The Ontario government has promised, through the proposed Water Opportunities Act, to position the province as a major force in the global water market. In your opinion, is Ontario (and Canada) well-positioned to enter this market?
Here are comments from:
- David Henderson, Managing Director, XPV Capital
- Angella Hughes, President and CEO, Xogen Technologies
- John Milloy, Ontario Minister of Research and Innovation
- John Neate, Senior Associate, OCETA and ETV Canada
- Zoltan Tompa, Director of Applications, Sustainable Development Technology Canada
Zoltan Tompa: Ontario certainly has the right ingredients to achieve this vision, including a wealth of intellectual capital in the private sector and in our world-class universities, excess manufacturing capacity and enormous potential for domestic market adoption. Canada already has some notable water technology company success stories where disruptive new water treatment technologies have been invented locally and delivered at scale into the global market place. There is also an increasing recognition among the public, industry and policy makers that our water resources are not as infinite as we once thought, and technological innovation will be required to compliment conservation and tighter regulations.
David Henderson: Yes. We have a free-trade agreement with, and easy access to, the largest water market in the world, the United States. Our economy is based on some of the most water intensive industries. Therefore, we get a dual benefit by investing in water innovation—it will increase the productivity of our key sectors and at the same time create a whole new generation of companies that can export their water solutions around the world.
John Milloy: We [at MRI] see huge opportunity ahead. The Conference Board of Canada estimates the global market for water technology at more than US$400 billion per year, doubling every five to six years. As part of our new Open Ontario plan, our government will introduce legislation that will build on Ontario’s expertise in clean water technology. We are now working with our colleagues at the Ministry of the Environment and across government to develop the Water Opportunities Act. We have already invested in innovative companies working towards clean water solutions. A recent example is Vive Nano, an emerging Toronto-based company specializing in nanotechnology that can clean contaminated water and reduce agrochemical waste entering our water supply.
What kinds of action do we need to see in order to deliver on these promises? How can Canada capitalize on its clean water technology?
ZT: The domestic market opportunity needs to be unlocked for Canadian water technology developers and entrepreneurs to prove their technologies and provide the credibility that they need to capture the expanding global market opportunities, especially in emerging economies. Simply put, not having a domestic reference site can be the biggest impediment to global market entry.
We require a transformational change in our water management practices and delivery infrastructure—what better way to do this than to have regulators, utilities, water operators and other large industrial water users tap into the vast pool of local, innovative water technology companies to test out solutions that have broad replicability in the Canadian and global context?
John Neate: Leading Canadian jurisdictions like Ontario should implement water management policies that embed the principles of life-cycle costing, long-term strategic asset management, continuous improvement, and value creation. A public-private forum that includes key water stakeholders should be established to develop and drive policy proposals and action plans that lever our water strengths, optimize the use of available capital, and encourage water efficiency and sustainable water management practices.
DH: We need to find the common ground between water stakeholders to ensure we have the economical, social and political support to make things happen. Secondly, we need to focus on our strengths and areas that can generate significant competitive advantage such as technologies that address water use in the oil and gas, mining, food and beverage, and agriculture sectors. Finally, we need to align and develop the programs that will attract the leading water technology companies and the talent that will drive their growth.
What are some of the major financial and implementation barriers to water technology adoption at home and worldwide?
Angella Hughes: The administrative red tape required to apply for government funding and tax credits is not to be underestimated. We [Xogen] are a relatively small company, but we’ve spent considerable time [making applications] and sometimes had to engage consultants to help when resources are already limited. In addition, more could be done in the private sector to help emerging technology companies obtain private capital.
ZT: Water utilities are mandated to deliver water safely, reliably and at the lowest cost, and this means that they are typically not overly receptive to new technologies that could upset that delicate balance. Moreover, it’s difficult to pass on capital expenditures for new technology deployment to the rate payer base, despite attractive long-term operational savings. And many industrial water users do not fully account for the secondary costs of water. As the cost of energy continues to go up, the costs of managing water will rise. These costs often get bundled into an aggregate operational expense and, as a result, make it difficult for water operators and industrial users to make optimal investment decisions.
In Canada there’s a patchwork of inconsistent provincial and federal regulations that further complicate market entry, so the path of least resistance is often to pursue the larger market opportunity south of the border and internationally. When the early market opportunity and the investment capital lies stateside, it becomes a pretty strong draw for companies to progressively move their operations out of Canada. The Canadian headquarters can become denuded of its intellectual capital and eventually be reduced to more of a local sales and service centre with the higher value jobs moving stateside.
JM: Innovative firms need capital and entrepreneurial expertise from investors who are prepared to take on higher risks in pursuit of higher returns. The average survival rate for start-ups is quite low, often because they lack the experience and skills needed to attract and partner with long-term investors. That’s why we created the Innovation Accelerator Fund.
JN: The main barriers are risk avoidance, inefficient use of limited resources, and lack of technology integration. Greater alignment and collaboration amongst all water stakeholders is needed to address the fragmented nature of the water industry, both in Ontario and in Canada. The complexity of providing water technologies and services is further compounded by the inconsistent application of regulations and standards. There is a pressing need to establish consistent water standards and technical specifications, as well as legislative and regulatory frameworks.
DH: One of the strongest catalysts for the adoption of new water technology would be educating citizens, governments and corporations about the true cost of water use. Secondly, we need to be more consistent in how we develop and enforce standards across municipal, provincial (or state) and federal jurisdictions. I would even go as far as say we should collaborate with foreign regulators such as the EPA in the United States to ensure that we develop water standards that make the proliferation of new technology seamless and expedient.
