Fortunately, the way buildings are being constructed in Canada is changing for the better. With the strengthening of Municipal building codes, real estate/condo developers have increased their focus on energy efficiency. If a developer is looking to meet (or exceed) city or building energy code requirements, implementing a geoexchange system is one of the best ways to do it.

What is the difference between geothermal and geoexchange?

The term “geothermal energy” points to a wide range of technologies. For example, when people talk about conventional geothermal technology they’re often referring to deep-drilled geothermal systems that extract high-temperature heat from kilometers below the earth’s surface – usually seen in industrial geothermal power plants.

Conversely, geoexchange is a form of shallow geothermal technology typically used to heat and cool commercial and residential buildings and houses.

How does a geoexchange system work?

Geoexchange systems use ground-source heat pumps to tap into temperature differentials just below the earth’s surface, typically at a depth between 45 to 120 meters (150 to 600 feet). During the winter, heat (energy) travels through a series of fluid-circulating pipes in contact with the ground.

The pipes use fluids (like water or glycerol) to carry heat from the Earth to the building, providing warmth through a duct system. In the summer, the heat of the building is transferred to the ground and then dissipated through the system’s loops, generating cool air in the process.

What are the benefits of a geoexchange system?

Geoexchange systems use the earth’s temperature to distribute heating and cooling, therefore they don’t require the burning of fossil fuels or any materials to operate. Once installed, the piping doesn’t need maintenance and the above-ground portions of the system require less maintenance than traditional systems.

These systems offer not only environmental benefits but also ensure safety with their odorless, flameless, and carbon dioxide-free operation, eliminating any fire hazards. The comfort of tenants is also enhanced since they provide a well-balanced distribution of heating and cooling, eliminating the common issue of uneven temperatures experienced with conventional systems.

What’s more, a geoexchange system can decrease a building’s energy use by 33%, greenhouse gas (GHG) emissions by 47%, and are as much as 400% more efficient than conventional HVAC systems – which translates into lower electric bills every month.

Breaking the cost barrier

One of the main reasons why geoexchange systems aren’t more commonly implemented is traditional HVAC systems are cheaper to install. Or at least they are initially; given the energy savings, geoexchange systems pay for themselves over time with demonstrated paybacks of between 5 to 7 years.

Targeted financing from the government and government agencies in Canada can also help pay for geoexchange projects. In Toronto, for example, the Toronto Green Standard Development Charge Rebate is available to projects that achieve higher levels of energy and carbon performance. For developers that want to own and finance their system, the Government of Canada provides business income tax incentives under Classes 43.1 and 43.2 in Schedule II of the Income Tax Regulations.

If developers wish to avoid the cost of installing the system altogether, they can engage clean energy utilities or third-party providers like Subterra Renewables, a leading low-carbon district energy developer, to be the owner/operator of the system.

Partnerships to unlock geoexchange potential

Through a construction financing partnership with Forum Equity Partners and Vancity Community Investment Bank (VCIB), Subterra Renewables has supported multiple geoexchange systems in the Greater Toronto Area.

“Despite the clear benefits, residential-scale geoexchange projects are usually too small to attract infrastructure financing from banks or pension funds who are searching for deals of $20 million or more,” explained Alfred Lee, Manager of Climate Finance at VCIB.

“Specialized suppliers of geothermal energy are essential, and we’re stepping up with the financing to help them succeed.”

After financing a half-dozen geoexchange projects, VCIB is a leading Canadian financier for a maturing market that’s ready to take the spotlight.

Financing for every stage of the geoexchange life cycle

VCIB’s financing covers geoexchange projects across a range of asset classes, types, and geographies — from new builds to refinancing successful projects as they move into the next operational life cycle, and from single-family homes and subdivisions to large condo complexes.

Trish Nixon, Managing Director of Climate Finance at VCIB, comments; “We’re seeing a large growth in interest for residential geoexchange as a way to improve residents’ homes. To reduce construction costs, many developers opt for a third-party financing model where a geo utility owns and operates the system.”

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For more information about geoexchange systems, including common barriers and misconceptions, read this recent study by Urban Equation for Sustainable Buildings Canada. If you’re a real estate developer or clean energy utility looking to finance a geoexchange project, get in touch.

In the weeks leading up to Budget 2023, much of the discussion swirled around how or whether Canada would be able to compete with the US$369 billion the Biden administration had poured into climate and clean energy incentives through the August, 2022 Inflation Reduction Act.¹ On March 28, Deputy Prime Minister and Finance Minister Chrystia Freeland set out to meet the moment with a $491-billion budget featuring future-forward investments to advance Canada’s net-zero economy.

Here is our roundup of highlights from Budget 2023 from the lens of our Climate Finance team:

Tiered Investments Address Eight Strategic Priorities
Pre-budget commentary emphasized the need for Canada to concentrate available resources on aspects of the net-zero transition where the country can either build on its strengths or readily establish new ones. Budget 2023 lays out a tiered investment strategy that treats pollution pricing and the national Clean Fuel Regulations as a cornerstone for three levels of financing:
• An “anchor regime” of investment tax credits;
• Low-cost strategic financing through the Canada Infrastructure Bank and the Canada Growth Fund; and
• Targeted investments to meet specific sectoral needs or support projects of “national economic significance”.

These public commitments are meant to draw significant private sector investment to eight strategic priority areas: electrification, clean energy, clean manufacturing, emissions reduction, critical minerals, infrastructure, electric vehicles and batteries, and major projects.

*

Investment Tax Credits
The budget introduces or expands investment tax credits in the following areas.

