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Development and commercialization of renewable energy technologies in Canada: An innovation system perspective
Renewable Energy 36 (2011) 1266e1271
Contents lists available at ScienceDirect
Renewable Energy journal homepage: www.elsevier.com/locate/renene
Development and commercialization of renewable energy technologies in Canada: An innovation system perspective Kalinga Jagoda a, *, Robert Lonseth a, Adam Lonseth a, Tom Jackman b a b
Bissett School of Business, Mount Royal University, 4825 Mount Royal Gate SW, Calgary AB T3E 6K6, Canada Simple Solar Heating Limited, P.O. Box 988, Okotoks AB T1S 1B1, Canada
a r t i c l e i n f o
a b s t r a c t
Article history: Received 5 June 2010 Accepted 16 August 2010 Available online 11 November 2010
The increased environmental awareness coupled with the recent changes in the oil prices triggered the necessity of focusing on effective management of energy systems. Global climate change has caused many people to consider ways of reducing greenhouse gases Renewable energy has become an essential feature in curtailing emission of Green House Gases, while meeting the demand for energy. This paper presents an innovation system framework for development and diffusion of renewable energy technologies. The framework is used to identify opportunities for small and medium enterprises in the renewable energy sector. A case study on a successful development, installation and implementation of solar thermal systems households in Calgary, Alberta, by an entrepreneurial firm, is also presented. Ó 2010 Published by Elsevier Ltd.
Keywords: Solar thermal Canada Innovation systems Policy
1. Introduction The increased environmental awareness coupled with the recent changes in the oil prices triggered the necessity of focusing on effective management of energy systems. In general, there are three ways to effectively manage energy systems: energy efficiency; energy conservation; and the switching of energy sources to renewable [1]. Energy efficiency relates to the ways and means of reducing wasting of energy in generation and distribution, while energy conservation deals with the implementation of methods and applications of reducing the amount of energy that is used to provide goods or services. Historically, the focus of government institutions and firms involved in energy generation, supply and distribution, were on these two ways. Many technology and incentive programs have been developed and implemented to achieve higher energy efficiency and conservation. However, in the last decade, interest in renewable energy has grown exponentially. Simply put, renewable energy is generated from a regenerative source. The most common regenerative sources include hydro, solar and wind, while geothermal and biomass are also becoming popular. The catalysts for growing interest in renewable energy sources were due to two main reasons: reduce the dependence of fossil fuels and, reduce greenhouse gases. With growing demand for fossil fuels, the prices have increased exponentially. This escalation
* Corresponding author. Tel.: þ1 403 440 8895. E-mail addresses: [email protected] (K. Jagoda), [email protected] (R. Lonseth), [email protected] (A. Lonseth), [email protected] (T. Jackman). 0960-1481/$ e see front matter Ó 2010 Published by Elsevier Ltd. doi:10.1016/j.renene.2010.08.022
of prices of fossil fuels has negatively impacted the competitiveness of small businesses, both in developed and developing countries, and threatens the very survival of some communities. Global climate change, along with increased awareness, has caused many people to consider ways of reducing greenhouse gases. Kyoto protocol, signed by many countries, has forced the governments to curtail emission of greenhouse gases (GHG), while increasing the efforts to convert their energy sources from fossil fuels to renewable energy sources. Many countries have introduced incentive programs for renewable energy systems, diversifying their energy mix to reduce the dependence of fossil fuels while curtailing GHG emissions. The increase in interest in renewable energy provides the SMEs two major opportunities. First, the use of renewable energy sources makes their energy cost lower in the long run. As there are many incentives provided by the federal, provincial and local governments, the initial cost of such systems are becoming lower. The choice of energy mode is mainly attributed to the cost of the initial investment. Solar energy (both photo voltaic and solar thermal) is becoming increasingly popular with small businesses, while wind power is becoming an attractive energy source for medium sized enterprises. Secondly, SMEs can gain competitive advantage by becoming eco-friendly and create loyal environmental friendly clientele. In the last decade, many companies have introduced green marketing strategy to differentiate their products and services from the competitors. The renewable energy also provides opportunities for entrepreneurs. As consumers are increasing their concern about the environment, many individuals and businesses are considering
K. Jagoda et al. / Renewable Energy 36 (2011) 1266e1271
incorporating renewable energy source for their energy inputs. Some developers are now offering solar heating and electricity generation, through installed solar panels as an add-in feature. The best renewable energy option varies from one province to another, due to environmental conditions. For example, wind power is popular in Eastern Canada while solar thermal is popular in the Prairies. This provides the opportunity for entrepreneurs to specialize in each particular market. As no system can be applied to one area or the other, each system needs considerable innovation before becoming a commercially viable product. Although many programs and incentives are developed to promote the usage of renewable energy systems, still it has not realized its full potential. The major barrier to successful application of renewable energy systems is the non-availability of product/service to a particular market. The research has shown that selection of an appropriate and viable renewable energy system is paramount for obtaining the desired results [2,3]. In Canada, SMEs represent the majority of firms involved in the renewable energy sector. The literature in renewable energy generation and application is often sparse, with the engineering specifications and economic aspects of such systems. There are limited studies that have been carried out in discussing entrepreneurial activities/aspects related to the renewable energy sector in Canada. This paper identifies and analyzes opportunities for small and medium enterprises in the renewable energy sector. The balance of this paper is structured as follows: the next section provides innovation systems framework for development and diffusion of renewable energy technologies, then it provides a brief overview of energy sector in Canada with specific focus on renewable energy. This is followed by the research methodology outline. It then concludes with a discussion on an entrepreneurial firm specializing in the application of solar thermal systems in houses for domestic water heating. 2. Innovation systems approach for development and diffusion of renewable energy technologies Innovation is the engine of the economic development and had been considered as major source of creating new employment and
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improving skill base [4,5]. The appropriate energy policies linked to support research and development of renewable energy technologies and creating proper market mechanisms by governments would solve domestic energy problems while improving the competitiveness of domestic industries [6]. It may not only create local market for renewable technologies but also export markets. In less than a decade more than 200,000 jobs (in renewable energy) have been created in Germany [6] while in US it accounted for more than 450,000 positions [7]. An Innovation system is characterized by of the elements and relationships which interact in the production, diffusion and use of new and economically useful knowledge [8]. It effectively matches the technical possibilities to market opportunities by providing multiple interactions with forward and backward flow of information from R&D to products. A national innovation system can be loosely defined as “the flow of knowledge and influence, as well as market transactions, between the different actors and institutions within the innovation system” [9]. In their study of UK renewable energy sector, Foxon et al. [5] identified three types of actors involved; actors involved in creating and or sharing knowledge, actors disseminating and using knowledge in the form of intellectual property and commercial products and actors setting the framework conditions. In their innovation map they identified the common drivers of innovation and sources, actors and relationships of knowledge creation diffusion and exploitation. In this paper we modify their innovation map to illustrate components of the innovation system map for Canadian renewable energy sector. This framework links four major types of players in development, commercialization and diffusion of renewable energy technologies. Policy support players include all three types of governments and international institutions who can play a major role in shaping energy policy of Canada. On the demand side, utility and consumers play a major part. Support infrastructure consists of various players who provide financial, technological and market assistance in research, development, commercialization and diffusion of renewable energy technologies. Citizens and interest groups play a significant role by providing awareness of renewable energy technologies, as well as influencing the policies and procedures other players. The innovation map is shown in Fig. 1.