How can we best address and overcome these barriers? Are there good models from other areas of the world?
ZT: Creating domestic market pull opportunities using public-owned assets such as government buildings, municipal water treatment facilities and distribution infrastructure is a very strong lever for nurturing local innovation and bringing the best of class technologies and knowhow to Canada. Next we need to establish clear economic signals that also encourage industrial water users to become demonstrators and early commercial adopters of new water technologies—these could be the form of investment tax credits or accelerated depreciation tax mechanisms. We also need to move toward proper costing of water through improved water accounting methodologies that force environmental externalities to be incorporated on the balance sheet and economic models or possibly in the future by other market mechanisms.
JN: Lessons can also be learned from other jurisdictions. The German Water Partnership (GWP), formed in 2008, is an example of an integrated platform of know-how, with a sophisticated grasp of the principles and practices of water management and local stakeholder involvement. By serving as an enabling vehicle for water action, the GWP has generated significant project and research activity in German industry, scientific organizations and not-for-profit organizations involved in the environment. These results have been achieved by integrating financing, engineering and innovative technologies with proven infrastructure construction, supervision and commissioning capabilities and, where required, the contract operation of facilities and training of local operations management and personnel.
DH: I think we could learn a lot from the Singapore’s approach. This export-driven nation has managed to go from water dependence to self-sufficiency without sacrificing economic prosperity. They introduced full water cost pricing, attracted global R&D investment, operate intelligent water networks and recycle water from toilet to tap. They are a great example that smart water policy, commitment and action can lead to environmental, economic and social success.
AH: Technology adoption should not be too onerous if the technology comes from a country where there is a similar culture and can demonstrate some kind of significant benefit; either from a treatment perspective, cost perspective or water conservation perspective. However, there are countries where we should enter with caution, especially if there is intellectual property involved or there is difficulty in determining how technology will be paid for once implemented. The federal government does have supports in these areas through the Department of Foreign Affairs and International Trade, Export Development Canada, and the Canadian Commercial Corporation. Xogen is using some of these services now and expects to use others in the future as it rolls out its technology.
Which Canadian water technologies will be most successful long-term?
ZT: There is a huge emerging opportunity for technologies that can retrofit within the existing footprint of aging water and wastewater treatment facilities to increase capacity for growing municipalities that don’t have additional room to expand their existing plants, or the capital to site new plants. As infrastructure continues to age, non-invasive leak detection and pipe remediation technologies will become a critical tool to add years to existing infrastructure and defer large capital intensive infrastructure projects. State-of-the-art sensors that leverage new technology and Canadian strengths in nano, optical and biotechnology enable the near real-time detection and analysis of a whole range of contaminants and pathogens never before possible. More recently, new water technology deployment opportunities are starting to open up in the upstream and downstream oil and gas industry that reduce water intensity in unconventional oil extraction operations and new shale gas plays.
JN: Expertise, equipment and facilities related to decentralized water management solutions and process optimization are key. This includes advanced filtration and disinfection technologies; water reuse and efficiency applications for municipal, industrial and commercial markets; water metering, quality monitoring and assessment; process automation and instrumentation; and wastewater treatment and value extraction.
AH: There’s a critical mass developing around the sustainable cities movement and that this sector, and water/wastewater will play a significant role. Most Canadians do not know what it means to be water stressed, but many parts of the world are dealing with this issue today, especially in growing cities. The development of technologies to not only clean up water, but also make it useful again, is one of the biggest opportunities coming.
DH: Solutions that bring productivity to our most important industries and solve societal water issues. For instance, let’s focus on reducing the energy and chemicals used in mission-critical oil and gas or mining water processes. We can also leverage our extensive biotech and engineering resources to find ways to reduce the amount of water used to grow our food. The federal government recently announced new legislation to reduce the amount of raw wastewater that is discharged into our rivers and lakes—we should take this one step further and support the development of technologies that can transform wastewater into energy, fertilizers, and new materials. And we should find solutions that can extend the life and capacity our water infrastructure, make it smarter and more adaptable to future challenges. This way, we’ll make our core industries more productive and our cities more livable while supporting the growth of next generation water companies that can export these solutions to the world, creating thousands of high-valued jobs.
Ten years from now, how will Canada’s water technology climate have changed?
AH: I believe that we’ll be playing a significant role, and that this role will continue to grow. However, as shown by Zenon and Trojan, Canada’s technology companies become acquisition targets for large multinationals which are doing exactly what we are trying to do: become global leaders in the provision of water and wastewater treatment solutions.
ZT: I see a vibrant innovation network of university researchers, startups, SMEs, and multinationals buttressed by sufficient risk capital and an eager domestic market that drives more water technology innovations to the market at an ever faster pace and greater success rate. Canada will become one of the top water technology jurisdictions in the world for attracting global talent, investment and businesses Ideally we will have created one or two more water technology powerhouses that continue to grow through innovation and acquisitions, rather than being acquired by other multinationals still early in their growth cycle.
JN: The Canadian water technology industry has an opportunity to move beyond where it is now by building and improving on what it does well, innovating to address market demand, and leading by example. A large number of equipment, engineering and consulting companies, as well as research and development facilities, associations and institutions, underpin the water industry in Canada. Today, Canada is home to a number of companies capitalizing on the water opportunity. With the right support, they can follow in the footsteps of other successful Canadian companies that have changed the way the world uses and manages water resources.