Clean Electricity Investment Tax Credit ($6.3 billion through 2028², $19.4 billion through 2035)
Maximum 15% refundable tax credit for eligible investments in:
• Non-emitting electricity generation systems: wind, concentrated solar, solar photovoltaic, hydro (including large-scale), wave, tidal, nuclear (including large-scale and small modular reactors);
• Abated natural gas-fired electricity generation (which would be subject to an emissions intensity threshold compatible with a net-zero grid by 2035);
• Stationary electricity storage systems that do not use fossil fuels in operation, such as batteries, pumped hydroelectric storage, and compressed air storage; and
• Equipment for the transmission of electricity between provinces and territories.

Clean Hydrogen Investment Tax Credit ($5.6 billion through 2029, $12.1 billion through 2035)
15 to 40% tax credit for project costs, depending on the carbon intensity of the production process, plus a 15% tax credit for equipment to convert hydrogen to ammonia for shipping.

Clean Technology Manufacturing Investment Tax Credit ($4.5 billion through 2029, $6.6 billion through 2035)
Maximum 30% refundable tax credit for investments in new machinery and equipment to manufacture or process key clean technologies, and extract, process, or recycle key critical minerals, including:
• Extraction, processing, or recycling of critical minerals essential for clean technology supply chains, specifically: lithium, cobalt, nickel, graphite, copper, and rare earth elements;
• Manufacturing of renewable or nuclear energy equipment;
• Processing or recycling of nuclear fuels and heavy water;
• Manufacturing of grid-scale electrical energy storage equipment;
• Manufacturing of zero-emission vehicles; and
• Manufacturing or processing of certain upstream components and materials for the above activities, such as cathode materials and batteries used in electric vehicles.

Carbon Capture, Utilization, and Storage Investment Tax Credit ($520-million top-up through 2028)
Variable-rate refundable tax credit for eligible expenses, retroactive to 2022
The budget adds to the $7.1-billion CCUS investment tax credit announced in the 2022 budget and extends eligibility to projects aiming to store carbon dioxide in geological storage in British Columbia.

Clean Technology Investment Tax Credit ($6.9 billion through 2028)
30% refundable tax credit for eligible expenses

The budget extends the Clean Technology Investment Tax Credit through 2034, increases the available funds in the short term, and expands its scope to include specific types of deep geothermal projects, on the condition that they not “co-produce oil, gas, or other fossil fuels”.

The tax credits are largely conditional on employers adhering to specific labour standards: to receive the maximum funds available, they must pay prevailing union wages and assign at least 10% of tradesperson hours to registered apprentices in Red Seal trades. Firms that fall short of these standards will see their investment tax credits fall from 15 to 5%.

Reduced Tax Rates for Zero-Emission Technology Manufacturers ($1.3 billion)
The government is extending a provision from its 2021 budget that halved the corporate tax rate for zero-emission technology manufacturers, from 9 to 4.5% for small businesses and from 15 to 7.5% for larger enterprises. The reduced rates will now be available through 2034, and they will also be extended to “the manufacturing of nuclear energy equipment and the processing and recycling of nuclear fuels and heavy water,” beginning in the 2024 tax year. The tax reductions are expected to cost $20 million through 2028 and another $1.3 billion through 2035.

Strategic Finance

Canada Infrastructure Bank ($20 billion)
The budget calls for the Canada Infrastructure Bank to earmark $10 billion each to clean power projects and green infrastructure. “These investments will position the Canada Infrastructure Bank as the government’s primary financing tool for supporting clean electricity generation, transmission, and storage projects, including for major projects such as the Atlantic Loop,” a large power grid megaproject in Eastern Canada for which the budget commits to further negotiations.

Canada Growth Fund ($15 billion)
Originally announced in the 2022 Fall Economic Statement, with a plan to finalize its structure by mid-2023, the $15-billion Canada Growth Fund is meant to “help attract private capital to build Canada’s clean economy by using investment instruments that absorb certain risks in order to encourage private investment in low-carbon projects, technologies, businesses, and supply chains.” Budget 2023 mandates the $225-billion Public Sector Pension Investment Board (PSP Investments) to manage the Fund and states that it will “begin investing in the first half of 2023.”

Targeted Initiatives

Strategic Innovation Fund ($500 million new, $1.5 billion existing)
The federal Strategic Innovation Fund will allocate $500 million in new funding and $1.5 billion from existing resources to projects in “clean technologies, critical minerals, and industrial transformation”. The budget notes that the Fund has created or maintained 105,000 jobs across 107 projects since 2018, using $6.9 billion in contributions to leverage $67 billion in private investment. Examples to date include:

• 200 million to Algoma Steel in Sault Ste. Marie, Ontario, to support a shift to lower-emission electric steelmaking;
• $47.5 million to Moltex Energy Canada Inc. in St. John, New Brunswick, for small modular nuclear reactor research and technology development;
• $25 million to Burnaby, B.C.-based Svante Technologies to develop carbon capture technology for heavy industrial emitters.

Clean Electricity Projects ($3 billion)
The budget earmarks $3 billion over 13 years for three categories of clean electricity projects that include the popular Smart Renewables and Electrification Pathways Program, originally an eight-year initiative that launched in 2021 and worked its way through its initial $964-million budget and a $600-million top-up in less than two years. SREP is to share the $3-billion allocation with a renewed federal Smart Grid program and new investments in science-based activities to support offshore wind development off the coasts of Nova Scotia and Newfoundland and Labrador.

Clean Fuels Fund
The budget lists potential opportunities in bioenergy development across the 10 provinces and commits to explore possible support mechanisms with the industry.

Carbon Contracts for Difference
The budget opens a discussion on carbon contracts for difference³ as a tool to make the carbon pricing that backstops future investments more predictable and help “derisk major projects that cut Canada’s emissions.” The budget document says contracts for difference “allow companies to plan ahead, supporting the growth of Canada’s clean economy by making clean projects more cost-effective than more polluting projects.” The approach has seen considerable discussion recently as a way to protect federal cleantech investments from being overturned by a future government.

