Only rarely do I read an article and think to myself, damn, I wish I wrote that. But, in late September, Eric Reguly, a business and economics columnist for The Globe and Mail, wrote an article entitled “Canada needs a new breed of corporate champion, and clean energy is the place to look,” which I wish I had written, and will borrow from here with appropriate attribution.

Reguly argued that the one predominant theme of his columns over the past two decades has been the hollowing out of Corporate Canada. “Through foreign takeovers, deep recessions or inept and feckless management, industry after industry has been gutted,” he wrote.

In support of his thesis Reguly cited several examples, including: BlackBerry going from global smartphone dominance to has-been; the crumbling of Ontario’s auto sector; the dismantling of Bombardier as a major aerospace company; and now Canadian oil companies falling out of investor favour as the world becomes increasingly serious about decarbonation.

And now the zinger in Reguly’s own words, and which relates to some of my recent columns for the Daily Oil Bulletin, especially Time For Alberta To Build A Cleaner Economy.

“As the country searches for industries to replace those it has lost, or is busy losing, lunging into renewables would be a smart strategy — not just the production of clean energy but the technologies behind it. Alberta is the obvious province to lead the charge. It has the entrepreneurial spirit, capital, technical know-how and big-project mentality to make a name for itself in the clean-energy revolution.”

The potential is certainly there for Alberta and the opportunity is huge. But global competition is already intense, and it will become even more so if Joe Biden wins the U.S. presidential election in November — leaving Donald Trump and his fossil fuel loving ways in the dustheap of history.

If Alberta is to be successful in the clean energy sphere, it must be much more strategic than it has been with past economic diversification efforts (see Blue Hydrogen Better Bet For Alberta Than Petchems), identifying niches in which it has a competitive advantage compared to the global competition. In addition, the province must significantly improve its innovation game, which will require massively more government spending on research, development and demonstration (RD&D), and even commercialization to a degree as well.

Global opportunity and competition

In 2019, global investment in clean energy systems was almost US$300 billion, maybe only 15 per cent of total energy investment, but a massive 800 per cent increase over the past fifteen years. And as major countries and companies continue to climb onto the zero-emissions bandwagon, clean energy investment is likely to dominate total investment much sooner than most prognosticators currently think.

At the same time, the International Energy Agency (IEA) is warning roughly half of the greenhouse gas (GHG) emission reductions required to avert catastrophic climate change in the coming decades must come from technologies that have yet to be commercialized. On that note, the agency has identified 46 energy technologies that it considers critical to achieving deep carbonization, with only six presently progressing quickly enough.

The four countries that have industrialized the most since the end of the Second World War –Germany and Japan, especially through the 1980s, and China and South Korea since then — are all presently leaders in the clean energy sphere, powered forward by aggressive industrial policy, as was their overall industrialization — or re-industrialization in the case of post-war Germany and Japan — in the first place.

Industrial policy for Alberta?

Rather bizarrely, despite the incredible success of Germany, Japan, China and South Korea, industrial policy is still considered a dirty phrase in North America. We don’t pick winners. We ain’t no commies — or fascists. The market is always right.

Well, I hate to break it to you all, but it’s our inherent belief in a laissez-faire planning system that got us into our present predicament. And a lack of industrial policy is what led the Alberta government to invest in areas as dumb as a cellphone company, hazardous waste treatment plant and a magnesium smelter in the past.

An intelligent industrial policy team would have asked what’s the potential market, who are the actual and probable competitors, do we have enough financial wherewithal to be successful, and where’s our competitive advantage. Reguly gets it. He understands that Albertans know energy, and have the technical know-how and entrepreneurial spirit to tackle some of the clean energy challenges required to put the world onto an environmentally sustainable path.

But which challenges? In which clean technology areas does Alberta have a competitive advantage? To the credit of the Kenney government, even without a formal industrial policy process, it recently identified two areas that are highly synergistic with our current oil and gas industry. These are blue hydrogen, as highlighted in Alberta’s Natural Gas Vision and Strategy, and geothermal energy, which the province is now planning to create a regulatory framework for.

However, where industrial policy would have come in handy, besides the intelligent and systematic identification of other possible clean energy areas to target, is in terms of timing. The Alberta government seems to think it can roll out its hydrogen roadmap as late as 2023, and has until 2040 to establish sales of clean hydrogen across Canada, North America and the world.

The window of opportunity for building up a blue hydrogen industry is likely the next 10 to 15 years, at which point green hydrogen should become economic and take the clean hydrogen growth baton. And our most likely competitors for the blue hydrogen market in the interim, Australia and the U.S., especially if Biden is elected president. The Australian government released its hydrogen roadmap in November 2019.

Alberta scores a ‘D’

Where Reguly was wrong, as are many others, was thinking Alberta is some sort of technological innovation machine, supported with capital aplenty. The Conference Board of Canada, as part of its How Canada Performs occasional series, provides innovation report cards for 16 advanced countries — including Canada — and the 10 provinces. In May 2018, it gave Alberta an overall grade of ‘D’, a mere nineteenth place finish among the 26 jurisdictions under consideration, and trailing behind Ontario, Quebec, British Columbia and Canada as a whole.

"Our innovation report card once again confirms that Alberta is a province of self-starting entrepreneurs, as it ranks first among the provinces on both entrepreneurial ambition and enterprise entries," the Conference Board wrote at the time. "But low and failing rankings on a number of indicators, including researchers engaged in R&D, venture capital investment, public R&D and business enterprise R&D leave Alberta near the back-of-the-pack on innovation performance overall."

The lack of public and private spending on R&D in Alberta seems especially shocking since the oilsands industry has been under siege by the global environmental lobby for well over a decade, and until five years ago the province and our oil and gas industry was making money hand over fist. A more rapid rate of technological innovation to decrease the industry’s carbon footprint and other environmental negatives may have put the ‘dirty oil’ lobby on its back foot.

Need for big-time federal bucks

A key to successful industrial policy once the correct target areas have been identified is aggressive and sustained government funding, whether direct funding or tax credits and the like, over the three stages on the innovation path: entrepreneurial, venture and economic development.

Believe it or not, under aggressive industrial planning, the really big government bucks aren’t needed for RD&D, but when a promising innovation attempts to shift from demonstration to commercial scale, known as the ‘Valley of Death’, when government funding is rare under a laissez-faire system.

Unfortunately, after transferring roughly $650 billion to the rest of Canada over the past six decades, and five years of economic hard times culminating in the COVID-induced global economic depression and yet another oil price collapse, the cupboard is now bare in Alberta — and there being little likelihood another high oil price era will bail the province out (see Another Oil Price Boom On The Horizon?).

As a result, the federal government should get ready to open the vault once Alberta develops a coherent industrial policy to create corporate champions in the clean energy sphere. And Prime Minister Trudeau, we’re talking multibillions here, not hundreds of millions, if we’re going to successfully compete against the big boys.