Fig. 1. Innovation Systems Framework for Development and Diffusion of Renewable Energy Technologies.
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K. Jagoda et al. / Renewable Energy 36 (2011) 1266e1271
The policy initiatives of the federal, provincial and local governments for supporting new technology initiatives are influenced by availability of resources, location of renewable energy sources, current state of industries, innovation systems and the demand for energy sources. For example, in Alberta, most of the wind farms are located in the southern part of the province (close to the US border). The electricity that will be generated by the Upper Churchill hydropower project will be transmitted to Québec, which will provide energy at much lower cost for energy intensive industries in Québec and will provide power for the mining industry in Labrador. 130 MW of power will be transmitted to the US via Québec and will generate additional revenue for the province of Newfoundland and Labrador [10]. In Ontario, the majority of the provincial government incentives are aimed at development and diffusion of wind and solar technologies. Some researchers argue that the current government takes a ‘hands-off’ approach and does not provide the adequate incentives for sustainable energy development [11]. The slow adaptation of stricter regulations on non-renewable energy sources (which would provide a level field for the renewable sources) is linked to the fear of losing international competitiveness and less pressure from its biggest trading partner, the US. According to 2003 statistics, only 7.3% of the total budget of research and development of the energy sector is allocated to renewable energy [12]. As a signatory to the Kyoto Protocol, Canada is committed to reduce its GHG by 6% of the 1990 levels, by 2012. The boom in oil sand projects and increased use of fossil fuels has resulted in an increase of 24% of the 1990 levels by the year 2003 [13]. In order to meet the Kyoto target, Canada needs to curtail GHG emissions by 26% of its forecasted levels [14].Deployment of renewable energy is an important step in achieving this target. Citizens play an important part in the development, application and implementation of renewable energy systems. Their influence ranges from installation of equipment, increasing environmental awareness of others and changing attitudes and behavior of others toward adaptation of such systems [15,16]. The survey of 745 investors involved in community wind power projects by Mayuyama, Nishikido and Iida [16] reported that investment as a profit sharing system has attracted a large number of private citizens and helped to create a social movement. A study of ten community energy plans in Canada by St. Denis and Parker [1] found that wind, solar thermal and photovoltaic are the commonly used renewable energy sources. Local communities are becoming more influential in energy management by taking an active role in the decision making process, by matching their local
demand with energy sources. The programs like ‘local Action Plans for climate change’ provides an opportunity for local communities to act on climate change, by incorporating renewable energy sources in their action plans [1]. 3. Overview of the energy sector of Canada The energy sector plays a key role of the Canadian economy. Rapid industrialization of countries, coupled with increasing population demand for the energy in the world, is increasing at an alarming rate. The energy consumption in Canada has increased by 26% between 1990 and 2004 reaching 7643 PJ in 2006 [17]. Canadian sustainable energy strategy is divided into two main groups: energy efficiency strategy and renewable energy strategy [13]. This paper focuses on the renewable energy strategy. Table 1 provides a variety of government programs introduced to promote research, development and implementation of renewable energy. 3.1. Canadian renewable energy sector The size and geographical location of Canada provides access to a wide variety of renewable energy sources. It has large reserves of biomass and solar, wind, geothermal and other forms of energy, providing a huge potential for development and commercialization. Canada has used only a fraction of those sources to generate energy. According to 2000 statistics, excluding hydroelectric and combustibles, only 1.3% of Canada’s primary energy supply came from renewable energy [13]. The adaptation of renewable energy technologies in Canada has not been as fast as other developed countries. For example, by 2004, Canada’s installed wind power capacity is 2.6% of the installed capacity of Germany [13]. The major reason for slow penetration of renewable energy is accounted to the lack of quick breakthroughs in technology improvements, expanding availability of natural gas, and moderate expectations for quick market acceptance of new products [14]. 3.2. Solar energy Applications of solar energy systems can be divided into two main categories: solar photovoltaic and solar thermal. Photovoltaic systems covert sunlight into electricity using semi-conductor materials. Solar thermal systems capture solar radiation using vacuum tubes or perforated vertical tubes, to heat water or air. The Canadian usage and installed capacity of photovoltaic systems outnumbers the solar thermal systems. The total installed capacity
Table 1 Government programs introduced to promote research, development and implementation of renewable energy. Program
Description of Activities
Action Plan 2000 on climate change
Provide support for the study of energy application of sustainable energy technologies in remote (non-grid) communities. Encourages increased cogeneration and district heating, the manufacturing and processing tax credit was extended to corporations that produce for sale, steam for use other than the generation of electricity. Assist in developing scientific and engineering platforms for evaluating and guiding innovation in clean, commercially viable technologies and processes. Provided $53 million loan for a research project on more efficient industrial gas turbine technologies Contributes to the development, demonstration and early adoption of new, cleaner technologies and opportunities. Encourage Canadians to build houses that meet minimum voluntary standard for windows and doors, insulation, heating, ventilation and air-conditioning. Encourages developers to install energy-efficient technologies or Power Smart Packages in new home developments. Coordinates applied research and commercialization projects for more efficient and environmentally friendly energy technologies. Provides loans at a lower rate for geothermal heat pumps and energy conservation devises.