VCIB Comments

On the whole, the budget has largely been seen as a transformative win and a moment of opportunity to jump-start energy transition investment in Canada.

“The federal commitments and incentives outlined in Budget 2023 will provide a much-needed boost to accelerate the deployment of decarbonization technologies”, said Trish Nixon, Managing Director of Climate Finance at VCIB. “The race to net-zero is our most urgent priority, and we are motivated to work with existing and new borrowers as well as public sector partners to finance more projects, faster.”

For more on VCIB’s climate financing or to talk to us about your clean energy project or energy efficiency retrofit, visit our website or contact us.

¹ https://www.whitehouse.gov/cleanenergy/inflation-rduction-act-guidebook/

² All time references for funding initiatives are based on the federal fiscal year, which runs from April 1 to March 31.

³The Canadian Climate Institute published an explanation of this investment tool last week: https://climateinstitute.ca/what-are-contracts-for-difference/.

*Reproduced with the permission of the Department of Finance, 2023

VCIB’s $3.2-million loan has paved the way for Vancouver-based Seven Generation Capital (7Gen) to acquire ten electric trucks and the required EV fast chargers that it will then lease to GoBolt, a growth logistics firm that offers secure storage and e-commerce fulfillment to big retailers.

Until recently, trucking was seen as one of the biggest challenges in the effort to reduce the fossil fuel use that drives climate change, for one very basic reason: while electric motors and batteries made sense for cars and light trucks, they couldn’t deliver enough distance or power to haul freight.

But now, a new generation of batteries offers better range at lower cost. That leaves an emerging electric freight industry with just two remaining hurdles: showing freight logistics companies that the technology is ready for prime time, and creating a turnkey business model that allows them to save money on electric trucking from the first day of a new lease.

Financing Makes the Difference

VCIB’s project finance deal with 7Gen is one of the first of its kind in Canada, says David Berliner, the bank’s Head of Clean Energy Deal Structuring. But it won’t be the last. The country has set some “very ambitious electric vehicle targets” as part of its wider climate strategy, and it’s going to take “a whole ecosystem of actors” to get the job done.

That includes financial institutions like VCIB, part of the Vancity Group, which has led the effort to fund clean energy projects by covering the buyer’s initial investment out of longer-term cost savings—and has a tried-and-true business model to bring to the freight sector.

“Companies that want to make the transition from traditional fossil-fueled trucks to electric vehicles will face higher up-front capital costs, but then they won’t pay for fuel and their maintenance costs will be lower.” It’s an opportunity that Berliner says is directly analogous to the residential and commercial solar market.

In the solar sector, a shift occurred more than a decade ago from trying to sell companies solar panel equipment to offering ‘zero money down, solar-as-a-service’, and in the process bringing in a separate financing partner.

“Solar energy was offered to the customer for a fixed price. This was compelling, especially in an era of famously volatile fossil fuel prices,” he recalls. “Project financing was what allowed solar to go from a niche industry to an industry with hundreds of billions of dollars and gigawatts deployed.”

In the freight sector, “A company like 7Gen can put that together into one package and become a one-stop shop for electrification, creating a very compelling business model that makes it a lot easier for more customers to make the switch,” he adds. “And financing is the fuel that is required for those business models to work.”

Seeing Is Believing

Some bigger institutions will be able to plan, manage, and finance the EV transition unassisted, Berliner says. “But for the majority, there will have to be a concierge or a project developer that helps companies navigate all the different aspects and benefits of a project.”

7Gen is building that model from the ground up.

“We were one of the first companies out there that looked at this from a customer perspective,” says 7Gen CEO, Frans Tjallingii. “As a freight operator, what do you need to do to get into EVs? You need a lot of different elements to all fall into place and work together, which is not always a given” if a company tries to juggle the vehicles, chargers, and financing unassisted.

Until 7Gen came along, “there was no one to really integrate vehicle and charger selection, interoperability and financing in an end-to-end, turnkey package that supported the fleet operators in moving toward electrifying their operations,” he adds. “Ultimately, our goal is to make it a lot easier and de-risk the journey. We know what it means to adopt an EV strategy, and we’re here to help, while our clients focus on their core business”.

One aspect of that journey is to help freight operators align the transition with their existing vehicle acquisition plans. Technologies are evolving, battery densities are improving rapidly, and potential customers are worried about choosing the wrong option. So 7Gen works with customers as a trusted advisor, developing tailored, step-by-step transition plans to shift their fleets over time.

“We go through their current operations, look at which vehicles they’re replacing anyway, compare new diesel with electric vehicles, and talk about what makes most sense for those vehicles and those routes,” he says. “Usually, under 300 to 350 kilometres and with some time for charging, it’s worth looking at electrics.”

There’s a “commercial benefit in being zero-emission, and a niche in being values-driven and on the forefront of that wave,” he adds. With the right turnkey package, “you can also save money from day one, get some commercial value, be more efficient, and gain a learning advantage over competitors that are waiting longer to get in.”

Only the Beginning

7Gen never encourages anyone to switch a whole fleet at once. “Start with one, two, five, 10, depending on your plans for fleet renewal,” Tjallingii advises. “The next year, we do the analysis for you, and if it makes dollars and cents, we see what’s available and look at the next generation of vehicles.”

The direct climate benefit from 7Gen’s leasing agreement with GoBolt is deceptively small, a reduction of just 4,140 tonnes of carbon dioxide equivalent over seven years. But it’s proof of concept for an electric commercial vehicle market that is primed for take-off across Canada and around the world.

“Most forward-thinking corporate actors like the 7Gens and Vancitys of the world are pushing those ecosystems forward,” Berliner says. “And demand side of that ecosystem is increasing the call for logistics companies like GoBolt. Alongside that is the lower total cost of ownership, so those two things go hand in hand.”

But in the end, all of that potential comes back to having the right financial partner.

