The vast energy sector that fueled Canada’s economic engine has been running on empty lately. In large part, that’s because the global market is now drowning in cheap oil. On the west coast, BC’s much-hyped but costly LNG project may still be moving through the pipeline, but only because government and investors are willing to bet on revenue streams coming online up to four decades out. Given all that, how can Canadian ingenuity and entrepreneurship make this country an energy superpower once again by exporting technology innovation?
BetaKit chatted with Chrysalix Energy Venture Capital CEO Wal Van Lierop in Vancouver to get the answers. Chrysalix is one of the longest running VC firms focused on alternative energy – and potentially, revolutionizing traditional energy source extraction. Van Lierop brought both energy and insight to the conversation.
Let’s kick this off with a big-picture view of where the energy sector is at.
Van Lierop. Technology is advancing much more quickly than anyone anticipated, leaving major opportunities. For instance, just five years ago, the most trusted experts were saying solar power would be adding 20 gigawatts to the global grid by now. We ended 2014 at 180 gigawatts. Solar is smashing those forecasts.
That’s just on the energy production side. On the consumer side, technology is changing how we’re using energy. For instance, we’re starting to redefine personal transportation. Car ownership in North America has dropped very significantly as more people are using alternatives like Modo, Car2Go, Uber and the like.
Then there’s the driverless cars space. Apple and Google are about to join in, with their engineers developing self-driving vehicles quickly. Meanwhile, Volkswagen is developing hybrid diesel vehicles that get 100 km to the liter – which is more efficient than Tesla. Does this mean the internal combustion engine gets a revival? Maybe.
You’ve said the resource development sector needs more innovation and investment to upgrade its technology. What are the implications for the Canadian oil patch?
Alberta oil sands are challenged from both a cost and environmental point of view. All of the easy-to-get oil is gone, but we can still drive down the cost of extraction to make it profitable to develop these marginal fields. But we can’t start new fields in the next 5 to 10 years without some significant breakthroughs – ideally, capital-light improvements where you get local upgrading.
The steel industry went through this kind of transformation about years ago, with the development of mini-mills. That’s the model they need to find, with capital-light applications that can quickly adapt to fluctuations in oil prices… They’ll innovate or die.
What does that innovation look like?
Glasspoint is a great example (VC-funded by Chrysalix). They’re using solar to improve the oil industry in the Middle East.
All the free-flowing oil there is gone, so they need to get the heavy oil out. To do that, you need to inject steam, which traditionally is powered by natural gas, to get the oil out of the ground. You’re not only losing the value of the natural gas, but that kind of operation is causing a bigger environmental problem.
Glasspoint’s solar solution has already been operating in Oman for three years and it’s been working flawlessly. As a result, they’ve just signed a deal with Oman to build one of the world’s largest solar plants. It’s a $600 million investment, to develop this 1,021-megawatt power plant, to get that oil out of the ground.
This kind of solution hits the heart of the problem, making exploitation of oil more benign and lower-cost. Now, we’re challenged in Alberta, if you think about trying to use solar power in winter – but that’s an example.
Fair enough. What other examples were you thinking about?
We’re excited about Vancouver-based Minesense. The mining industry needs a lot of innovation. In a lot of cases, the only innovation they’ve seen is bigger tires, bigger mines and bigger machines. The hit rate of getting the valuable stuff vs. the dirt we remove has gone off the scale. This is common, now. One of the biggest gold mining companies in Canada told us that top quality reserves are long gone. We’re all trying to make do with B and C quality reserve sites. Meanwhile, on a daily basis, power use and waste-water is an enormous problem.
Minesense brings sensors and artificial intelligence to the mining industry. The first solution comes with the actual scoop of the mining equipment. In real time, the machine driver gets a read whether that scoop is worthwhile to bring back for refining. This has the potential to reduce removal of waste rock by up to 50 percent. That’s a huge improvement of productivity and an enormous reduction of the environmental impact. Their real-time sensors also help with bulk ore sorting on a conveyer belt, improving efficiency and making mining of even lower-grade ores economical.
So how do we power up this side of the Canadian tech sector?
This comes back to why Canadian companies don’t have more unicorns. We don’t have industry strategies in most provinces compared with what other OECD countries have. They’ll say our government shouldn’t pick winners – but virtually every other country is already doing that. It’s important to find your competitive advantage and exploit it.
Aligned with this hurdle is the problem that we don’t provide enough hard capital. The investor community here is largely focused on early-stage financing, which doesn’t develop the rigidity necessary for companies to grow in big markets. We don’t have well-supported VCs who can help our companies become recognized players in a global stage.
The Hootsuites of the world will always get funding. But we have many companies that won’t get funding because they don’t have the right matchmakers. But that’s what you need.
There are 9,000 early-stage tech companies in BC that could benefit from this and most of them won’t reach their potential. Only a handful will make it to the world markets. If we could set a target of a unicorn a year, that would be fantastic!