Extension of the manufacturing credit
Centre for research in cleaner manufacturing Gas Turbine research project Technology and Innovation initiative R-2000 Home Program Power Smart new home program in British Columbia New Ontario Centre of Excellence for Electricity and Alternative Energy Technology Manitoba hydro ePower smart loans
K. Jagoda et al. / Renewable Energy 36 (2011) 1266e1271
of photovoltaic exceeded 10 MW [19] while solar thermal systems generated 100 TJ/year [20]. In the last decade and a half the Canadian government introduced several initiatives and programs to promote solar energy. These range from corporate tax incentives for the start-up of renewable energy projects (through Canadian renewable and conservation expenses), grants to business users (through renewable energy development initiative), to market incentives for electric retailers to produce electricity based on renewable energy sources [18]. The usage of solar energy in heating and hot water sector is increasing in developed countries. This is particularly significant in countries like Canada where the average daily temperatures in winter are well below the freezing point in most of the country. In Germany, space and domestic hot water accounts for 40% of the end-user energy demand while in Canada it is 16% [21]. In Canadian residential, commercial, institutional and public administration 60e80% of the total energy consumed is used for space and water heating [22]. Solar energy such as photovoltaic and solar thermal provides many opportunities for SMEs both as user and system supplier. This will help reduce (conventional) energy consumption, total energy cost (for the user) and CO2 emissions of the buildings. With the current economic downturn, companies involved in the renewable energy generation, development and installation, are showing shrinking demand for their products and services. As an example, Timminco, which specializing in solar grade silicon for the rapidly growing solar photovoltaic (PV) energy industry, reported second quarter sales of $22.3 million in 2009 compared with $63.3 million in similar period of 2008 [23]. 4. Methodology Both action research and case study methodologies were used in this study. The innovation and commercialization of solar thermal energy by the following case study company were traced. As one of the authors of this paper is a member of the senior management of this firm, first-hand information was able to be collected, in real-time. Additional interviews with the mangers were carried out in 2008e2009. Several site visits were carried out in 2008e2009 to gain the understanding of the application of solar thermal water heating systems in new housing developments. Environmental data required for the analysis were collected from Environment Canada, NASA and other sources. A financial and environmental analysis was also conducted and the results were compared to other alternative energy sources of local and international firms.
fluid circulates through the solar tank transferring the heat into the solar tank. Cold potable water flows into the solar tank and is preheated prior to entering the original hot water tank which is now used as a back-up. When hot water is used in the house, fresh cold water enters the solar tank where it is pre-heated before entering the original water heating tank. 5.1. Research In North America, the accepted solar heater is the flat-plate model which is good in warm climates. Although this is an effective method in summer months in Alberta, it isn’t very effective when it is cold outside, specifically in winter. Therefore, in Alberta, evacuated-tube heat-pipe technology works extremely well at absorbing the sun’s heat, even when it is as cold as -40 C. Solar thermal, using evacuated-tube heat-pipe collectors, absorb 60% of the solar energy per square meter. Every collector panel is the equivalent of saving 1.2 acres of carbon absorbing forest; every 3 panels is the same as taking one car or light truck off the road. 5.2. Development A significant challenge of solar thermal systems using evacuated-tube heat-pipe collectors relates to managing excessive heat. Simple Solar has designed a unique heat dissipater that mounts on the back of the solar collector to dissipate excessive heat. It is controlled by a thermo-mechanical valve that opens when the solar fluid returning from the solar tank reaches 90 C. This heat dissipater effectively returns excess heat to the atmosphere, ensuring the solar fluid does not exceed 90 C. However, under periods of low hot water demand, the contents of the potable water in the solar tank can exceed 80 C. That is greater than the 50 C temperature desired for domestic water use, so a safety feature is required to prevent scalding of the user. Simple Solar’s system includes a mixing valve, or anti-scald valve, at the outlet of the solar tank that blends cold water into the solar-heated water to maintain a 50 C maximum supply temperature. Other innovation in the Simple Solar heating system is safety features are provided to prevent serious damage or injury in the event of system function. For example, if there is a vapor lock or pump failure the closed loop system will overheat at the manifold
5. Case study: simple solar Simple Solar heating is an original equipment manufacturer of solar hot water heating appliances based in Calgary, Alberta, Canada. They specialize in domestic and industrial solar heating systems. Started in 2006, it has grown from a small manufacturer to a leading subcontractor in the domestic solar heating equipment for leading builders in Southern Alberta. Their star product, Freedom Won appliance, utilizes solar-thermal collectors that have heat-pipes mounted inside vacuum sealed glass cylinders. These devices are extremely effective at collecting heat and transferring it into a copper manifold. Unlike older technology flat-plate collectors, these vacuum insulated heat-pipe tubes collect heat even in extreme winter temperatures. As seen in a typical installation shown in Fig. 2 below, the Freedom Won product includes a solar storage tank that is integrated into the domestic hot water system. The solar collector absorbs energy from sunlight and heats the solar fluid. The solar
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Fig. 2. Freedom Won Water Heater e typical installation.