“There’s a well-established leasing market in Canada,” Berliner says, but that market depends on fossil-fueled vehicles. “We were willing and able to sit alongside a partner, roll up our sleeves, and do more work. This is a first, smaller transaction, and smaller transactions are often harder to get done.” But given the urgency to electrify transportation, “we wanted to be a good partner and find a good partner to work with.”

“To make these projects work, we need a lender who’s pragmatic and willing to work with us to figure out the details,” Tjallingii says. “VCIB was very interested in this project from the get-go because it’s zero emission and really fits with their values. So we were very glad to be able to work with them.”

“As an Impact Partner, VCIB will be an important part of Canada’s ZEV future, and we look forward to collaborating to grow Canada’s zero emission vehicle industry,” said Matthew Fortier, Accelerate President and CEO. “This partnership shows that the financial services sector is integral to building and fostering a successful and competitive ZEV ecosystem.”

VCIB will use its experience building a resilient economy to help examine opportunities and challenges within various segments of the ZEV ecosystem and will leverage its cleantech sector expertise to further support and engage with Accelerate’s growing membership.

“Advancing the adoption of zero-emission vehicles is essential to decarbonizing the transportation sector, while supporting the mobility of workers through a just transition,” said Jonathan Frank, Head of Business Development, Clean Energy, Vancity Community Investment Bank. “Joining Accelerate builds on our decades of leadership in environmental sustainability and economic inclusion, and supports Vancity’s commitment to be net-zero by 2040,” continued Jonathan.

Canada will be better positioned to attract foreign investment and vehicle mandates by developing a strong and integrated ZEV supply chain. Crucially, expanding the vehicle sector will support a just transition for hundreds of thousands of workers who build parts, repair or assemble combustion engine vehicles. Mobilizing other sectors to ally with the vehicle industry will also open opportunities within clean energy, responsible mining and battery assembly and create more high-value jobs, including in software and AI design.

“Accelerate is focused on developing an essential part of Canada’s industrial future – one that is clean, that drives cross-sectoral economic activity and provides a just transition for Canadian workers,” said Fortier. “VCIB will be a key partner as we work towards a new ZEV future.”

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About Accelerate

The Accelerate Alliance is a national initiative bringing together key players across Canada’s Zero Emission Vehicle (ZEV) supply chain, from mining to battery R&D, commercialization, parts and vehicle assembly and charging infrastructure. Accelerate enables this emerging industry to collaborate, strategize and advocate for priorities that will catalyse the development of a ZEV supply chain in Canada.

Accelerate is a rapidly growing community of companies, organizations and associations representing all sectors of the ZEV supply chain. A full list of members can be found at: https://acceleratezev.ca/our-members/

About VCIB

VCIB is an Ontario-based schedule 1 federally chartered bank and a subsidiary of Vancity Credit Union. As Canada’s first values-driven bank, VCIB provides banking, investing, and financing solutions, to help purpose-driven businesses and organizations thrive, grow, and foster change. Additionally, VCIB offers specialized financing solutions for social purpose real estate and clean energy projects. VCIB is a certified B Corporation and a member of the Global Alliance for Banking on Values. For more information, visit vcib.ca, tweet us at @BankVancity and connect with us on LinkedIn.

“We don’t have a lot of time,” Gasparro told a session on the coming boom in climate cleantech investment. “This message has been very clear throughout this conference—we have to deploy capital towards plug and play technologies.”

VCIB’s own experience and growing project portfolio show that the opportunities are out there. But Gasparro said a rapid shift off carbon won’t happen until everyone gets on board.

“We have public sector assets that are readily available, where we can layer on technology to drastically reduce greenhouse gas emissions while generating a return on investment for investors and financial institutions,” he told participants. But “one thing we need to make perfectly clear is that governments can’t do this on their own. Bay Street and Wall Street can’t do it on their own. Silicon Valley, academia, not-for-profits can’t do it on their own. We have to work together” to get the rapid, deep emission cuts that are both needed and achievable.

Gasparro’s remarks followed a question from session moderator Naynika Chaubey, a partner in Vancouver-based venture capital firm Evok Innovations, about the widely-held belief that half of the technology needed to drive down emissions is still at the prototype stage.

In fact, as none other than the Intergovernmental Panel on Climate Change (IPCC) documented in its latest science report this week, “there are real, credible cases out there where we can put our capital and expertise behind founders who are utilizing existing assets.”

Gasparro cited VCIB’s role in financing the world’s largest raw wastewater energy transfer project, a $38-million venture at Toronto Western Hospital recently completed by Noventa Energy Partners. The system captures heat from municipal sewer lines, supplying 90% of the hospital’s heating and cooling and reducing its greenhouse gas emissions by 85%.

It’s the kind of successful, small-scale project that too often falls off the radar when policy-makers and financiers are focused on future prospects for multi-billion-dollar carbon capture schemes that aren’t yet ready for prime time. But this week’s IPCC report said smaller actions and decisions across every economy and society can reduce end- use emissions by as much as 40 to 70%.

The Toronto Western project will be “the equivalent of taking 1,800 cars off the road every year, and it will save the hospital $1 million per year for 30 years,” Gasparro said. “That’s really at the intersection of when you talk about building back better. And even more important, it’s going to help us hit our climate targets.”

During the session, Gasparro and Chaubey joined Yuan Shi, director of Vancouver’s Creative Destruction Lab and Graeme Millen, managing director, technology banking at Silicon Valley Bank Canada, to dig into a cleantech investment trend that’s expected to be bigger than the internet. Shi said new entrepreneurs need capital to be “cautious and patient” until they can find paying customers for their excellent ideas. But Millen said the sector is maturing, with funders introducing more sophisticated commercialization models and more founders showing up with past business experience—and often the scars to prove it.

Millen noted that cleantech currently has access to “an immense amount of capital, not just by volume, but intelligent capital,” from investors who understand the needs of business.

