Global Courant
The timing couldn’t be better for Calgary-based Kanin Energy to open a Texas office last year. It was just as the US government unveiled its massive climate bill, including tens of billions of dollars in new subsidies and other clean energy incentives.
Kanin Energy develops facilities that use high-temperature waste heat from industrial facilities to produce electricity. The new US grants now cover up to half of the costs of those projects.
“Not only are we seeing a lot of traction in Houston and Texas and in the United States in general, now there’s all these incentives that have really boosted our economies for our projects,” said Janice Tran, the company’s CEO, from her Houston office. “So it made even more sense to actually kind of double down and grow here.”
US President Joe Biden’s Inflation Reduction Act (IRA) is pushing many Canadian clean energy startups to move their focus and resources south of the border to take advantage of the subsidies and associated influx of business .
Experts say this could lead to a loss of investment in Canada, which could slow the development of clean energy and emission reduction projects north of the border and make it more difficult to meet national climate goals. There is also the risk of losing skilled workers, known as brain drain.
Canadian government is introducing its own grants, but some industry executives say Ottawa’s support is too narrow or not robust enough to compete with what’s on offer in the US
For Tran, her company is not eligible for the investment tax credit in Canada, which can cover up to 30 percent of the cost of much green energy and clean technology. projects such as renewable energy, battery storage and hydrogen production.
Kanin Energy is now hiring in the US and will begin relocating staff south of the border if it doesn’t get traction with its Canadian proposals.
“We’re going to grow in the United States because it makes sense there,” Tran said. “In Canada, the economies are just not that high. So we don’t have any projects that are currently in late stage development. Everything we have in Canada is early stage.”
LOOK | Canada’s investment deduction against the US IRA:
Canadian cleantech CEOs on what the US is doing right with the IRA
Robert Delamar of Kanata Clean Power and Janice Tran of Kanin Energy compare grants offered on both sides of the border.
Heading south
Dozens of multibillion-dollar energy transition projects have been approved since passing the IRA last year, said Kevin Krausert, CEO of Avatar Innovations, an energy innovation and investment firm.
“Companies are currently fleeing Canada,” says Krausert. “I can’t think of an interesting energy tech startup working on net-zero ambitions that isn’t currently actively establishing itself in the United States.”
The federal government should provide incentives similar to the IRA, he said, to slow down the amount of investment dollars leaving Canada.
“If you are an investor and you want to invest a dollar in emission reduction technologies, are you going to invest that dollar in Canada or are you going to invest in the United States where you can get a much better return right now?” he said.
The federal government this month began consultations on its proposed investment deduction. Government officials say the tax credit is part of the overall strategy to attract investment in clean energy. Overall, Ottawa has pledged $120 billion since 2015 to build a clean energy economy, a spokesman said.
“We will continue to work hard to build Canada’s clean economy into the 21st century and provide more high-paying middle-class jobs, more vibrant communities and more prosperity for Canadians for generations to come,” said the spokesman for the financial services company. department, Adrienne Vaupshas, in an email. rack.
Despite criticism, a TD Economics report in April said the federal government’s financial support for the clean energy transition “is yielding positive results and has gained competitiveness relative to the US.”
The report been careful the country’s competitiveness in the coming years will depend on continued investment and other factors such as improving skills development and speeding up project appraisals.
Last week Treasury Secretary Chrystia Freeland pointed to the deal with Volkswagen to build a new battery plant in Ontario as an example of how Canada is competing with subsidies offered in the US
“We simply could not and would not accept a universe where investment from Canada is sucked south of the border. And so when the IRA came into place, we understood that we had to level that playing field and make sure Canada was competitive,” , she told reporters.
Despite the US subsidies, some analysts south of the border and here in Canada say governments should not pick winners and losers in business or engage in a financial arms race to lure taxpayer investment.
The federal government’s investment tax credit aims to provide subsidies to the clean technology sector and to reduce emissions, such as the construction of carbon capture and storage facilities, such as these at Shell’s Scotford complex northeast of Edmonton (Kyle Bakx/CBC).
Historic Climate Expenditures
The IRA will provide $370 billion in grants, but the real value will be the amount of investment it could attract.
The bill creates the most supportive regulation in clean technology history, according to Goldman Sachs Research, which estimates the IRA’s impact could spur $11 trillion in total infrastructure spending by 2050.
Because of the subsidies, Kanata Clean Power focuses less on Canada and more on the US. The company is proposing to build a plant in Wyoming to produce ammonia from natural gas, primarily for the fertilizer industry.
The facility would be part of a much larger system to capture emissions from industrial facilities and store them underground. Kanata is part of a consortium of companies pursuing the project, which has received funding from the US government.
The U.S. climate bill is an “incredible financial stimulus,” said company chairman Robert Delamar from his Vancouver office.
“We’re talking hundreds of millions of dollars a year over the 12 years the subsidy will be in effect. So that ends up being about two-thirds of the cost of building an ammonia plant,” he said.
The company is proposing a similar ammonia plant in Alberta, but Delamar said Canada’s investment tax credit is more complicated because certain devices would receive different levels of subsidies than others.
“It’s just cheaper to build these facilities in the United States because of the IRA,” he said.
Kanata’s largest shareholder is the Frog Lake First Nation, about 125 miles east of Edmonton.
Canada is not the only country feeling pressure to compete with the IRA, as many heads of government in Europe and other parts of the world have experienced. blinded by the climate law and now have to decide whether to introduce substantial subsidies themselves.