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K. Jagoda et al. / Renewable Energy 36 (2011) 1266e1271
and build pressure. To prevent a pipe rupturing a pressure relief valve is provided on the solar collector that will relieve the overheated fluid at 50 psi. The solar fluid, that is non-toxic, will spill onto the roof and drain into the gutters, rather than inside the house. Lastly, in the event of a leak in the heat exchanger, the potable water system, at 60 to 70 psi, will leak into the solar fluid loop, not the other way around, ensuring the potable water system will not be contaminated with the (non-toxic) solar fluid. Also, in this occurrence, the pressure relief valve on the solar system will not withstand the potable water pressure and the leaked potable water would be relieved onto the roof.
While residential hot water is the company’s first market there are also large opportunities for residential space heating. Simple Solar is currently testing residential space heating applications which use three times more energy than water heating. Included in the residential sector are hot tub and swimming pool heating segments that are easily retrofitted to solar energy. Beyond the residential market are industrial and commercial applications for space and water heating. These sectors include laundromats, carwashes, food-processing plants, arenas and community swimming pools that are heavy users of water heating. In addition there are warehouses, apartment buildings, office towers and shopping centers for water and space heating applications.
5.3. Market introduction and development 6. Conclusions Simple Solar introduced its product through an established home renovation company in Okotoks is selling the Freedom Won directly to customers in Calgary and Okotoks. The major issue with the alternative energy options for the homeowners is the significant initial investment. With the current difficult economic conditions and tight lending practices of the major banks, raising $10,000 could be challenging for some homeowners. However, there are now options available to them to include the cost of the solar thermal systems in their mortgages. This allows them to acquire energy efficient and environmental energy sources with an initial cost as low as $2500. Table 2 provides the cost benefit analysis for a homeowner with the average house price of $400,000 with 25% down payment with an interest rate of 6%. From these results it is clear that the homeowner will save approximately $106 per year from the mortgage payments. However, when the interest rate goes down the savings will increase by a considerable amount. 5.4. Diffusion The opportunity for solar heating is immense. In the residential market alone there are over one million houses in Alberta and it is estimated at least half of them are candidates for solar heating. Simple Solar has proven the technology and is addressing the mass market with this environmentally friendly product. Achieving only 1% market share of Alberta homes would mean 10,000 homes had solar installed. This would be $70 million revenue. Both federal and provincial governments have introduced several incentives to increase the renewable usage and reduce carbon footprints. These programs range from tax incentives to cost recovery programs. The federal government’s Home Retrofit incentive program will apply to solar heating systems. This program provides a tax credit of 15% of the amount spent between $1000 and $10,000 on thermal solar system or other qualified project. The maximum amount available is $1350 per household. The federal government’s Eco-Energy program also supports solar water heating systems. This program provides $1250 support for a solar water heating system. The Alberta government is now supporting the Eco-Energy program by assisting with the inspection fees. The customers can receive $100 towards the initial inspection and another $100 for the follow up inspection.
Table 2 Cost benefit analysis for the homeowner. Interest rate
Additional mortgage payment per month
Additional mortgage payment per year
Solar Savings
Net Savings/ year
5% 6% 7%
34.90 38.39 42.02
418.80 460.68 504.24
567.20 567.20 567.20
148.40 106.52 62.96
The innovations systems approach for the renewable energy advocates that the development shared vision among policy makers, community, industry and support network is important to achieve common goals. In Canada, there is a huge potential for SMEs to be involved in the renewable energy sector. The correct systems and products, tailored to a specific market, could yield considerable business opportunities. However, each market has its own challenges, so the selection of the best renewable energy method is key for successful commercialization. Based on this case study, solar thermal systems are the best renewable energy method for domestic water heating in Calgary, Alberta. The analysis also shows that the savings in utility costs will make recovery of the initial investment on solar thermal system, four years. As this paper focuses on solar thermal applications in Alberta, Canada, similar studies in other parts of the country will be a valuable exercise. In addition, investigation of development, commercialization and diffusion of variety of renewable energy using national innovation framework would provide valuable insights to policymakers and entrepreneurs.
References [1] St. Denis G, Parker P. Community energy planning in Canada: the role of renewable energy. Renewable & Sustainable Energy Reviews 2009;13: 2088e95. [2] Shum KL, Watanabe C. An innovation management approach for renewable energy deployment- the case of solar photovoltaic technology. Energy Policy 2009;37:3535e44. [3] Thompson S, Duggirala B. The feasibility of renewable energies at an off-grid community in Canada. Renewable & Sustainable Energy Reviews 2009;13: 2740e5. [4] Mokyr J. Technologies and institutions. In: Steil B, .Victor D, Nelson R, editors. Technological innovation and economic performance. Princeton, NJ: Princeton University Press; 2002. [5] Foxon TJ, Gross R, Chase A, Howes J, Arnall. A, Anderson A. UK innovation systems for new and renewable energy technologies: drivers, barriers and systems failures. Energy Policy 2005;33:2123e37. [6] Lund PD. Effects of energy policies on industry expansion in renewable energy. Renewable Energy 2009;34:53e64. [7] Bezdek RH. Renewable energy: economic powerhouse? Solar Today 2007;21: 30e3. [8] Lundvall BA. National systems of innovations: towards a theory of innovation and interactive learning. London: Pinter Publishers; 1992. [9] OECD. Dynamising national innovation systems. Paris: OECD; 2002. [10] Newfoundland and Labrador, http://www.releases.gov.nl.ca/releases/2009/ exec/0402n06.htm; 2009. Government of Newfoundland and Labrador. [11] Hofman K, Li X. Canada’s energy perspective and policies for sustainable development. Applied Energy 2009;86:407e15. [12] Canadian Association for Renewable Energy, www.renewables.ca; 2003. [13] Liming H, Haque E, Barg S. Public policy discourse, planning and measures toward sustainable energy strategies in canada. Renewable & Sustainable Energy Reviews 2008;12:91e115. [14] Summary- Canada’s 2003 greenhouse gas inventory. Environment Canada, www.ec.gc/phb/ghg/inventory_report/2003summary/2003summary_e.cfm; 2005. [15] Hondo H. Life cycle GHG analysis of power generation systems: Japanese case. Energy 2005;30:2042e56.