“I don’t think we should discount the fact that Canada has an incredible ecosystem for creating entrepreneurs who want to go out there, have a purpose, and make some money,” Gasparro said. Our country benefits from a stable political climate, an academic system that encourages entrepreneurship, and easy access to U.S. markets—all of which have helped make Toronto, where VCIB is based, the third-largest technology city in North America.

Panelists agreed that a company’s immediate valuation is not the most important question to ask when a founder shows up in search of financing. Gasparro stressed the need for financial institutions to treat entrepreneurs as partners, not just clients.

“One of the things we pride ourselves on at VCIB is that when they come to us for capital—if they need help figuring out their capital structure—we’ll spend the necessary time working with them to grow their business,” he added.

Financial institutions are beginning to realize, and founders already understand, that “if you’re worried about a few basis points on a transaction, you’re missing the bigger picture,” Gasparro noted. “There’s nothing wrong with a cheque, just to be clear. But there are many more things you’re looking for from a banking partner.”

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To learn more about VCIB’s clean energy financing, visit our website. If you’re seeking financing for a clean energy project, get in touch.

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With nearly 1,400 megawatts of renewable energy capacity in operation or under development, the Six Nations of the Grand River Development Corporation (SNGRDC) is past the point where it has to push for a seat at the table when major economic decisions are being made.

“I’m pleased to say it’s our boardroom now,” said SNGRDC President and CEO, Matt Jamieson. It’s taken more than a decade, but the community now owns and initiates its own renewable energy and energy storage projects, then cycles the revenue back into community services and well-being.

The community’s latest project was a deal with Vancity Community Investment Bank (VCIB) to refinance the Niagara Region Wind Farm, the second-largest in Ontario.

Community Autonomy by 2030

The rapid growth of SNGRDC’s renewable energy portfolio is gaining recognition as a monumental achievement in its own right. But there’s a far bigger purpose behind the projects. Autonomy 150 by 2030 is the title of the development corporation’s medium-term strategic goal: to generate $150 million in annual economic impact by the end of this decade.

“We believe that by being successful in that pursuit, our future leaders will have the ability to be totally autonomous of any outside influences or funding,” Jamieson said. That financial stability will enable the community to “make independent decisions that are grounded in our nationhood and not influenced by dependency on any third party.”

For years, renewable energy proponents have tried to pitch projects by pointing to jobs, business opportunities, and better health as secondary benefits that communities can expect when they decarbonize their energy supplies. Yet, for the SNGRDC, these so-called secondary benefits are just the start.

“These co-benefits are just as important as the sustainable outcomes our investments create,” Jamieson said. “We don’t get involved in industries unless there’s a positive impact on the environment, on our future. Everything we do as a society is qualified through seven-generational thinking. If it’s not good today, it’s certainly not going to be good seven generations down the road.”

Unlocking the Value

That line of thought leads to a strategy that seeks to add value streams at every stage of a project.

As SNGRDC has matured as a company, “we actively take equity in these projects,” Jamieson said, with a 51% share becoming the new math of any investment the development corporation takes on. It also means keeping the benefits of a major project closer to home through job creation and local spending with community-based enterprises.

“Not only are we an investor. We’re the constructor of these projects,” he explained. “It creates tremendous economic impact, it puts people to work, it builds pride in the community, and that creates more opportunities to partner and grow.”

Meanwhile, financial returns from the projects have supported more than $14 million in community care and infrastructure investments since 2016.

Next up, SNGRDC is co-developing a 250-megawatt, 1,000 megawatt-hour battery storage facility that will be Canada’s biggest when it’s complete, delivering 4.1 million tonnes of greenhouse gas reductions. Strategic investments such as this “will finally unlock the true value of renewable energy, which will lead to future public policy that clearly embraces more renewables procurement,” Jamieson said.

The Community Takes Charge

SNGRDC’s success, with its $2.4 billion worth of development experience, is changing the dynamics of community energy investment.

“We have developers calling us every day, many need us more than we need them, and that’s a refreshing change,” Jamieson said. “It’s a paradigm shift from the past. We control the boardroom, so if companies don’t share our values and have the same sustainable focus, we simply don’t let them in.”

Businesses that approach us have a “responsibility to be authentic,” Jamieson explained. They have to listen and learn about the aspects of a new venture that matter most to the community. “Maybe it’s not about a slice of the profits. Maybe it’s to help build water infrastructure for the community. It may be a narrative that activates other opportunities.”

To get that understanding, “you must have a relationship and relationships take time. Given our past experience in this country, you have to earn trust, and that takes time, too.”

But that’s starting to happen. He cited Aecon, a large infrastructure firm that “saw the writing on the wall over a decade ago,” and which has become a valued partner that collaborates on projects throughout the region. VCIB showed its commitment with the refinancing deal that brought the community $400,000 per year in additional profits from the Niagara Region Wind Farm.

VCIB “really proved to be a flexible lending partner that understood the situation we were in at the time,” he recalled. “We were seeking a banking partner that could help us optimize the economic return for our community and they really latched onto that goal. They were very flexible in working with us to arrive at the outcome we were pursuing.”

In the end, “the impact will be real, and we couldn’t have done it without VCIB.”

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Eager to learn more about the role that values-based partnerships and cross-sector collaboration can play in helping communities overcome challenges, build capacity, and reap the benefits of the clean energy transition? Read Terri Lynn Morrison’s guest post “True partnership is key to Indigenous clean energy success” and watch the February 3 webinar video below.

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With nearly 200 renewable electricity projects at different stages of development in Indigenous communities across the country, clean energy is a major force for local economic autonomy, green job creation, and rapid decarbonization—and an opportunity for private sector partners who are serious about working with Indigenous communities.

