November 8, 2019 By Ellen Cools
As governments, industries and the general public become more concerned about the threat of climate change, the bioeconomy is set to play a major role in developing a low-carbon, circular economy. But there are multiple barriers to this, such as the need for more capital to scale up projects, more communication with the public, and more access to market.
At the Scaling Up Bio 2019 conference from Nov. 4-6, in Ottawa, speakers spoke about these and other issues to 195 attendees. The theme of this year’s conference was “delivering a bio-circular economy.”
In his opening remarks, Jeff Passmore, conference organizer and CEO of the Passmore Group, touched upon the importance of communication and collaboration. “Let’s collaborate to make the future happen,” he said.
A ‘pan-Canadian opportunity’
Sandy Marshall, chair of Bioindustrial Innovation Canada, kicked off the presentations, noting that the bioeconomy is “a truly pan-Canadian opportunity.”
Given the size of Canada’s forests and agricultural fields, the bioeconomy will help all provinces’ economies diversify, he explained. But to do this successfully, industry needs to take advantage of the infrastructure in place in the forests and integrate into the circular economy.
This is not possible without the commercialization of bio projects, Marshall argued.
This is where the BioDesign Consortium comes into play. The group has a shared vision for the future of the bioeconomy: creating a biomass climate that supports scaling up Canadian companies, establishing a committed innovation policy and financing, developing innovation clusters, and building anchor companies in Canada.
“The bioeconomy is an enabler, we must look at it as a strong driving component of economic growth in forestry and agriculture,” Marshall said.
Iain Stewart, president of the National Research Council of Canada (NRC) agreed, noting in his presentation that clusters like BioDesign have helped start a dialogue within the industry and between government, universities and non-profits.
There is “no simple answer for why the sector is not achieving its potential,” Stewart said. There are a range of barriers, such as regulatory and market issues, and the need for financial investment, expertise and know-how.
The National Research Council is “a resource available to your sector,” he told the audience. The NRC conducts research for clients, supports business innovation and public policy, and develops intellectual property in collaboration with companies. Small companies looking to scale up their business can apply for the Industrial Research Assistance Program, Stewart explained.
“We work with small organizations on their terms and decide when they’re ready for more funding, working to help them grow,” he shared.
‘Enough money to fail’
Although there are many organizations that provide funding or research assistance, Wal van Lierop, executive chairman and founding partner of Chrysalix Venture Capital, noted the one big problem in the Canadian bioeconomy: “We give them just enough money to fail.”
Van Lierop explained that there are four interconnected trends changing the world economy: the global climate crisis, mass urbanization, population growth and digitalization.
“To create opportunities, we need disruptive innovation and clean tech,” he said. “We need intelligent systems that will tackle climate change.
“We need breakthroughs if we even want to have a chance of coming close to what we need,” he continued. The big question, then, is who is going to finance the breakthroughs?
“Of the $40 trillion in global pension funds, only $8 trillion has been divested from the fossil fuel industry,” he shared. Additionally, the oil and gas industry was built off subsidies, so “is it realistic to expect the rise of a new energy industry with very limited subsidies?” he asked.
“If we are serious about the new energy industry, we need to start thinking of bifurcation in funding,” he argued.
To raise this capital, van Lierop believes the Canadian bioeconomy needs a clear strategy on how to capture the right returns, as well as increased marketing and communication. Industry also needs to find influencers and business leaders to help with this economic transformation, along with capital from sovereign wealth funds and pension funds. The government also needs to be persuaded of the importance of their contributions.
Reducing risk and attracting capital
There were approximately 50 government representatives in the room at the conference, and several of them gave presentations, including Green Party parliamentary leader Elizabeth May, who gave the keynote speech on Day 1.
Multiple investors were also in attendance and spoke about the bioeconomy’s need for capital. They shared the key criteria they look for when investing and how to reduce risk through capital assistance and insurance.
Speaking of risk, Jordan Solomon, president and CEO of Ecostrat Inc., shared some exciting news: the company, in collaboration with Natural Resources Canada (NRCan), has developed The Canadian Standards for Biomass Supply Chain Risk (BSCR) to help capital markets better understand the risk associated with feedstock in biomass projects.
Applying a rules-based, standardized approach to quantifying risk is a proven way of reducing capital markets’ perception of risk, Solomon explained. The perception of risk is particularly high in biomass projects because suppliers are often small and almost never investment-grade.
