The federal government is working on new programs to help Canadian cleantech companies compete for contracts, expanding a model that’s shown promise in the health-care sector. 

Ottawa has made green innovation a major part of its climate strategy, pledging billions for industrial emissions-reductions projects, electric vehicles, and commercialization support. But cleantech executives say Canadian businesses and governments remain reluctant to buy new products and services, making it difficult to scale companies in Canada. 

Sustainable Development Technology Canada (SDTC), a federal agency that funds startups and scale-ups in the sector, has hired a high-profile executive to lead its effort, while Small Business Minister Mary Ng’s cleantech advisory council is also exploring the concept. “Countries around the world [are] putting so much money into carbon reduction,” said Sheldon Levy, Ng’s scale-up advisor. “We just must have companies in Canada that can be a major part of that global effort.” 

Canadian governments’ and businesses’ unwillingness to buy innovative products is a longstanding issue. The country spends relatively less than the U.S. and other OECD countries do on technology. The public and private sectors “do not have a culture of intensive technology adoption,” said Jonathan Rhone, CEO of Vancouver-based Axine Water Technologies. 

The trend extends to cleantech, and makes it harder for companies to scale initially and win business internationally. Prospective foreign clients often ask what experience a firm has in Canada, said Karen Hamberg, formerly a top executive at Vancouver-based Westport Fuel Systems. “There is always a sheepish admission that … deployment in the domestic market has not been the same.” Westport made its early sales in California and China, and has since expanded in Canada. 

Following years of reports and recommendations, Ottawa has moved to address a similar problem in the health-care sector. In July 2019, Ng announced $7 million to set up branches of the CAN Health Network in Western Canada and Ontario. The program’s pilot stream funded SE Health, a Markham, Ont.-based home-care operator, to test software from AlayaCare, a Montreal-headquartered scale-up, for virtual patient interactions and remote monitoring. The project recently concluded, and the two organizations are due to present to other CAN Health members next week.

Traditional public-sector medical procurement can take years, said Martin Ducharme, AlayaCare’s director of strategy and business development. CAN Health forms an “integrated market” for Canadian health-technology companies by pooling procurement opportunities and workloads. Once one hospital or system has bought an innovative product via a competitive request-for-proposals (RFP) process, it shares information with other members, who can bypass regular purchasing rules to get the same technology for themselves. Smaller systems can piggyback on the due diligence and testing performed by larger, richer ones.

“Avoiding redundant RFPs across different health-care jurisdictions is fantastic,” said Ducharme, noting, “If you win one of them, it basically gives you access to the entire network.” That puts runners-up in a worse position, he acknowledged—it’s significantly easier for a CAN Health member to contract with a winning firm than a different vendor. Nevertheless, the government is encouraged by the results so far; on Wednesday, Ng announced over $2.2 million to establish an Atlantic Canadian wing of the network.

Now federal departments and agencies are working to replicate the CAN Health model for cleantech. “All of it is to be able to give Canadian companies the best opportunity to win RFPs” by ensuring they tailor their products to buyers’ needs, said Levy. Among the transferable lessons, the network has learned how to navigate policy issues raised by focusing on domestic suppliers, such as obligations under international and interprovincial trade agreements. 

Discussions about the cleantech initiative began six months ago, according to Levy, who hopes to have demonstration projects in place by the end of the year. The B.C. government has expressed interest. Levy said one key step to establishing the network is identifying executives who can bring together prospective public- and private-sector buyers, as Dante Morra, chief of staff at Mississauga’s Trillium Health Partners, did for CAN Health. 

SDTC has its own candidate for the role: François Lecavalier—a former Canada Infrastructure Bank and Business Development Bank of Canada (BDC) executive—who joined the agency as vice-president of integrated markets in April. The agency will mimic CAN Health’s model for the public-sector market. “We’re matching SDTC companies with municipalities, and once a pilot is successful … one RFP could lead to multiple contracts,” said Lecavalier; a first project will be launched shortly.

The tag-along approach won’t work for cleantech firms who primarily sell to business, since clients won’t share vendor and technology information with competitors. “In the private sector, we’re going to have to go one-on-one,” said Lecavalier; the pitch to large firms includes that it’s “part of your role as a Canadian corporate company to help these [smaller firms] in their scaling-up process.” For example, Toronto-headquartered Brookfield Asset Management could be a target, given vice-chair Mark Carney’s frequent comments about the commercial opportunities of emissions reductions.

SDTC will fund pilot projects as a “sweetener” for municipalities and companies to participate, then rope in BDC to finance clients’ working capital needs to fill new orders. Lecavalier said the agency plans to start with cleantech firms working on smart-city technology like emissions-reducing traffic systems, agtech and energy-efficiency systems for buildings. “Within 18 months, we’ll know if it’s working or not,” said Lecavalier; SDTC hopes to eventually add a third section focused on matching clients with buyers internationally.

Canadian cleantech executives and organizations have long urged policymakers to support the sector by updating purchasing practices and incentivizing private-sector adoption. In its October 2018 report, the Clean Technology Economic Strategy Table, a federal advisory group, called on Ottawa to become a “lead buyer” for the industry with a spending target of five per cent of total procurement by 2025, as well as accelerated tax write-offs for companies’ expenditures on equipment. Clean Energy Canada, a think tank, recommended that governments procure on the basis of goals such as supporting innovation and economic development in addition to value for money.

But not everyone sees it that way. “I don’t think that government is a natural early adopter of new technologies,” said Rhone, noting that it’s more important for the public sector to be a “preferential adopter” of domestic companies’ solutions once they’re commercially proven. He thinks Canadian firms should also look to sell internationally from the start. “It’s predominantly an export market.”

Hamberg, who now chairs the cleantech strategy table, said programs should focus on areas of the sector that have commercially viable and cost-competitive solutions. “We’re not talking about pilot demonstrations here; we’re talking about technology that must meet specific performance requirements, because some of these markets [are] zero-to-ready.” She cited Ottawa’s promise to spend $2.75 billion over five years on clean public-transit projects, noting that domestic companies make electric-bus chassis and propulsion systems. “There needs to be [a] coalition approach to … make sure that we are prioritizing the deployment of made-in-Canada cleantech,” she said.