K. Jagoda et al. / Renewable Energy 36 (2011) 1266e1271 [16] Maruyama Y, Nishikido M, Iida T. The rise of community wind power in Japan: enhanced acceptance through social innovation. Energy Policy 2007;35:2761e9. [17] Report on energy supply and demand in Canada-2006 revision. Statistics Canada; 2009. [18] Islam M, Fartaj AF, Ting DS. Current utilization and future prospects of emerging renewable energy applications in Canada. Renewable & Sustainable Energy Reviews 2004;8:493e519. [19] Filon A. Renewable energy options eoverview and trends. The 28th annual conference of the solar energy Society of Canada, August 18e20; 2003.
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[20] World Energy Council. Survey of energy resources 2001. London, UK: World Energy Council; 2001. [21] Rosiek S, Batles FJ. Integration of the solar thermal energy in the construction: analysis of the solar-assisted air-conditioning system installed in CIESOL building. Renewable Energy 2009;34:1423e31. [22] Ghafghazi S, Sowlati T, Sokhansanj S, Melin S. A multicriteria approach to evaluate district heating system options. Applied Energy 2010;87:1134e40. [23] Timminco. http://www.timminco.com/PressRelease.aspx?prId¼1029146&id¼ 24; 2009.
Contents lists available at ScienceDirect
Renewable Energy journal homepage: www.elsevier.com/locate/renene
Development and commercialization of renewable energy technologies in Canada: An innovation system perspective Kalinga Jagoda a, *, Robert Lonseth a, Adam Lonseth a, Tom Jackman b a b
Bissett School of Business, Mount Royal University, 4825 Mount Royal Gate SW, Calgary AB T3E 6K6, Canada Simple Solar Heating Limited, P.O. Box 988, Okotoks AB T1S 1B1, Canada
a r t i c l e i n f o
a b s t r a c t
Article history: Received 5 June 2010 Accepted 16 August 2010 Available online 11 November 2010
The increased environmental awareness coupled with the recent changes in the oil prices triggered the necessity of focusing on effective management of energy systems. Global climate change has caused many people to consider ways of reducing greenhouse gases Renewable energy has become an essential feature in curtailing emission of Green House Gases, while meeting the demand for energy. This paper presents an innovation system framework for development and diffusion of renewable energy technologies. The framework is used to identify opportunities for small and medium enterprises in the renewable energy sector. A case study on a successful development, installation and implementation of solar thermal systems households in Calgary, Alberta, by an entrepreneurial firm, is also presented. Ó 2010 Published by Elsevier Ltd.
Keywords: Solar thermal Canada Innovation systems Policy
1. Introduction The increased environmental awareness coupled with the recent changes in the oil prices triggered the necessity of focusing on effective management of energy systems. In general, there are three ways to effectively manage energy systems: energy efficiency; energy conservation; and the switching of energy sources to renewable [1]. Energy efficiency relates to the ways and means of reducing wasting of energy in generation and distribution, while energy conservation deals with the implementation of methods and applications of reducing the amount of energy that is used to provide goods or services. Historically, the focus of government institutions and firms involved in energy generation, supply and distribution, were on these two ways. Many technology and incentive programs have been developed and implemented to achieve higher energy efficiency and conservation. However, in the last decade, interest in renewable energy has grown exponentially. Simply put, renewable energy is generated from a regenerative source. The most common regenerative sources include hydro, solar and wind, while geothermal and biomass are also becoming popular. The catalysts for growing interest in renewable energy sources were due to two main reasons: reduce the dependence of fossil fuels and, reduce greenhouse gases. With growing demand for fossil fuels, the prices have increased exponentially. This escalation
* Corresponding author. Tel.: þ1 403 440 8895. E-mail addresses: [email protected] (K. Jagoda), [email protected] (R. Lonseth), [email protected] (A. Lonseth), [email protected] (T. Jackman). 0960-1481/$ e see front matter Ó 2010 Published by Elsevier Ltd. doi:10.1016/j.renene.2010.08.022
of prices of fossil fuels has negatively impacted the competitiveness of small businesses, both in developed and developing countries, and threatens the very survival of some communities. Global climate change, along with increased awareness, has caused many people to consider ways of reducing greenhouse gases. Kyoto protocol, signed by many countries, has forced the governments to curtail emission of greenhouse gases (GHG), while increasing the efforts to convert their energy sources from fossil fuels to renewable energy sources. Many countries have introduced incentive programs for renewable energy systems, diversifying their energy mix to reduce the dependence of fossil fuels while curtailing GHG emissions. The increase in interest in renewable energy provides the SMEs two major opportunities. First, the use of renewable energy sources makes their energy cost lower in the long run. As there are many incentives provided by the federal, provincial and local governments, the initial cost of such systems are becoming lower. The choice of energy mode is mainly attributed to the cost of the initial investment. Solar energy (both photo voltaic and solar thermal) is becoming increasingly popular with small businesses, while wind power is becoming an attractive energy source for medium sized enterprises. Secondly, SMEs can gain competitive advantage by becoming eco-friendly and create loyal environmental friendly clientele. In the last decade, many companies have introduced green marketing strategy to differentiate their products and services from the competitors. The renewable energy also provides opportunities for entrepreneurs. As consumers are increasing their concern about the environment, many individuals and businesses are considering
K. Jagoda et al. / Renewable Energy 36 (2011) 1266e1271