But just as important as the number and scale of the projects is how they are created. The question we are asking in this series is what do fair and equitable partnerships for Indigenous communities look like? A real, functioning partnership cannot just be a matter of technical compliance or ticking the box. When projects are developed through partnerships that engage with communities, respect local needs and timelines, and remain answerable to the people whose interests the technology is meant to serve, amazing things can happen.

Setting a higher bar

Indigenous economies are grounded in a social, political, and ecological relationship that goes beyond the bounds of environmental assessments elsewhere. That relationship isn’t optional: community leaders are held to a higher standard of accountability and, if we fall short, we hear about it from our relatives and neighbours. We need partners who understand that and who are willing to adhere to that same standard.

A few years ago, I was the project director for a 150-megawatt wind farm owned by three Mi’gmaq communities, including my home community of Listuguj. When we conducted our environmental assessment, we diligently addressed potential impacts on hunting grounds, migratory routes, and medicinal plants. These concerns wouldn’t come up in the average environmental assessment—even though they probably should, considering their importance to community members.

Almost everyone was excited that we were building a project that would create jobs and increase our own source revenue to bridge the gap of underfunded programs and services that are needed in the community. The project was guided from start to finish by the need to protect the environment and all who rely on the land. Our development partner, Innergex Renewable Energy Inc., understood our concerns and respected the process. And the Mesgi’g Ugju’s’n Wind Farm was a better project as a result.

Patience is a virtue

You may not hear this in most MBA classrooms, but the defining feature of an Indigenous clean energy project is patience.

The wider financial world works at its own rhythm, and that rhythm is usually frenetic. In Indigenous communities, business is done at a pace that reflects local needs and norms. A negotiation might be delayed by a change in leadership, a tragedy in the community, or by goose hunting season. Or, a community may spontaneously plan a week-long engagement when questions come up around a project.

If you’re working on Indigenous land for the first time, you might be surprised, confused, or offended. Don’t be. You’re witnessing real community participation in action and seeing an antidote to the years of delay, controversy, and uncertainty that result when a project is imposed without consent.

But patience is very much a two-way street. Every Indigenous community has had the conversation with would-be partners who freely disclose that they’re only calling because a government official told them to. That’s not the best way to signal interest in working with the people whose land and consent you need.

Opportunities abound

For many financial partners, it’s a different, more collaborative way of operating. But it results in a project to be proud of, with many more opportunities on the horizon.

So far, most work in the Indigenous clean energy space has focused on renewable electricity. But we also see a massive need and opportunity to increase the energy efficiency of housing that has historically been underfunded, shoddily built, poorly maintained, and often unsafe for our people to live in.

That’s why Indigenous Clean Energy (ICE) is working to build local capacity and create the enabling environment our communities need to build new, energy-efficient housing based on high-performance standards. We’re connecting the dots between clean energy and sustainable investment, delivering healthier, more durable housing that lasts longer and is cheaper to operate. We’ve identified six Guide Communities to demonstrate the approach, and the program will need investment partnerships at every step along the way.

Indigenous entrepreneurs are also stepping up in other aspects of clean, low-carbon energy development—from sustainable biomass and green hydrogen to energy storage. Our team delivers a variety of training and internship programs for Indigenous people, including women and youth, that in turn help Indigenous communities build their clean energy capacity and reduce their greenhouse gas emissions.

When we invited young people to come up with their own clean energy projects, one of the first bright ideas was a solar-powered ice cream truck for the powwow trail. (And, really, should any of us have been surprised?)

Add it all up, and it’s hard to imagine a more hopeful, exciting, dynamic space than Indigenous clean energy. At a time when the daily news is an automatic ticket to despair, Indigenous project developers and their partners are creating a better future and building it with their own hands, one clean energy project at a time. The need is still massive, and the door is open to those who share our vision and values.

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Eager to learn more about the role that values-based partnerships and cross-sector collaboration can play in helping communities overcome challenges, build capacity, and reap the benefits of the clean energy transition? Watch the February 3 webinar conversation in the video below.

Throughout this conversation, I and the more than 200 others who joined, were reminded of how powerfully Indigenous clean energy investment has evolved and matured. It was so exciting to hear first-hand how dozens of projects across Canada are succeeding with the right combination of Indigenous leadership, local participation, community benefits, and fair and equitable partnerships.

The discussion moderated by Clint Davis, CEO of Nunasi Corporation, with Terri Lynn Morrison of Indigenous Clean Energy, Matt Jamieson of the Six Nations of the Grand River Development Corporation, and Steve Parsons of the Eskasoni First Nation Corporate Division pointed to the rapid transition taking shape as communities take control of their clean energy future. With 197 medium- to large-scale projects at different stages of planning or construction, Indigenous communities are poised to receive a combined $295 million per year in financial returns, said Morrison, a Mi’gmaq from Listuguj, Quebec.

The session left me with five takeaways for our work at VCIB and really for anyone looking to work with Indigenous communities on clean energy.

1. It’s All About the Relationship

All three panelists stressed that a successful Indigenous clean energy project depends on social acceptance and an authentic working relationship based on trust.

In any negotiation, a community has to sort out whether a new contact is interested in a quick transaction or a solid working relationship. “I’ll know in the first three minutes of conversation with a potential partner whether it will work or not,” Parsons said.

The panelists shared that company representatives have freely disclosed to them that they’re only calling because a government official had told them to. So here’s a pro tip: Treating Indigenous partnerships as a box to be checked is not the way to build trust with the community.

2. The Land is the Asset that Matters Most

This reality can be lost on partners who come from outside the Indigenous sphere: A project literally can’t get on the ground without land, and that means landholders must be at the centre of every decision.

“Let’s all remember that we have the biggest asset,” Morrison said. “With Indigenous involvement in a meaningful way, we’ll have the opportunity for some amazing projects.”

3. Respecting Community Values

Projects built on that land must be grounded in the social, political, and ecological relationships to which Indigenous leaders and developers are held accountable, Morrison explained.

