While cleantech in Canada has seen 42% job growth in six years, from 38,800 full-time employees in 729 companies in 2011 to 55,200 in 850 firms in 2015, the sector is only meeting a fraction of its potential and is falling behind internationally, Analytica Advisors concludes in an annual review released this week.
When it issued its first report in 2011, Analytica said the industry as a whole could be worth C$50 billion or more within a decade, Canadian Press reports. Now, Analytica President Céline Bak sees cleantech growing from $13.27 billion in 2015 to about $18 billion in 2022.
“When I made that call several years ago, there was an assumption at that time that financial markets would move more quickly than they have,” she told CP. Now, the much higher target is “out of reach” without changes in the way capital investments are made.
Based on confidential information from 148 companies, the report delivers a mixed review of the sector.
On one hand, cleantech is Canada’s first new industry of the 21st century, a “highly competitive, innovation-led industry that is committed to exporting and investing heavily in global-scale commercialization,” it states. “Canada’s clean technology companies are working to build out competitive positions in fast-growing global markets. In lieu of dividends, share buy-backs, or executive bonuses, they are investing in talent. They are creating and commercializing intellectual property and solutions that protect or repair ecosystems while growing and diversifying our economy.”
But those gains aren’t paying off in business terms. “Canada’s clean technology industry is awash in red ink,” Analytica warns. “Its firms, and the know-how and intellectual property (IP) they hold, are vulnerable to foreign takeovers. Despite unprecedented interest and engagement from provincial and federal governments, Canada’s low-carbon Renaissance is very much on the ropes. The sector needs smart new policy from the public sector and engagement from Bay Street to build markets for low-carbon solutions, unlock private finance, and secure the prosperity that should accrue from investment in low-carbon innovation.”
The report shows that retained earnings across the cleantech sector have steadily declined over a five-year span, with green power generation the only industry to show a positive return on sales between 2011 and 2015.
“It means we have an industry where companies are not yet at a scale where they can be profitable,” Bak explained. “They need capital in order to get to that scale. Private sector financial markets, by virtue of the regulation that they must abide by, do not yet have the flexibility to lend to companies that are not profitable.”
Although the industry produced $6.7 billion in export revenue in 2015, its global market share fell 12% over an eight-year span. Based on the report, CP places Canada 16thamong the top 25 exporters.
While the federal government has allocated $1.8 billion to cleantech investment, the bulk of that money won’t be available until 2019. “We have some companies that are at the stage now, and who are ready to use that financing in the next weeks, not months, certainly not years,” Bak told CP.