But when the BSCR is applied to debt cost of biomass projects, the actual costs go down, Solomon shared.
“The margin for error is lower so financing costs are lower, and this accelerates the deployment of capital,” he said. “It also helps prevent project failures due to improper or inadequate assessment of feedstock risk.”
Ecostrat will carry out multiple Canadian case studies over the next year, and the Canadian Standards Association is in the process of transforming the standards to a National Standard of Canada.
The company has also formed a review committee, consisting of over 40 members, representing more than $50 billion in deployable “bio-targetable” capital from investors, Solomon shared.
But as multiple speakers noted, it is difficult to get capital investments in Canadian bio projects. In an interview with Ian McKay, CEO of Invest in Canada (a new government agency tasked with increasing the flow of global capital into Canada’s economic ventures), Passmore asked multiple questions about Canada’s economic position in the world, Invest in Canada’s efforts to attract capital, and how this could help Canada’s bioeconomy.
The forest bioeconomy
Day 2 of the conference kicked off with a keynote from Stéphane Renou, president of FPInnovations.
Renou spoke about the importance of forests in the bioeconomy: “The forest is a key solution for economic growth, climate change and regional development.
“Every molecule that comes from biomass with wood is a benefit to the environment,” he added.
But there are a few things the forestry industry needs to do in order to create a carbon sink, he said, such as managing the forests actively, developing performance-based codes in building with wood, and getting into the value-added economy.
The key to all of this is collaboration. In particular, Renou argued that we need a critical mass of scientists. The scientists need to change from “people who develop knowledge to people who develop solutions.”
A critical mass of scientists will result in open dialogue between scientists and end users, ensuring research is done to solve specific problems. FPInnovations is working to connect scientists with industry and end-users so the industry can “innovate fast and first,” he said.
Continuing with the focus on forestry, Bob Larocque, senior vice-president at the Forest Products Association of Canada (FPAC), moderated a panel discussion called “Canada’s Forest Bioeconomy: Strategic Innovation for Commercial Success,” with Chris Walton, executive director of the Centre for Research and Innovation in the Bio-Economy (CRIBE), Pascale Lagacé, vice-president, environment, energy and innovation for Resolute Forest Products, and Marco Veilleux, vice-president of business development and strategic projects for Fortress Global Enterprises.
“Canada is excellent with pre-development and development research but we really struggle with scaling up,” Walton said. Based on consultations across Ontario, CRIBE discovered the industry is not sharing information and collaborating along the value chain.
To help overcome those challenges, CRIBE has launched Nextfor, an Ontario forest-based innovation network that plans to do “intentional, targeted collaboration with industry leaders to move development forward.”
Currently, the industry is struggling to get end users to come to the table, Walton said. In fact, there were no end users in attendance at the conference.
“Without them, we can’t get the necessary feedback,” Walton said. “We need end-users to recognize there’s a value in this product and start collaborating.”
Veilleux agreed, adding, “We need to have open-based knowledge and innovation to avoid duplication and waste of resources.
Legacé, meanwhile, shared some of the challenges Resolute has faced in its efforts to move from the commodity market to the specialty market.
“The real value with bioproducts is to penetrate other markets,” she explained. But this is difficult because “when you get into non-traditional markets, you are talking to very different industries with different languages, KPIs are different, and what they’re looking for is different.”
For example, to get customers to switch from petroleum-based products to bio-based products, they might need to change their manufacturing process.
Consequently, you need to be transparent and work with customers to help them in the transition, Legacé said.
Some customers don’t want to invest the money to make that transition, so identifying the target market is key. Resolute has found more success working with small players because they want to develop niche projects and, for pilot plants, that’s the scale you want to work with, Legacé explained.
“We have a supply problem in Canada,” Walton added. “If a large company was interested in a biotech substitution of 15-20 per cent of their product, we don’t have the supply for it.”
This is where policy can play a role, Veilleux said. He believes a federal bioproduct procurement program is needed.
Many other speakers also called for more commitment from governments and policy to help establish the industry and level the playing field. This year, Scaling Up also had a “feature province”: Nova Scotia. Speakers from Nova Scotia shared how the province’s industrial ecosystem has helped them scale up their companies.
Scaling Up Bio will return to Ottawa Oct. 26-28, 2020, at the Fairmont Chateau Laurier.
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