When Listuguj and two other communities developed a 150-megawatt wind farm, with Morrison as project director, they recognized the need to go above and beyond a standard government-mandated environmental assessment. This meant addressing community concerns about potential impacts on hunting grounds, migratory routes, and medicinal plants.

“Indigenous communities are drawn to a cleaner economy because it’s so in line with our vision of a circular economy, only taking what we need, and sustaining for the next seven generations,” she said. “It’s great that we’re building a project that will represent a significant amount of money coming back into the community. But at the end of the day, it’s about the territory and the impact on the land.”

4. An Emphasis on Community Benefits

An Indigenous clean energy project serves multiple bottom lines. It has to supply reliable electricity and make money. It must also deliver training, jobs, and revenue to the community.

“The people are what makes the community,” Jamieson said. So “we expect the partner to show up” with a willingness to help that community build capacity and learn more about the business.

In the early stages of a partnership, “we want to work with companies who come early and often, who recognize that we don’t know their industry,” he added. “What we don’t look for is companies that come to us and need us more than we need them,” in what he called a “joint venture façade”.

5. Project Finance: From Debt to 51% Ownership

One of the most tangible takeaways from the webinar was that 51/49 is the new math of Indigenous clean energy partnerships.

“Our joint venture strategy is not complicated,” Parsons said. “The projects are all 51%/49%,” with the community holding majority ownership. “We don’t run the company. That’s why we take on a partner. But we always protect the interests of Eskasoni first and foremost.”

“At the end of the day the controlling interest of our band comes first,” Jamieson agreed. “If you don’t have that, you can’t control the project” in the community’s interest.

Building up equity, rather than relying on debt financing, has always been a challenge for Indigenous business development. Jamieson cited VCIB and the Canada Infrastructure Bank as institutions that have delivered innovative financing solutions to give Indigenous development corporations the edge they need.

This one-hour webinar just gave a glimpse at the economic and business development powerhouse that is making the energy transition a reality for Indigenous communities. Stay tuned for the next post in VCIB’s series on Indigenous clean energy where we’ll explore how industry players can better engage community to support Indigenous development, and the journey from being a clean energy participant to being a clean energy developer.
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Eager to learn more about the role that values-based partnerships and cross-sector collaboration can play in helping communities overcome challenges, build capacity, and reap the benefits of the clean energy transition? Watch and listen to the full conversation in the video found below.

But while a net-zero grid is achievable, the decisions regulators make in the months ahead will not only determine how effectively and affordably the province confronts its capacity shortfall—they will shape the grid and determine its carbon footprint for the next generation.

This fall, I was a panelist in a virtual roundtable hosted by Energy Storage Canada “Achieving Net Zero with Energy Storage,” where we discussed the role of storage in bringing greenhouse gas emissions from the provincial grid to net-zero. Participants heard loud and clear that what the renewable electricity system Ontario needs is achievable and affordable. It can also deliver a powerful suite of community benefits—from lower greenhouse gas emissions, better local air quality and energy resilience, to massive job and investment opportunities—as well as provide greater price stability.

But it will only happen if government, academia, and the private sector—financial institutions, in particular—work together to deliver a decarbonized future. None of these institutions can create that future unassisted, the problem is simply too big. Yet by working together, we give ourselves the best possible chance of success.

3.6 gigawatts by 2030

Yes, 3.6 gigawatts. This is the size of the electricity capacity shortfall Ontario could face by 2030, and it’s one of the big numbers that loomed over our panel discussion. With some of the province’s biggest generators reaching the end of their useful life, and others going offline for major refurbishment, the first impulse by system operators seems to be leaning heavily towards natural gas resources.

That strategy would essentially recarbonize a grid that led North America with its timely phaseout of coal-fired generation, culminating when the Thunder Bay Generation Station burned its last lump of coal in 2014. It’s a perverse and dangerous path, particularly when considering the UN’s Intergovernmental Panel on Climate Change calling for a 45% reduction in the world’s greenhouse gas emissions by 2030.

Making matters worse, gas supplies are increasingly implicated in the release of methane, a climate pollutant that is about 80 times more potent than carbon dioxide over a 20-year period. This would also put the Province of Ontario at odds with the Government of Canada’s commitment at COP26 to cut methane emissions by 30% by 2030 (from 2020 levels). In addition, it could also expose Ontario residents to greater price volatility, similar to the experience in the UK where violent price increases in natural gas destabilized internal supply chains.

The alternative option is an all-hands-on-deck commitment to take a portfolio approach to meeting electricity demand with the lowest-carbon resources—which can also be the least expensive option. It ends with energy storage as a cornerstone of the effort to decarbonize the system, deliver a modernized, reliable grid, and kick off a 30-year investment to dramatically expand electrification into end-uses like personal vehicles, space heating and cooling, and heavy industry.

Financing Completes the Picture

With thousands of megawatts of storage already in the system, Ontario has ample hands-on experience setting aside surplus electricity when it’s generated for use during times of peak demand. A decarbonized grid will need far more storage, distributed much more widely across the province. Governments should not be solely responsible for getting storage and a menu of other essential grid enhancements in place. Financial institutions like Vancity Community Investment Bank (VCIB) have already shown an ability to finance battery storage and are ready and eager to do more.

Every financial institution hates stranded assets. That means the solution to Ontario’s electricity supply crunch depends on an intersection between good and smart public policy and banking, with the province keeping key policies fairly consistent over long periods of time to build confidence in the stability of project cash flows.

Attracting private sector capital into the marketplace will complete the picture of a net-zero future. But, as noted, in order to attract that capital into projects there must be policy certainty. The chill created by policy uncertainty is an existential threat to the shift off carbon. We saw a prime example in the early months of the pandemic, when Ontario quite understandably deferred a portion of its Global Adjustment charges to bring some financial relief to ratepayers. While VCIB had no objection to that decision, it still forced a pause in our financing for battery storage projects.

