour with you gentlemen. It's the end of the entire week, but I think this is the most exciting part.
I'm going to try to do three questions, which means about two minutes each.
We talked about the tidal projects, and you mentioned delays in the regulatory process. I've heard of the Bay of Fundy thing for years, and it just makes a heck of a lot of sense, with tides going up every 12 hours. Why aren't we working on that? How can the federal government help commercialize big projects like this?
Second, Mr. MacDonald, you mentioned there were some good policies, and I was wondering if you could give us a couple of ideas. We really want your feedback on what policies we can come forward with to help you out. You are the guys who are getting the job done. We have the research, but we want to see you guys out there commercializing it, making a lot of money, and paying a lot of taxes to the government. So what are the good policies, and where did they go?
My third question is with regard to the hydrogen fuel cells. I come from Oshawa, and I just saw GM's Volt. I thought it was the most fantastic idea coming forward. So the technology is coming here.
What is a good government partnership? What should we be doing? You talked about the infrastructure. I'd like to see that hydrogen highway between Windsor and Montreal, actually, because Oshawa is right in the middle, and with two nuclear plants we could get a lot of hydrogen going. Dan's got a nuclear plant in his riding, so that would be great.
What should the government be doing with those partnerships?
You might be down to a minute each now.
President, ASL Environmental Sciences Inc.
Can I start on the tidal?
As I mentioned, it's a combination, it's not just one solution. It has to be a coordinated set of programs based on a partnership with industry, and industry-led, with key support from government and universities sometimes. John talked about the feed-in tariff, and that's critical for any developing technology. It applies just as much to tidal and wave energy as it does to solar panels or anything else.
I mentioned the regulatory regime, and I think this may be more unique to ocean renewable energy. We often overlook that. It's critical. There are roadblocks in the way. It's not always just investment that's required. Sometimes we can't get our technology out there in the ocean because of the cumbersome regulatory regime, and I'm convinced a lot of that is because the departments in government that I mentioned need more funding. They need to respond better by having better science. They've been pressed for funds on that.
I'll leave it at that, given that time is short.