Cleantech firms on the West Coast should be prepared to diversify their markets beyond obvious targets like China as the federal government prepares to roll out $6.7 billion in new tax credits for the industry this coming spring.
So says Natural Resources Minister Jonathan Wilkinson, who appeared in downtown Vancouver Tuesday to tout his government’s fall fiscal update and the new refundable tax credits that were announced last week.
“People should be careful about getting too focused just on China,” he said. “I would say that the early markets for Canadian hydrogen from an export perspective on the West Coast are probably Japan and South Korea.”
Burnaby-based Ballard Power Systems Inc. (TSX:BLDP) announced in late September it had entered into an investment agreement with a local government in Shanghai that would see it commit $130 million towards building a new R&D centre and manufacturing facility in the city’s Jiading District.
The hydrogen fuel cell maker has long been drawing a bead on the giant market opportunities offered in China.
Four years ago Ballard’s joint venture with Weichai Power Co. Ltd. brought $184 million into its coffers when the Chinese firm upped its ownership stake in the B.C. firm.
These big moves came even after the company experienced what CEO Randy MacEwen described at the time as a “costly and embarrassing toast-up” with a Chinese partner in 2015.
Ballard eventually cut ties with China’s Azure Hydrogen, citing breach of contract after Ballard spent nearly two years providing fuel cell modules for hydrogen buses and later licensing its telecom backup power system. Services were being provided, but money eventually stopped coming in, according to Ballard.
(MacEwen was not CEO at the time the deal was signed).
The CEO said Ballard wouldn’t curb its activity in China, but would instead pursue only “strong, well-capitalized local partners" after taking a US$7.5 million hit as a result of the deal going bad.
“As you think about doing business in China, it raises all kinds of challenges for tech companies. So I’m quite familiar with that,” said Wilkinson, the former CEO of Vancouver-based cleantech firm BQE Water Inc.
“It's important that companies are very thoughtful about IP protection. That's certainly something that we are going to be interested in engaging in conversation in. It's certainly important that we are thinking about how we ensure Canadian companies benefit in a significant way and that they're able to ensure that they sustain that.”
He cited Ballard has one company that has navigated those challenges successfully in a market that bears a bad reputation when it comes to protecting the intellectual property (IP) of its foreign joint venture partners.
“One misconception which used to be true and which now is less true is that you can’t enforce IP rights in China,” lawyer Roch Ripley, a partner at Gowlings WLG and head of the firm’s Vancouver IP department, told BIV last month. “If you’re a foreign market and you’re looking to attract foreign IP to enter your jurisdiction and foreign investment, then you’ve got to offer these protections in order for people to invest in that jurisdiction.”
He said this shift to offer more protections to non-Chinese firms as ramped up in the past 15-20 years.
As for B.C. firms’ interest in China, Ripley said interest has been dissipating somewhat.
“The appetite is still there, but I think it’s lower than it was,” he said. “Some of it is geopolitical.”
Meanwhile, Wilkinson emphasized that these new tax credits will be geared towards deployment of new cleantech rather than the development of new innovations.