The other side of that story is that with great (market) power comes a great potential for good. A government with the policy and regulatory clout to cast a pause over a powerful, emerging market can just as easily make deliberate decisions to assist in derisking the investments that drive that market. This derisking is critical because, as a regulated financial institution, we are limited in how much risk we can take with our depositors’ capital. Therefore, the choices made by government and regulators are critically important for a financier like VCIB. Investing in a net-zero future is in our DNA, but we can only take on investment risk to the extent that regulations permit.

On December 1, 2021, Jonathan Frank, VCIB’s Head of Clean Energy, participated in a great discussion as part of the MaRS Climate Impact conference. This session, moderated by Andrew Chisholm, Corporate Director at RBC, covered how the public and private financial sectors can come together to support municipalities in their strategies to combat climate change. Joining Frank as panelists were Lisa Helps, Mayor of Victoria, and Marie-Claude Bourgie, Executive Director at Greater Montreal Climate Fund.

Read three key takeaways from the discussion below:

1. Using innovative financing to transform Canada’s energy grid

An innovative model that mobilizes both public and private capital while helping to aggregate smaller municipal-scale projects is something that’s being developed at MaRS, the municipal impact investment fund. “It draws on a successful program in the UK that pools private and public capital and is able to drive that capital into projects that meet key objectives around improving resilience and reducing emissions, mitigation, and adaptation” says Frank.

Lisa Helps, Mayor of Victoria, continued; “The municipal impact investment fund gives both the private and public sectors a stake in its creation, allowing them to test it out. That will build comfort, to allow our staff and colleagues at the elected level to step back once they’ve seen it work. And it will work, because they’ve been doing this in the UK for 15 years. We’re not inventing something new.”

Historically, a lack of investment in clean energy projects has been a huge challenge when it comes to moving the needle forward on climate commitments. “A lot of financial markets are not set up to invest in much-needed energy projects,” said Frank.

Why? It’s often because clean energy assets are still considered somewhat novel despite being commercially proven technologies—and that makes it harder to bring the money in. But there are often other factors at play.

“These projects are usually very long-term in nature, their revenues are based on estimated performance, or they’re simply too small to attract big financiers,” continued Frank. “These challenges and more combine to a lack of financing to get some clean energy projects off the ground.”

In many cases, it’s difficult for project developers and building owners to know if they’ll have the financing they need to start developing the projects in the first place. Innovative financing and creative mobilization of public and private capital can help solve the financing challenge.

For example, VCIB recently partnered with Canada Infrastructure Bank (CIB) to finance the largest wastewater energy transfer project in the world. To move this project forward, CIB was able to help de-risk and improve the project’s economics.

Getting this first project off the ground will serve as a valuable showcase for other municipalities and building owners to start replicating and scaling up this low carbon energy solution.

“This type of project financing has typically only been available to large utility scale infrastructure projects,” said Frank. “But by bringing this approach down to community scale, or distributed generation scale, we can give those types of asset classes access to the same kind of non-recourse-based lending.”

2. Changing the narrative

We’re seeing every major Canadian financial institution make strong commitments to net-zero portfolios. But the key to ensuring that clean energy investments follow those commitments is rewriting the story surrounding the transition to a net-zero economy.

“We need to change the narrative about this being a transition that has downsides and trade-offs, to one that’s about inclusive economic prosperity and social resilience in the face of a changing and increasingly unpredictable world,” said Frank.

Financial institutions and investors need to see that solutions to the climate crisis also present a multi-trillion-dollar opportunity, and Canada must be a part of this global mega-trend. The longer businesses wait to be a part of this transition, the more their balance sheets and portfolios are going to feel the effects of climate change, and the number of stranded assets will grow.

Marie-Claude Bourgie, Executive Director at Greater Montreal Climate Fund, continued: “The best way to start change is to design models that can be recreated.” For example, “putting the right people at the table to design these projects and then adding concessional financing to leverage private sector capital… We’re trying to recreate [this model] to support property owners to be able to finance changing their systems.”

3. Empowering businesses and residents to adopt clean energy

“City emissions contribute only 1% of emissions in our community. 99% are from industry and residents,” said Mayor Helps. “We need to leverage mechanisms to help businesses and residents contribute to climate action.”

By helping organizations and residents adopt clean energy, public and private financial institutions can play a major role in the transition to a net-zero economy. This means supporting the creation of bankable projects at all scales, from individual homes to large buildings.

This year, as part of its effort to provide flexible financing solutions, VCIB developed Canada’s first solar-oriented loan program for organizations looking to kickstart their own solar projects. VCIB’s Commercial Solar Financing Program provides Canadian businesses and non-profits up to $10 million to install solar panels on their properties, supporting Canada’s transition to a net-zero grid.

It’s important to consider that “although solar energy has become increasingly cost effective, behind-the-meter commercial solar has had a slower adoption in Canada, and this is partly due to the lack of appropriate financing,” said Frank, in another conversation earlier this year. “Specialized financing is essential to properly support the growth of Canada’s solar and clean energy industry as a whole.”

While solar energy is perhaps more well known, one of the areas where we’ve seen significant growth is geothermal heating and cooling for new-built multi-unit residential buildings. Practical financing solutions make it easier for condo or building developers to choose fossil-free heating and cooling solutions.

The global growth of solar energy has proven that if we can deploy more of a technology, then the costs for that kind of technology will come down, and more people will start believing in it – and that’s the kind of positive feedback loop we need to accelerate right now.

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As the session came to a close, Chisholm highlighted the need for collaboration to get us to inclusive low-carbon prosperity. “We have the tools and the expertise in Canada.” Let’s find the public-private formula to make it work.

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Visit our Clean Energy page to learn more. If you’re seeking financing for a clean energy project, get in touch.