Renew and profit North America’s alternative energy industry comes of age

The Gazette
June 20, 1998

To anybody who admires cool technology, the allure of renewable energy is nearly irresistible: it’s much cleaner than burning coal or oil, and once you get the engineering right, power from the sun, the wind or agricultural waste should theoretically be very cheap.

Nevertheless, the renewable-energy business still remains tiny in Canada two decades after the oil embargoes of the 1970s sparked a wave of enthusiasm for new energy technologies.

That’s bad news for a country that is not only one of the world’s major energy hogs and greenhouse-gas offenders. It’s also ironic since Canada has some of the world’s most abundant sources of renewable energy.

But happily, there’s also good news. After years of technological flops, marketing failures and company bankruptcies, the renewable-energy business is finally coming of age.

Environmentalist Tom Adams, executive director of Energy Probe, notes that more and more companies have refined their technology, found the right market niche and started to make serious money.

“I see steady, progressive growth” for these hardy survivors, agrees Allan Dolenko, a top renewable-energy expert with the federal government, which sank millions into helping to develop some of the successful technologies. Indeed, for the most promising companies and technologies, that growth could be very rapid indeed.

John Hollick, a Toronto civil engineer has spent the past 15 years developing one of the world’s most promising solar-heating technologies. Today, he is seeing the payoff that can come from persistence. As orders for his cheap, efficient Solarwall systems flow in from all over the world, Hollick’s Conserval Engineering Inc. predicts that sales will double to $2 million next year and possibly hit $20 million within five years.

One recent installation, visible as the gray, corrugated south and west walls of the huge Canadair plant in St. Laurent, ranks as the world’s biggest solar collector.

Another company that sees big growth opportunities is the Axor Group, a Montreal engineering and construction concern. It is building and will be part-owner of Canada’s biggest wind-powered power generating facility on the Gaspe Penninsula.

Axor president Yvan Dupont notes that since the cost of wind power dropped to close to that of conventional power in the past few years, the industry has taken off, growing globally by more than 20 per cent a year. Axor has every intention of grabbing its share of this growth by seeking out other projects.

But the road to success has often been rocky and slow. Montreal entrepreneur Patrick Foody oversaw the development of Iogen Corp., an Ottawa concern whose ethanol-from-plants technology promises to create the world’s most promising alternative to conventional auto fuel. However it took two decades of struggle before its promise began to be realized. Foody laughs that his wife, Helen, who is Iogen’s chief financial officer, used to call the firm “Sinkhole Technology.”

Renewable energy is gaining undeniable credibility, however, as it attracts investment from big multinational corporations that rarely waste time on marginal business opportunities. British Petroleum is not only an oil-industry giant but also the world’s biggest maker of the photovoltaic cells that turn sunlight directly into electricity.

Closer to home, Montreal’s Bombardier Inc., which last year produced $8.5 billion worth of transportation products ranging from snowmobiles to jet airliners, has given the venerable electric car a new look, some new technology and a new lease on life.

Bombardier’s two-passenger NV (for neighbourhood vehicle) promises to become a cheap, practical alternative to a second car in the U.S. sunbelt. (The Canadian winter, which is hard on batteries, makes the car less practical here, and it isn’t yet sold in Canada.)

Although Bombardier can’t expect such an unusual vehicle to gain overnight acceptance, the NV has been popular enough to delight at least some of its 50 dealers. About 2,000 have been sold in its first year since mass production began in Sherbrooke, representing retail sales of roughly $15 million U.S.

These four companies, whose products promise to be among the most successful in Canada’s renewable-energy business, embody some important lessons about how hard it can be to convert a wonderful idea into a profitable product.

– – –

Among the four, Iogen is the company whose technology is probably the most complex and whose development time was the longest.

Its intellectual father is company chairman Patrick Foody, a 68-year-old Irish-born engineer with seemingly endless entrepreneurial energy and 10 patents to his name.

The genesis of Iogen was Foody’s effort in the 1970s to find a new, low-cost source of feed for farm animals by breaking down the fibres in otherwise-indigestible plant materials like wood scraps. By the time this proved to be a dead end, the oil crisis had struck and Foody switched his efforts to producing ethanol – a form of alcohol that can be mixed with gasoline to produce a high-quality auto fuel.

Ethanol – the ‘Holy Grail’

Ethanol is already used in some gasoline, but its source is costly grain, making it uneconomical without heavy subsidies.

But ethanol produced from agricultural by-products like grain straw or corn stalks would be a very different animal – not only cheaper, but more environmentally friendly, since it would recycle waste products. From an environmental standpoint, “it’s really the holy grail of transportation fuels,” saidAdams of Energy Probe.

The problem, however, is that the cellulose in straw and other waste products is a lot harder to convert into alcohol than the starch contained in grains. It requires an enzyme – a special protein produced by living organisms to help along a chemical reaction – that can work with cellulose rather than starch.

It has taken 10 years for Iogen to develop an organism that can produce such an enzyme cheaply enough to make the resulting ethanol economically attractive. Today the company, run by Foody’s son, Brian, calculates that it can make ethanol from just about any plant waste for 35 cents a litre, or about 30-per-cent cheaper than ethanol from grain. Within the next few years, advances in enzyme technology will cut that price to 25 cents, says Brian Foody.

As a result, Petro-Canada plans to partner with Iogen, building a demonstration ethanol plant next year that will cost up to $30 million. Petro-Canada has the right, if the process proves economically viable, to build full-scale ethanol refineries that would cost about $150 million each.