incorporating renewable energy source for their energy inputs. Some developers are now offering solar heating and electricity generation, through installed solar panels as an add-in feature. The best renewable energy option varies from one province to another, due to environmental conditions. For example, wind power is popular in Eastern Canada while solar thermal is popular in the Prairies. This provides the opportunity for entrepreneurs to specialize in each particular market. As no system can be applied to one area or the other, each system needs considerable innovation before becoming a commercially viable product. Although many programs and incentives are developed to promote the usage of renewable energy systems, still it has not realized its full potential. The major barrier to successful application of renewable energy systems is the non-availability of product/service to a particular market. The research has shown that selection of an appropriate and viable renewable energy system is paramount for obtaining the desired results [2,3]. In Canada, SMEs represent the majority of firms involved in the renewable energy sector. The literature in renewable energy generation and application is often sparse, with the engineering specifications and economic aspects of such systems. There are limited studies that have been carried out in discussing entrepreneurial activities/aspects related to the renewable energy sector in Canada. This paper identifies and analyzes opportunities for small and medium enterprises in the renewable energy sector. The balance of this paper is structured as follows: the next section provides innovation systems framework for development and diffusion of renewable energy technologies, then it provides a brief overview of energy sector in Canada with specific focus on renewable energy. This is followed by the research methodology outline. It then concludes with a discussion on an entrepreneurial firm specializing in the application of solar thermal systems in houses for domestic water heating. 2. Innovation systems approach for development and diffusion of renewable energy technologies Innovation is the engine of the economic development and had been considered as major source of creating new employment and
1267
improving skill base [4,5]. The appropriate energy policies linked to support research and development of renewable energy technologies and creating proper market mechanisms by governments would solve domestic energy problems while improving the competitiveness of domestic industries [6]. It may not only create local market for renewable technologies but also export markets. In less than a decade more than 200,000 jobs (in renewable energy) have been created in Germany [6] while in US it accounted for more than 450,000 positions [7]. An Innovation system is characterized by of the elements and relationships which interact in the production, diffusion and use of new and economically useful knowledge [8]. It effectively matches the technical possibilities to market opportunities by providing multiple interactions with forward and backward flow of information from R&D to products. A national innovation system can be loosely defined as “the flow of knowledge and influence, as well as market transactions, between the different actors and institutions within the innovation system” [9]. In their study of UK renewable energy sector, Foxon et al. [5] identified three types of actors involved; actors involved in creating and or sharing knowledge, actors disseminating and using knowledge in the form of intellectual property and commercial products and actors setting the framework conditions. In their innovation map they identified the common drivers of innovation and sources, actors and relationships of knowledge creation diffusion and exploitation. In this paper we modify their innovation map to illustrate components of the innovation system map for Canadian renewable energy sector. This framework links four major types of players in development, commercialization and diffusion of renewable energy technologies. Policy support players include all three types of governments and international institutions who can play a major role in shaping energy policy of Canada. On the demand side, utility and consumers play a major part. Support infrastructure consists of various players who provide financial, technological and market assistance in research, development, commercialization and diffusion of renewable energy technologies. Citizens and interest groups play a significant role by providing awareness of renewable energy technologies, as well as influencing the policies and procedures other players. The innovation map is shown in Fig. 1.
Fig. 1. Innovation Systems Framework for Development and Diffusion of Renewable Energy Technologies.
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The policy initiatives of the federal, provincial and local governments for supporting new technology initiatives are influenced by availability of resources, location of renewable energy sources, current state of industries, innovation systems and the demand for energy sources. For example, in Alberta, most of the wind farms are located in the southern part of the province (close to the US border). The electricity that will be generated by the Upper Churchill hydropower project will be transmitted to Québec, which will provide energy at much lower cost for energy intensive industries in Québec and will provide power for the mining industry in Labrador. 130 MW of power will be transmitted to the US via Québec and will generate additional revenue for the province of Newfoundland and Labrador [10]. In Ontario, the majority of the provincial government incentives are aimed at development and diffusion of wind and solar technologies. Some researchers argue that the current government takes a ‘hands-off’ approach and does not provide the adequate incentives for sustainable energy development [11]. The slow adaptation of stricter regulations on non-renewable energy sources (which would provide a level field for the renewable sources) is linked to the fear of losing international competitiveness and less pressure from its biggest trading partner, the US. According to 2003 statistics, only 7.3% of the total budget of research and development of the energy sector is allocated to renewable energy [12]. As a signatory to the Kyoto Protocol, Canada is committed to reduce its GHG by 6% of the 1990 levels, by 2012. The boom in oil sand projects and increased use of fossil fuels has resulted in an increase of 24% of the 1990 levels by the year 2003 [13]. In order to meet the Kyoto target, Canada needs to curtail GHG emissions by 26% of its forecasted levels [14].Deployment of renewable energy is an important step in achieving this target. Citizens play an important part in the development, application and implementation of renewable energy systems. Their influence ranges from installation of equipment, increasing environmental awareness of others and changing attitudes and behavior of others toward adaptation of such systems [15,16]. The survey of 745 investors involved in community wind power projects by Mayuyama, Nishikido and Iida [16] reported that investment as a profit sharing system has attracted a large number of private citizens and helped to create a social movement. A study of ten community energy plans in Canada by St. Denis and Parker [1] found that wind, solar thermal and photovoltaic are the commonly used renewable energy sources. Local communities are becoming more influential in energy management by taking an active role in the decision making process, by matching their local
