Good afternoon, Mr. Chairman and honourable committee members. I appreciate this opportunity to add my voice to this very important topic on how to de-risk the adoption of clean technology in Canada's natural resource sector.
After looking at the very impressive list of your witnesses, including those speaking today, I feel that I might be able to provide an alternate view by offering a glimpse into the trenches of the clean technology world. I'm not an academic, but a person who has served his country in our navy, loves to work with his hands, and thrives on incremental changes that improve operations and lives.
I've been immersed in the clean technology world for almost 10 years now. Even though over this period many struggles have occurred, both with family and my company Responsible Energy, the underlying reason for why I keep going has not been affected, which is a desire to protect our environment and our future.
I'll give you a bit of background on Responsible Energy. I founded Responsible Energy in 2007. Since then, we have raised over $3.1 million from the founder, friends, family, angel investors, and grants. With regard to the grants that we've received over this period of time, of course, there's SR and ED, the scientific research and experimental development tax incentive program; IRAP, the industrial research assistance program; and EODP, which is the eastern Ontario development program provided by FedDev. With these funds, we've been able successfully to prove our concept, the scalability of our technology, and multi-patent our clean technology both in Canada and the U.S. We believe that we've created a solution for both the waste management and energy sectors, and we are ready to be commercialized.
As a company, Responsible Energy has worked very hard, with every penny it has received from both investors and government grants. Success is not just about properly managing those funds, but also maximizing every available resource, for example, building our proof of concept in a friend's garage; since 2012, finding a location where we have not had to pay for rent or power; or using materials and equipment from a mothballed facility. I do not exaggerate when I say that we have saved millions in developing our clean technology.
More specifically around de-risking in regard to the federal government, I believe that the federal government does an amazing job of de-risking clean technology ideas, but it falls short on de-risking the implementation. In my terminology, I call it commercialization of clean technology ideas. In order to de-risk the commercialization of clean technology ideas, pre-commercial technologies require capital—bottom line.
To add to that statement, the federal government has been right alongside us every step of the way, ever since I came up with the idea to develop our waste energy solution. From the first time I reached out to IRAP, the federal government has been an amazing partner. With you, we were able to develop quickly and efficiently. Everything seemed to be falling into place, or so it seemed, but as soon as we were ready to commercialize, that is when we hit the commercialization wall hard. We are now currently in the chicken or egg syndrome. Who would be the first to commit funds, even conditional funds? Anyone? The answer that keeps coming back is that it is no one at this point in time.
Our first obvious step was SDTC, because the investment community raves about them. I heard loud and clear from the investment community, “If you can get them onboard, then we will follow.” However, once we had approached SDTC, our first applications were rejected. We received a few comments, such as, “it's too small of a project”, “you're not requesting enough money”, “we're heavily invested in that space”, “it's too early for you—you need to build a larger unit first”.
On our fifth try, our statement of interest was accepted, which made it to the investment committee round, but in the end we got rejected because our funding was not secured.
In parallel during the same period, we talked with BDC's ventures fund. My initial approach four years ago received the response that I should seek out capital in the U.K. To add insult to injury, their clean-tech representative told me last fall that they're no longer investing in clean-tech infrastructure, but are focusing on the IoT, the Internet of things.
I have a wonderful graph here that I unfortunately was not able to get to the committee in time for translation, but it shows the gap, the “commercialization gap”, as I call it. We have friends, family, angels, IRAP, FedDev, SR and ED all on one side, and everything works perfectly right up to when you're ready to commercialize the technology. Unfortunately, the funds are limited on that side of the commercialization gap.
As you move along the commercialization gap, there is a big space, and then, tipping into the commercialization gap, you have SDTC and the BDC ventures fund, which is why I mentioned them previously. They are attempting to help in that gap, but they're not far enough into it.
Then you have industry. Industry has more than enough money to fund this gap. How do we get industry into that gap? Everybody else on the other side seems to be tapped out and taking huge risks.
The graph leads into the next phase, which is how I see clean tech. You have all these industries, but currently clean tech is considered a single sector for all key industries. Clean tech is considered a one-stop shop in the same way that the IT sector was in the late nineties and early 2000s.
For a lot of people, clean tech was considered the second generation of that type of investment. They thought clean tech would do the same sort of thing that the IT world did. Unfortunately, each key industry has unique needs and environmental challenges, and that one language does not work for all. They all have their own individual challenges. Here, I have another pretty picture that you guys didn't get to see, but I've been informed that you'll see it later on this week.
I've come up with a few recommendations that I believe show how to de-risk clean technology investment, because that's my pain right now: the investment side of clean tech.
We need to place the responsibility of protecting our environment where it belongs. We need to require each key industry to be responsible for investing in its own sector's pre-commercial clean technologies. The success or failure of each industry to invest should be a simple thing to monitor and report.
We need to offer a reduction in the required carbon tax payable—of course, once fully implemented—or a tax incentive that is directly related to a company's investment in pre-commercial clean technology. Eligible pre-commercial clean technologies must have previously received funding from a federal, provincial, or municipal government, or an approved agency. You can have some conditions on that money, that incentive.
Also, there is an opportunity to provide additional incentives for private investors in clean technology in focusing on the commercialization gap, such as increased capital gains tax exemptions or providing an easy-to-follow set of rules for flow-through shares. It's worked very well for the mining industry, but everybody's very confused about it when it comes to clean tech.
In conclusion, when it comes to de-risking, I believe the federal government should follow NRC Canada's IRAP model. They are about helping start-ups accelerate the growth of their business through innovation and technology.
Stay on the upfront side. Stay on the idea side.
It is acceptable within IRAP's model that many businesses will not succeed past their funding, but some will carry on to do great things for Canada.