Federal program freeze could hinder clean tech progress, industry says

Industry associations are worried the temporary suspension of federal funding for clean tech startups will hinder small companies trying to get off the ground.

Sustainable Development Technologies Canada (SDTC), a federal foundation that distributes funds from Innovation, Science and Economic Development Canada to support the growth and development of precommercial cleantech companies, has an agreement with Ottawa to spend $1 billion between 2021 and 2026.

However, funding was suspended on Oct. 3 by Innovation, Science and Economic Development Minister François-Philippe Champagne until the foundation addresses concerns raised in a recent fact-finding report.

The third-party report — prepared by Raymond Chabot Grant Thornton — questioned the foundation’s decision to distribute $38 million in "relief payments" during the first two years of the COVID-19 pandemic in 2020 and 2021.

SDTC said its board of directors and leadership team are reviewing the report and taking action to “implement the recommendations as quickly as possible to minimize disruption to Canada’s sustainable innovation ecosystem.”

“The report found no clear evidence of wrongdoing or misconduct at SDTC and indicated that no further investigation is merited,” the SDTC pointed out in a statement published on Oct. 4.

Until the foundation has implemented the recommendations — which it anticipates will be complete by the end of 2023 — no new projects will be approved and no new applications will be accepted.

Maike Althaus, executive director of the Canada Cleantech Alliance — a coalition of 22 clean tech industry associations and accelerators across the country — said in a press release that SDTC must act quickly to unfreeze the funding because “a delay of a few months can be a death sentence for a cleantech startup.”

A predictable and stable business climate is important for all companies, but especially startups, said Althaus, adding that new companies face “critical milestones” in commercializing their technology.

She called the federal foundation “a key driver of Canada’s transition to net zero,” noting SDTC’s funding programs play a “vital role” in Canadian climate innovation.

SDTC is an arm’s length, not-for-profit, foundation established by the federal government in 2001. It has funded a wide range of clean tech companies over the years, from EV charging infrastructure to farming techniques to methane reductions.

The B.C.-based company Cascadia Seaweed is getting $4.3 million in startup funding to keep developing its seaweed-based agricultural feed supplement. It was among six companies that SDTC announced it would fund last September. Clear Blue Technologies got $5 million to aid development of compact solar power solutions for off-grid telecom applications and $2 million was earmarked for a Vancouver company focused on creating organic waste infrastructure to help municipalities keep that waste out of landfills.

Other funding recipients included companies involved in producing lithium-ion batteries, providing farmers with soil data, hydrogen production, recycling of various materials, uses for captured carbon dioxide and methane, emission management software for oil and gas companies and green building strategies.

SDTC said the pause will not affect “regular business operations,” including the disbursement of funds for existing projects in its portfolio.

Natasha Bulowski / Local Journalism Initiative / Canada’s National Observer