demand with energy sources. The programs like ‘local Action Plans for climate change’ provides an opportunity for local communities to act on climate change, by incorporating renewable energy sources in their action plans [1]. 3. Overview of the energy sector of Canada The energy sector plays a key role of the Canadian economy. Rapid industrialization of countries, coupled with increasing population demand for the energy in the world, is increasing at an alarming rate. The energy consumption in Canada has increased by 26% between 1990 and 2004 reaching 7643 PJ in 2006 [17]. Canadian sustainable energy strategy is divided into two main groups: energy efficiency strategy and renewable energy strategy [13]. This paper focuses on the renewable energy strategy. Table 1 provides a variety of government programs introduced to promote research, development and implementation of renewable energy. 3.1. Canadian renewable energy sector The size and geographical location of Canada provides access to a wide variety of renewable energy sources. It has large reserves of biomass and solar, wind, geothermal and other forms of energy, providing a huge potential for development and commercialization. Canada has used only a fraction of those sources to generate energy. According to 2000 statistics, excluding hydroelectric and combustibles, only 1.3% of Canada’s primary energy supply came from renewable energy [13]. The adaptation of renewable energy technologies in Canada has not been as fast as other developed countries. For example, by 2004, Canada’s installed wind power capacity is 2.6% of the installed capacity of Germany [13]. The major reason for slow penetration of renewable energy is accounted to the lack of quick breakthroughs in technology improvements, expanding availability of natural gas, and moderate expectations for quick market acceptance of new products [14]. 3.2. Solar energy Applications of solar energy systems can be divided into two main categories: solar photovoltaic and solar thermal. Photovoltaic systems covert sunlight into electricity using semi-conductor materials. Solar thermal systems capture solar radiation using vacuum tubes or perforated vertical tubes, to heat water or air. The Canadian usage and installed capacity of photovoltaic systems outnumbers the solar thermal systems. The total installed capacity
Table 1 Government programs introduced to promote research, development and implementation of renewable energy. Program
Description of Activities
Action Plan 2000 on climate change
Provide support for the study of energy application of sustainable energy technologies in remote (non-grid) communities. Encourages increased cogeneration and district heating, the manufacturing and processing tax credit was extended to corporations that produce for sale, steam for use other than the generation of electricity. Assist in developing scientific and engineering platforms for evaluating and guiding innovation in clean, commercially viable technologies and processes. Provided $53 million loan for a research project on more efficient industrial gas turbine technologies Contributes to the development, demonstration and early adoption of new, cleaner technologies and opportunities. Encourage Canadians to build houses that meet minimum voluntary standard for windows and doors, insulation, heating, ventilation and air-conditioning. Encourages developers to install energy-efficient technologies or Power Smart Packages in new home developments. Coordinates applied research and commercialization projects for more efficient and environmentally friendly energy technologies. Provides loans at a lower rate for geothermal heat pumps and energy conservation devises.
Extension of the manufacturing credit
Centre for research in cleaner manufacturing Gas Turbine research project Technology and Innovation initiative R-2000 Home Program Power Smart new home program in British Columbia New Ontario Centre of Excellence for Electricity and Alternative Energy Technology Manitoba hydro ePower smart loans
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of photovoltaic exceeded 10 MW [19] while solar thermal systems generated 100 TJ/year [20]. In the last decade and a half the Canadian government introduced several initiatives and programs to promote solar energy. These range from corporate tax incentives for the start-up of renewable energy projects (through Canadian renewable and conservation expenses), grants to business users (through renewable energy development initiative), to market incentives for electric retailers to produce electricity based on renewable energy sources [18]. The usage of solar energy in heating and hot water sector is increasing in developed countries. This is particularly significant in countries like Canada where the average daily temperatures in winter are well below the freezing point in most of the country. In Germany, space and domestic hot water accounts for 40% of the end-user energy demand while in Canada it is 16% [21]. In Canadian residential, commercial, institutional and public administration 60e80% of the total energy consumed is used for space and water heating [22]. Solar energy such as photovoltaic and solar thermal provides many opportunities for SMEs both as user and system supplier. This will help reduce (conventional) energy consumption, total energy cost (for the user) and CO2 emissions of the buildings. With the current economic downturn, companies involved in the renewable energy generation, development and installation, are showing shrinking demand for their products and services. As an example, Timminco, which specializing in solar grade silicon for the rapidly growing solar photovoltaic (PV) energy industry, reported second quarter sales of $22.3 million in 2009 compared with $63.3 million in similar period of 2008 [23]. 4. Methodology Both action research and case study methodologies were used in this study. The innovation and commercialization of solar thermal energy by the following case study company were traced. As one of the authors of this paper is a member of the senior management of this firm, first-hand information was able to be collected, in real-time. Additional interviews with the mangers were carried out in 2008e2009. Several site visits were carried out in 2008e2009 to gain the understanding of the application of solar thermal water heating systems in new housing developments. Environmental data required for the analysis were collected from Environment Canada, NASA and other sources. A financial and environmental analysis was also conducted and the results were compared to other alternative energy sources of local and international firms.