There’s certainly plenty of raw material available for such plants. At Reap Canada, a Montreal firm that researches industrial uses for agricultural products, economist Patrick Girouard says Canadian farmers produce enough agricultural-waste products to make about 15 billion litres of ethanol, equivalent to nearly half the gasoline used in Canada each year.

Such a development would catapult Iogen from being a $15-million-a-year producer of industrial enzymes into being a key player in a multi-billion-dollar industry. And it would help cut the output of greenhouse gases, since ethanol from waste produces virtually no carbon dioxide, unlike the process used to produce ethanol from grain.

– – –

Like Iogen, John Hollick’s solar-heating technology was anything but an overnight success. Hollick got into the solar business because it seemed blindingly obvious that if he could find a low-cost way of altering a building’s wall (preferably the south wall) to capture free energy from the sun, there would be plenty of customers.

But that didn’t reckon with the conservatism of architects and consulting engineers who usually decide what kind of wall covering and heating system will be used in an industrial building. After years of meagre sales, Hollick came close to leaving the solar-energy business to run a vineyard.

But since that crisis nine years ago, his fortunes have turned. A new version of his Solarwall cuts the cost of solar heating dramatically. The Organization for Economic Co-operation and Development looked at the system and found that it can pay for itself in as little as 16 months – before the hefty government subsidies for renewable energy available in Canada and many other countries.

Although Hollick’s patented system is simple in concept, it took years to perfect.

He creates a solar-collector chamber by installing a wall of ordinary-looking metal siding about 15 centimetres outside the structural wall of a building. When sun heats the metal, the secret of Hollick’s technology comes into play: the wall is perforated with tiny holes a few centimetres apart, which enable a fan in the building to draw in the air heated by the outside metal surface before it can be blown away.

This trick, which required painstaking experimentation with hole size and spacing, produces fully 50 per cent of the warm air produced by a Solarwall system. The rest of the warming occurs as the air flows through the holes and up the inside of the chamber.

Solarwall heating systems, which are actually at their most efficient in the middle of the winter when the sun is low and the air is clear, can now be found all over North America at big buildings owned by outfits like Ford, General Motors, Federal Express, the U.S. army and Ontario Hydro.

A new market is developing in the tropics, where Solarwall systems are being used in India, Malaysia, Indonesia and the Caribbean to dry spices, tea, cocoa and other agricultural products. And, perhaps most impressive of all, a Solarwall system helps to heat the United States Antarctic Research Station near the South Pole.

– – –

The challenge for Bombardier’s NV is not so much technology as marketing. The technology to produce a serviceable electric car has been around since about 1900, when electric cars were actually preferred to their noisy, unreliable gasoline-powered counterparts.

But the problem with electric cars is still the same one that killed the industry 90 years ago: they can’t go very fast or very far because a bank of batteries can’t hold nearly as much energy as a tank of gas.

But nearly a decade ago, Don Sperling, director of the Institute for Transportation Studies at the University of California’s Davis campus, thought of a clever solution.

He figured that the speed and range of an electric car would be no problem if it was a tiny car intended to be used purely for errands, since 80 per cent of urban trips last less than 10 minutes and nearly 90 per cent involve only one or two people.

In the U.S., where Sperling estimates that 60 per cent of households have at least two vehicles, such a cheap second car for local use could be attractive to many. That would be especially true in retirement communities or other planned communities with lots of stores and services available within a short distance.

Sperling seems to be right. The use of golf carts as second or third cars has already taken off in recent years, with an estimated 400,000 on U.S. roads. The two-seat NV is designed to be more road-ready than a golf cart, with a hard roof, windshield, automotive headlights and tail lights, seatbelts and 40 km/h top speed (compared with a golf cart’s 25 km/h). It’s more expensive, too, typically costing about $8,000 U.S. compared with the $5,000 to $6,000 price tag for a golf cart.

Customers ask pointed questions about the price, acknowledges Dwight Swan, manager of an NV dealership in Sun City, a Florida retirement community, but many are persuaded to pay it for the extra comfort and safety. Swan’s Sun City NV Centre has sold 45 of the little vehicles in its four months in business, which is enough to make him very happy.

How long will it take before the NV is a common fixture in sunbelt homes? Sperling is cautious, warning that it can take many years for a nifty new product to win a place in the hearts of consumers. Pierre Arsenault of Bombardier, who’s in charge of marketing the NV, notes only that his company is a patient one, saying: “Bombardier likes to pick niches and then build them.”

– – –

The Axor Group, on the other hand, is not a patient company. It is a point of pride with Dupont, its president, that Axor has a reputation for building large commercial and industrial structures within budget and very often ahead of schedule.

The $160-million Nordais wind farm, to be built by Axor on sites near Cap-Chat and Matane, will represent a big jump in Canada’s wind-power production. Its 100 megawatts of output represents five times as much wind power as is produced by all the other sites in Canada. That will help Hydro-Quebec, its customer, meet a new U.S. requirement that those who sell power in that country derive at least 5.5 per cent of their revenue from non-hydroelectric renewable sources.

Because it is using a new energy technology, the partners in the Nordais project will receive 5.4 cents for each kilowatt of electricity, which is a cent or more above the price of the most efficient conventional power plants. But such special support won’t be needed for long. Dupont expects wind power to be fully competitive within another five or six years, and he is already scouting several other potential wind-power projects.

His optimism is buttressed by a new report on renewable energy from the International Energy Agency. It notes that wind energy is already very close to the cost of electricity from conventional power-generating plants and predicts a further drop of 25 to 30 per cent over the next 10 years.

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