Thank you for the opportunity to speak.
I'm Tom Rand. I'm a senior adviser here at MaRS in their clean tech group, and I'm also the managing partner of ArcTern Ventures, which is a privately backed venture fund that invests directly in clean energy technology companies.
I'm going to focus a lot on the adoption side. I notice in the focus here it's not so much on the development of technologies but rather the adoption. I'm also going to bracket a lot of comments.
As I'm sure the committee knows, there was an enormous amount of work done over the past 12 to 18 months through the provincial Canadian working group on clean tech. That work was very robust. The outcomes, I think, are sound. Therefore, I'm going to focus my comments mainly on recommendations on following through on how to define the mandate that came out of some of the federal budget recently. There is about $1.8 billion that's heading towards EDC and BDC. I think it has it exactly right in addressing some of the central risks around adoption in the natural resources sector, as well as others, of clean tech.
Clean tech is capital intensive. We have a great farm team here in Canada. One of the questions you ask is, “What are we doing right?” You can tweak SDTC, but broadly speaking, it's done right. Double down on SDTC, that was done.
The question is how you get large first commercial plants adopted. I think that's where the market is stopped. There's a logjam there. There are probably a dozen companies in Canada capable of building large commercial facilities of next generation clean tech with a greater than incremental drop in energy use and greater than incremental gain in energy efficiency. Next-generation cellulosic ethanol, for example, is the poster child I've been using to talk about this market gap. It was addressed in the last budget, so I don't want to advocate for it being addressed. It has been addressed.
I will talk a bit about the risk that all of that political will may go to naught if EDC and BDC are not given a narrow enough mandate to allow them to move the market and change the risk for the private sector so that they can play and come into this space.
The risk is that EDC and BDC will act as market followers not market makers. They are banks. Their primary job is to return dividends to their shareholders. The funds that are being allocated to EDC and BDC can be very effective if they are firewalled, and those groups are given the capacity and the licence to use that capital in a different way and have success metrics associated with using that capital in a different way.
I have a one-pager. I can distribute a soft copy to you to follow up, but I'll go through it very quickly.
The point I'm making is that a very narrow mandate to follow up on that budget is required to get BDC and EDC to move the market. I'm going to focus my comments mainly on EDC, which has $450 million to fund first-of-a-kind commercial projects. I think NRCan has existing programs that can dovetail nicely with what EDC is doing, particularly if NRCan focuses on some of the enabling funds that get a company through the gate to EDC. FEL-3 drawings are site-specific drawings for getting these first commercial plants built. If NRCan endorses some of these points on a mandate to EDC, that's the best thing we can do. A lot of work was put into that policy and I don't think we can do any better.
First of all, the size of those projects should be very large. If the capex of those projects is not at least $50 million to $100 million, then you're incrementally different from SDTC and you're not moving the market. They should be big.
Secondly, the technical risk should be for first-of-a-kind large commercial. If it's the second and third, the private sector should be there, to a large extent, as opposed to the first of a kind.
Regarding commercial readiness, those projects should have offtake contracts with global partners, tier-one engineering firms, who have committed to build that plant and can provide a robust cost analysis and lots of upside potential. This is so that when we build that first-of-a-kind plant in Manitoba and they are producing cellulosic ethanol, there is a robust pipeline of opportunity behind that plant, which speaks to further GHG reductions but, of course, also an economic upside for the country. It should cover a large amount of that first project. If they come in and take a 10% or 15% piece as they normally would, it's not going to do anything. They need to take up to half of those first projects.
It should be milestone-based, so supporting a company right through the engineering engagement and FEL-3 drawings, which are sort of advanced engineering drawings to define the plan. Then milestone it right up through shovel-ready, permitting, and commissioning. I think we have projects in the pipeline today. I don't think it takes more than 12 to 18 months to get that out that door.
Projects built in Canada that have partners with a broad pipeline of activity overseas are also very helpful. The point I'm making there is that we have an enormous ability to move the needle here in Canada on greenhouse gas emissions, but the most we'll move that needle is if we look to these Canadian clean technology companies as exporting solutions to the rest of the world.
The poster child is Woodland Biofuels. It can build a cellulosic ethanol plant in Canada with a Chinese partner. There are Chinese partners who will pay for half that plant. It has 30 to 40 plants it can build in China, the same partners. That's the equivalent of taking every single Canadian car off the road. That's where the link comes to very substantial GHG reductions when we look to global markets. There's more detail, but I don't want to get into too much detail now.
The main point I'm making is that there is a lot of substantial work that's been done. I endorse the outcome of that working group. Now the challenge is that if we do not provide that narrow mandate—and NRCan is one of the groups that can do that—then this money might disappear down the rabbit hole under business as usual. That's the risk. There are receptive audiences in EDC and BDC. There are good people there who understand this. The banking divisions, though, just don't speak this language, so refining that mandate would help.
Lastly, NRCan does great work. There are buckets of money that have been very helpful as companies look to operate demonstration plants at scale. If that could be formed as a continuum feeding into EDC, there's work being done to form a clean tech hub in Ottawa where's there a single door. That would be very helpful, and NRCan has programs that will dovetail nicely as it coordinates those activities.
I'll finish with that. I will certainly offer the one-pager. It's not long, but I'm happy to distribute it to the committee if the committee sees fit.