Prime Minister Stephen Harper returned from China last month with an agreement to ship more Canadian oil across the Pacific, but also brought home some much smaller agreements seeding new clean energy research partnerships between the two countries.
Among numerous other bilateral agreements, Prime Minister Stephen Harper's trip to China yielded research partnerships between Canadian and Chinese firms in the clean energy sector.
The deals involve only a few company-specific projects, but insiders say they may be the key to making sure Canada's green energy sector benefits from China's boom and doesn't get swallowed up by larger Chinese firms.
China is the world's biggest producer of solar panels and wind turbines and, thanks in part to a $45-billion investment in 2010, is now also the No. 1 consumer of wind energy. Solar energy also looks set to soar in China. The Chinese government's most recent five-year plan called for a 15-fold increase in solar power generation by 2015.
Rupert Merer, a Toronto-based analyst for National Bank who specializes in the clean energy business, says succeeding in the industry is now impossible unless countries deal with China.
"You can either do it with them or go against them," he said. "And if you don't work with them they'll probably beat you anyways."
Merer says the Chinese produce their equipment so cheaply that no one else can compete.
"Chinese solar module production has put the rest of the world out of business in solar," he says. "And the same could happen to wind."
The Chinese connection
That's no surprise to Al Paulissen, president of Guelph, Ont., wind turbine manufacturer Wenvor Technologies. He says he's been approached by Chinese companies that say they can build components for his wind turbines for a third of what it costs to manufacture the same parts in Ontario.
Wenvor is involved in one of the new research partnerships to develop a wind-powered desalination system with a Chinese research institute. Making new connections with Chinese companies is as important as bringing the new product to life, he says. Paulissen hopes to find a reliable Chinese manufacturer to lower the company's costs and make it more competitive — a model he says could save Canadian jobs in the long run.
Paulissen points out that the Chinese still can't churn out the high-tech parts needed for his turbine. He says that partnering with the Chinese brings Canada into a cost-cutting global supply chain — just like has been done with the auto industry — that will keep high-tech jobs here rather than seeing them erased altogether.
"If we can bring in those products that are no longer competitive here, we keep alive the ones that are the high-tech sectors," he says.
Canadian business partners hope the research and development partnerships will let them profit from China's booming clean energy industry.
Cheaper turbines might also mean more sales, which Paulissen says may eventually translate into even more green-collar jobs.
But China can be a dangerous place to do business for those who go in without government backup.
Mihail Stern, chief technology officer at Toronto's Cleanfield Energy, says his company inked a partnership with a Chinese manufacturer several years ago, but that the Chinese company later changed owners and bailed on the deal.
Despite this, Stern says he's optimistic about Cleanfield's new partnership to develop a next-generation solar cell with a Shanghai-based company because the governments of Canada and China helped put it together.
"This is the best way to get into the Chinese market — partnering with a good company in China, and basically partnering with the government of China," he says.
Olga Alexeeva, who researches the green energy business at Laval University, says China has reason to forge more partnerships because Canada is a world leader in three technologies they want: small-scale hydro power, biomass heating and solar energy.
But Canadian companies are wary that their Chinese partners will simply steal their technologies the moment they learn how to make it.
Alexeeva says the recently signed investment protection deal, which will give companies legal recourse if business deals go wrong in either country, will help protect Canadian firms' intellectual property. But if Canada's green energy sector is going to grow along with China's, she adds, the Canadian government is going to have to take a more active role.
And you can bet that's exactly what the Chinese government is doing for their companies, Alexeeva says.
"If you want to be equals in the negotiations, you need government help."
Frontpage photo courtesy of the Office of the Prime Minister
Canada-China research and development projects
Several research partnerships between Chinese and Canadian firms in the clean energy sector came out of Prime Minister Stephen Harper's February trip to China. These projects involve the research and development of:
These partnerships come through the International Science and Technology Partnerships Program, a Department of Foreign Affairs and International Trade agency that funds and facilitates research and development partnerships between Canadian firms and businesses in other countries.
By the numbers: Canada and China's clean energy industries
Numbers as of December 2010
Source: The Pew Charitable Trusts