Transport Committee on Oct. 4th, 2012

[Lawrence Toet, Conservative, Elmwood—Transcona, MB]

It is every type. So where do you see the first applications of this happening? Do you see it in commercial vehicle fleets or in buses? Where do you see this moving?

[Greg Tarasco]

With the APC project, we are developing a heavy-duty flywheel for transit buses specifically. That is the first order of business, because as fleet vehicles or municipalities are struggling with their capital and operational expenditure budgets, they cannot afford to buy hybrid buses. The ones they have bought don't work. They have no ROI—return on investment—in this process. They want to buy hybrids, and their budget pressures demand it. The technology prevents it.

We are specifically addressing that, and in that, we have facilitated the whole supply chain in heavy transit and transit buses to be on our advisory board for this APC. We're in discussion with companies like Purolator and other such well-known Canadian companies to do this. This is an all-Canadian advisory board of some of the largest companies in Canada that will be advising us on how we can address the OEM's, the manufacturer's, pain points for commercialization and the end fleet purchaser's pain points, of which there are many. This is as much a marketing and commercialization process as it is a technology process.

Our technology is done. We just have to integrate it into the vehicle and allow the benefits for the manufacturer and the fleet operators. That's the first step, and that's the key project. That's the pain point in the market right now. It's the fleet operators, the transit authorities, OC Transpo, Transit Windsor—you name every bus transit authority. That's who we're addressing first.

We'll be commercially ready in about 18 months.

[Lawrence Toet, Conservative, Elmwood—Transcona, MB]

You talked about being much more low-cost than the battery technologies on the hybrids. We've heard various testimonies of what percentage that adds to the cost. What percentage do you perceive adding to the cost of a bus?

[Greg Tarasco]

We'll approach it from two different angles.

The premium for a hybrid is about $200,000 over. As I've reviewed the testimony, it ranges from $130,000 to $250,000, depending on the bus; extended buses are roughly $200,000 for a premium, which is onerous by any stretch. We can bring that down by half.

The battery pack is around $55,000, and you have to go through three life cycles, so the original expectation of buying $55,000 worth of batteries is now $155,000 worth of batteries. That's a 200% surprise increase in operational expenditures by the fleet operators.

We come in at $35,000 for a unit. Why? Because it's a blue collar worker, made in Ontario solution, it's metal, it's machined, and no foreign entities are involved. It's a simple process and assembly, a simple application deployed.

On every measure we come in at a lower cost. We can lower by 50% the cost of the energy storage system on hybrid vehicles.

[Lawrence Toet, Conservative, Elmwood—Transcona, MB]

You've talked about the different transit authorities. Have you had direct contact with the bus manufacturers themselves?

[Greg Tarasco]

Yes, I have. We're in ongoing negotiations with all of them.

[Lawrence Toet, Conservative, Elmwood—Transcona, MB]

That's good to hear.

Just to switch gears a little, I was very interested in your comments regarding investment. You touched on the fact that the closer you're vested to your investment, you're going to work harder on bringing forward a technology that is actually commercially viable.

In other words, the more you're working with your own money, or your family's money, the better the chance—if I'm reading you right, and you can correct me—you're going to come up with a commercially viable product because your stakes are higher. I really liked your example of the government as a facilitator, not the investor.

Can you expand that a little? How you would see us, as a government, be better as a facilitator and not so much as an investor?

[Greg Tarasco]

Yes. That's a great question.

There is no better due diligence process for the facilitator than having money on the table in a project. You want it to work. There is no feeling that if it doesn't work, oh well, we'll get on to the next project, skin in the game, if you will.

I have two points.

First, there is a capacity problem in facilitating investments from Canadian investors. If we go to a private equity or venture capital model, the average size of a Canadian fund is about $400 million. The average size of a fund in the U.S. is $7 billion.

Whether we want it or not, our capacity shortfall is there. They can't afford to make wrong decisions, so the risk aversion is based on that.

Second, from a policy perspective, allowing foreign investors or foreign entities under the guise of “it's only used to define R and D, they can't take control of the company” or “the IP still resides with the company and it's Canadian property”, are all measures that go to this length.

At the end of the day, capital is the lifeblood. Whether it comes from private industry, foreign initiatives, or the government, it's still capital. It's still required.

The best way, the most efficient way, is to have the investor who is directly linked to the company get the synergies going there. Remove the barriers, the administration, the red tape, facilitate the investor, develop a relationship, and the result is something like Silicon Valley.

[The Chair, Conservative, Larry Miller]

Thank you very much.

Ms. Morin, you have the last five minutes.

[Isabelle Morin, NDP, Notre-Dame-de-Grâce—Lachine, QC]

Thank you, Mr. Chair.

Mr. Tarasco, I find this subject fascinating. I would like to thank all of the witnesses. I learned a lot today.

I would like to come back to investments. If I understood what you said earlier correctly, Williams Hybrid Power is your only competitor. Is that correct?