fluid circulates through the solar tank transferring the heat into the solar tank. Cold potable water flows into the solar tank and is preheated prior to entering the original hot water tank which is now used as a back-up. When hot water is used in the house, fresh cold water enters the solar tank where it is pre-heated before entering the original water heating tank. 5.1. Research In North America, the accepted solar heater is the flat-plate model which is good in warm climates. Although this is an effective method in summer months in Alberta, it isn’t very effective when it is cold outside, specifically in winter. Therefore, in Alberta, evacuated-tube heat-pipe technology works extremely well at absorbing the sun’s heat, even when it is as cold as -40 C. Solar thermal, using evacuated-tube heat-pipe collectors, absorb 60% of the solar energy per square meter. Every collector panel is the equivalent of saving 1.2 acres of carbon absorbing forest; every 3 panels is the same as taking one car or light truck off the road. 5.2. Development A significant challenge of solar thermal systems using evacuated-tube heat-pipe collectors relates to managing excessive heat. Simple Solar has designed a unique heat dissipater that mounts on the back of the solar collector to dissipate excessive heat. It is controlled by a thermo-mechanical valve that opens when the solar fluid returning from the solar tank reaches 90 C. This heat dissipater effectively returns excess heat to the atmosphere, ensuring the solar fluid does not exceed 90 C. However, under periods of low hot water demand, the contents of the potable water in the solar tank can exceed 80 C. That is greater than the 50 C temperature desired for domestic water use, so a safety feature is required to prevent scalding of the user. Simple Solar’s system includes a mixing valve, or anti-scald valve, at the outlet of the solar tank that blends cold water into the solar-heated water to maintain a 50 C maximum supply temperature. Other innovation in the Simple Solar heating system is safety features are provided to prevent serious damage or injury in the event of system function. For example, if there is a vapor lock or pump failure the closed loop system will overheat at the manifold
5. Case study: simple solar Simple Solar heating is an original equipment manufacturer of solar hot water heating appliances based in Calgary, Alberta, Canada. They specialize in domestic and industrial solar heating systems. Started in 2006, it has grown from a small manufacturer to a leading subcontractor in the domestic solar heating equipment for leading builders in Southern Alberta. Their star product, Freedom Won appliance, utilizes solar-thermal collectors that have heat-pipes mounted inside vacuum sealed glass cylinders. These devices are extremely effective at collecting heat and transferring it into a copper manifold. Unlike older technology flat-plate collectors, these vacuum insulated heat-pipe tubes collect heat even in extreme winter temperatures. As seen in a typical installation shown in Fig. 2 below, the Freedom Won product includes a solar storage tank that is integrated into the domestic hot water system. The solar collector absorbs energy from sunlight and heats the solar fluid. The solar
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Fig. 2. Freedom Won Water Heater e typical installation.
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and build pressure. To prevent a pipe rupturing a pressure relief valve is provided on the solar collector that will relieve the overheated fluid at 50 psi. The solar fluid, that is non-toxic, will spill onto the roof and drain into the gutters, rather than inside the house. Lastly, in the event of a leak in the heat exchanger, the potable water system, at 60 to 70 psi, will leak into the solar fluid loop, not the other way around, ensuring the potable water system will not be contaminated with the (non-toxic) solar fluid. Also, in this occurrence, the pressure relief valve on the solar system will not withstand the potable water pressure and the leaked potable water would be relieved onto the roof.
While residential hot water is the company’s first market there are also large opportunities for residential space heating. Simple Solar is currently testing residential space heating applications which use three times more energy than water heating. Included in the residential sector are hot tub and swimming pool heating segments that are easily retrofitted to solar energy. Beyond the residential market are industrial and commercial applications for space and water heating. These sectors include laundromats, carwashes, food-processing plants, arenas and community swimming pools that are heavy users of water heating. In addition there are warehouses, apartment buildings, office towers and shopping centers for water and space heating applications.
5.3. Market introduction and development 6. Conclusions Simple Solar introduced its product through an established home renovation company in Okotoks is selling the Freedom Won directly to customers in Calgary and Okotoks. The major issue with the alternative energy options for the homeowners is the significant initial investment. With the current difficult economic conditions and tight lending practices of the major banks, raising $10,000 could be challenging for some homeowners. However, there are now options available to them to include the cost of the solar thermal systems in their mortgages. This allows them to acquire energy efficient and environmental energy sources with an initial cost as low as $2500. Table 2 provides the cost benefit analysis for a homeowner with the average house price of $400,000 with 25% down payment with an interest rate of 6%. From these results it is clear that the homeowner will save approximately $106 per year from the mortgage payments. However, when the interest rate goes down the savings will increase by a considerable amount. 5.4. Diffusion The opportunity for solar heating is immense. In the residential market alone there are over one million houses in Alberta and it is estimated at least half of them are candidates for solar heating. Simple Solar has proven the technology and is addressing the mass market with this environmentally friendly product. Achieving only 1% market share of Alberta homes would mean 10,000 homes had solar installed. This would be $70 million revenue. Both federal and provincial governments have introduced several incentives to increase the renewable usage and reduce carbon footprints. These programs range from tax incentives to cost recovery programs. The federal government’s Home Retrofit incentive program will apply to solar heating systems. This program provides a tax credit of 15% of the amount spent between $1000 and $10,000 on thermal solar system or other qualified project. The maximum amount available is $1350 per household. The federal government’s Eco-Energy program also supports solar water heating systems. This program provides $1250 support for a solar water heating system. The Alberta government is now supporting the Eco-Energy program by assisting with the inspection fees. The customers can receive $100 towards the initial inspection and another $100 for the follow up inspection.
Table 2 Cost benefit analysis for the homeowner. Interest rate
Additional mortgage payment per month
Additional mortgage payment per year
Solar Savings
Net Savings/ year
5% 6% 7%
34.90 38.39 42.02
418.80 460.68 504.24
567.20 567.20 567.20
148.40 106.52 62.96
The innovations systems approach for the renewable energy advocates that the development shared vision among policy makers, community, industry and support network is important to achieve common goals. In Canada, there is a huge potential for SMEs to be involved in the renewable energy sector. The correct systems and products, tailored to a specific market, could yield considerable business opportunities. However, each market has its own challenges, so the selection of the best renewable energy method is key for successful commercialization. Based on this case study, solar thermal systems are the best renewable energy method for domestic water heating in Calgary, Alberta. The analysis also shows that the savings in utility costs will make recovery of the initial investment on solar thermal system, four years. As this paper focuses on solar thermal applications in Alberta, Canada, similar studies in other parts of the country will be a valuable exercise. In addition, investigation of development, commercialization and diffusion of variety of renewable energy using national innovation framework would provide valuable insights to policymakers and entrepreneurs.
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