[Greg Tarasco]

No, in the transportation space, flywheel will apply to transportation. There are several that have not done well. They use different flywheel technologies—some patented, some not patented, some mechanical, some electrical.

Why I cite Williams...there are really two competitors based out of Europe, and us, from Canada, so there are really three in the world that are doing this. That space will crowd up pretty quickly.

[Isabelle Morin, NDP, Notre-Dame-de-Grâce—Lachine, QC]

You spoke about a $10 billion market. In these circumstances, I do not see why you need to wait for government funding before moving forward. Why is that necessary if a $10 billion market is available? If I were in that situation, I would want to move quickly rather than waiting for other industries to use the same technology. I would get ahead of the game.

[Greg Tarasco]

We are hurrying up, we are expediting several issues, and we don't naturally seek government money. You're right, there is no need in a market this size. We don't need to. The reality of the issue is that 20 years of hybrid technology with batteries has tainted the market to the point that no one wants to take any risk. On the OEMs, whether it's GM, New Flyer, Ford, if you go down the list of automotive manufacturers, they've been burned so many times they don't want to participate any more.

So we don't have a natural flow or engaging partner. Now, we've worked towards getting that, fine, so you're right, we shouldn't.

[Isabelle Morin, NDP, Notre-Dame-de-Grâce—Lachine, QC]

If I wanted to equip my electric vehicle with a flywheel, how much would it cost me?

[Greg Tarasco]

To make a flywheel for a regular car is around the $2,500 mark, as opposed to $6,000 to $10,000 for a battery. It's steel. It's commodity-based. It's $40 a pound for steel, as opposed to mining, getting heavy metals from companies overseas.

[Isabelle Morin, NDP, Notre-Dame-de-Grâce—Lachine, QC]

Thank you very much.

Mr. Hughson, you said earlier that new technologies would make it possible to ease traffic congestion. Were you referring to the GPS system or to other innovations?

[Earl Hughson]

The more information available between the vehicle and the infrastructure, the more streamlined the flow of traffic can be. It's simple little things like we see on the Queen Elizabeth Way and in Mississauga, and you see it in California. It's just putting in lights that are monitoring the flow of vehicles. It looks like you're slowing people down. You're actually dramatically increasing the flow.

When accidents happen, if you look at the statistical progression, for every second on a highway where there's one accident that could be avoided, it's going to take 15 times longer after it's removed to get rid of the bottleneck. You'll have a traffic jam all through rush hour just because it was there for 15 minutes.

All of these things affect flow. Accidents are one part, but it's also knowing where vehicles are. Vehicles with these technologies can run very safely very closely together as well, compared to a normal car.

[Isabelle Morin, NDP, Notre-Dame-de-Grâce—Lachine, QC]

That is more about reducing the number of accidents.

A friend of mine has a car equipped with sensors. They are located at the back of the car, making it possible for the car to park itself. The sensors did not pick up the presence of a small metal pole, and his car hit it. He had to spend approximately $15,000 to repair his vehicle. He had to replace his entire back bumper, which was destroyed, and the sensors. They are very expensive parts. It is also very costly for the insurance companies. This type of system is available when you buy a car, but as soon as it breaks down, it is very expensive to repair.

Have you thought about that?

[Earl Hughson]

Some of these applications are very new. They're testing power steering in very benign applications that some industries will pay for, like automatic parking. They're testing systems that are needed for much more advanced things in the future when they're proven and placed in more mission-critical applications.

I'm now being approached by OEMs that need some more advanced sensors on the front and back. They're developing what's called electronic bumpers, because the sensing systems aren't where they need to be. They're moving ahead very quickly in parallel, first in more benign applications, and then, as they're perfected, in more active and safety-related applications. So all the different pieces are being proven independently in unique applications that are coming together.

[The Chair, Conservative, Larry Miller]

Thank you very much. Our time has expired. We have a bit of committee business to do.

I'd like to thank all of our witnesses for coming here today and contributing.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

Chairman, I apologize for interrupting. I want to make sure, because we are winding down the study. We are going to be testing some of the tax changes that you might be able to suggest to our officials before we file our report. I'm wondering if someone could indicate to the witnesses when they would need to have their suggested changes in to the committee in writing.

[The Chair, Conservative, Larry Miller]

Within a week.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

We would need to see this in writing as clear as possible. Then we can consider recommending them to the government.

Thank you for the great testimony, all of you.

[The Chair, Conservative, Larry Miller]

Thanks for that, Mr. Poilievre, and thanks again to our witnesses for being here.

We have a bit of a budget that we need to approve. We'll just wait until everybody gets a copy here. It's really just housekeeping.

[The Chair, Conservative, Larry Miller]

Let me ask our members to please return to the table.

Everybody has a copy of the budget. Basically, we're down to the point that we're starting to wind up this study. This amount will just allow us to pay for the witnesses we have coming in.

Unless there are questions, I'd entertain a motion to adopt.

It is moved by Mr. Coderre to adopt it.

Is there discussion?

(Motion agreed to [See Minutes of Proceedings])