Earlier this month, we attended a conference in San Francisco that focused on various carbon removal technologies, including direct air capture, land-based carbon removal and enhanced mineralization. The conference had over 650 participants, with 130 of them being corporates from both private and public companies that are working toward reducing carbon emissions. The number of start ups in this space has grown exponentially in the last couple of years and the United States is becoming a leading global carbon capture centre.

The Inflation Reduction Act (IRA), passed in August 2022, has created favourable conditions for carbon capture technology deployment in the U.S. The most notable provision is the 45Q tax credit for CO2 storage, which aims to promote carbon capture utilization and storage (CCUS).Companies providing direct air capture technologies have grown from only three start ups a couple of years ago to over 60 today. One of the reasons for this is the attractive credit of US$130 per tonne of CO2 captured and stored.

We also learned more about the Department of Energy’s Loan Programs Office (LPO), which grants debt capital to companies providing clean energy services and infrastructure. Over the last decade, this office has already issued over US$38 billion, with billions more available for future funding. The LPO is focused on providing capital in three main areas:

  1. Title 17 Clean Energy Loan Program to accelerate the commercial deployment of innovative energy technologies.
  2. Advanced Technology Vehicles Manufacturing Direct Loan Program to promote local manufacturing of more fuel-efficient and clean vehicles.
  3. Tribal Energy Loan Guarantee Program to support the investments into energy projects for federally recognized tribes.

Many companies that will benefit from the IRA are also eligible to receive additional debt financing if they meet any of the LPO’s three programs, unlocking capital to deploy into clean technologies. With the amount of capital pouring into clean energy sectors, it is definitely an exciting time to follow the sector.

Although carbon capture is a difficult area to gain exposure to in public markets, there are a few public companies that have internally incubated such technologies. One such company is Advantage Energy Ltd. (AAV CN), which we currently own and had the opportunity to meet at the conference. Advantage is an Alberta-based natural gas and light oil producer that has started a subsidiary clean-tech company, Entropy, providing modular carbon capture and storage technology. Advantage owns 85% of Entropy, with Brookfield Renewable being the other strategic owner.

Entropy’s carbon capture technology is already in operation at Advantage’s Glacier Gas Plant and has a capture rate of 90% to 95% of post-combustion flue gas. With the addition of the technology, Advantage’s carbon emissions at that specific plant have fallen by about 15%, resulting in a CO2 savings of about 47,000 tonnes annually. This helps make the company one of the lowest emission intense producers compared to its peers.

The carbon capture process involves capturing the CO2 from the flue gas stream emitted by the plant, processing it by scrubbing it with a chemical solvent and then storing the captured CO2 permanently deep underground. The process is illustrated in the figure below.

The post-combustion carbon capture technology is a strategic advantage for Entropy and the company is a key asset for Advantage Energy. Currently, there are only two operating post-combustion carbon capture projects in the world. The post-combustion technology can be retrofitted to existing energy-generating assets, which is the market the company aims to serve through its capital-light licence and support model, in addition to developing, owning and operating carbon capture units. Moreover, Entropy uses its proprietary solvent called Entropy23 that allows for lower input and operating costs due to its superior chemistry developed in-house. 

Currently, Entropy is benefiting from Canada’s investment tax credit of 50% for carbon capture equipment, but it is also expanding its team to focus its commercial efforts in the U.S. to benefit from the IRA. Recently, the company announced a first memorandum of understanding with California Resources Corporation, in which Entropy will provide technology, engineering and development services to decarbonize gas-fired boilers, avoiding about 400,000 tonnes of carbon annually. 

Aurubis AG (NDA GY), Europe’s largest copper producer and the world’s largest copper recycler is worth mentioning for its commitment to reducing its carbon footprint. Copper smelting is a heavy emitting activity but critical for the energy transition as we have highlighted in a previous note. The company has set Science-Based Targets with a goal of 1.5-degree alignment by 2030 and is piloting the use of blue ammonia in its production process for copper rods at its Hamburg facility. The carbon dioxide by-product from blue ammonia production is captured and stored underground. If successful, Aurubis will permanently switch to blue ammonia, potentially saving 4,000 tonnes of CO2 annually.

The opportunities in the carbon capture space are extremely attractive, with both policy and capital driving growth. We are confident that Advantage and Aurubis will benefit from them in the future while providing critical technology in helping it and other companies achieve net-zero goals.

Photo of the CC&L Private Capital team in Edmonton volunteering at Home for Dinner nights

Each year, the CC&L Foundation supports numerous not-for-profit organizations across Canada in support of:

  • promoting a better environment;
  • improving education;
  • advancing science and medicine;
  • creating stronger communities; and
  • encouraging the arts.

In particular, it aims to support organizations in which our employees or partners have a personal connection and have made financial or time commitments.

CC&L Foundation commits $125,000 to Ronald McDonald House Charities Alberta

In 2022, the CC&L Foundation committed $125,000 to Ronald McDonald House Charities Alberta. The Ronald McDonald House supports families who need to travel while seeking vital medical treatment for their seriously sick or injured child. They provide a home-away-from-home when those families are experiencing one of life’s most difficult times. Each year, thousands of families will stay at one of the four Ronald McDonald houses in Alberta, and stays can last anywhere from a few nights to several months.

Currently, Ronald McDonald Houses are only able to serve 14% of those who need to travel for pediatric care within Alberta. This results in some families being turned away to make their own arrangements, sometimes resulting in keeping families away from their children. To expand capacity and assist in meeting the high demand, Ronald McDonald Houses are in the process of doubling their capacity in Edmonton and Calgary. The CC&L Foundation’s donation is contributing to these expansion projects.

CC&L Private Capital volunteers at Home for Dinner

Jim Kapeluck is a Wealth Advisor with our CC&L Private Capital team in Edmonton. Earlier this year, Jim and the local team volunteered at one of the Ronald McDonald ‘Home for Dinner’ nights. The team prepared and served meals to families in need.

Find out more about the work of the CC&L Foundation.

Volunteer in orange vest gives a box of food donation to fleeing refugees from Ukraine.

The ongoing conflict in Ukraine has displaced over 12 million Ukrainians, with many seeking refuge in neighbouring countries and beyond. The CC&L Foundation has stepped up to provide vital humanitarian aid. Through two successful fundraising campaigns, the Foundation has raised $409,000 in support of eleven organizations such as Help Us Help and the Canada-Ukraine Foundation.

The impact of these funds has been far reaching, including:

  • Delivery of food boxes to almost 1 million people in 21 oblasts
  • Provision of bulletproof vests, food, shelter and assistance in relocating families
  • War Trauma Therapy program started for 9,900 children
  • Purchase of 1,000 new firefighting sets of personal equipment
  • Re-launch of the Canada-Ukraine Surgical Aid Program
  • Delivery of supplies and medicine to 78 hospitals across Ukraine
  • Delivery of 140 metric tons of buckwheat seeds for harvest in October, providing much-needed food security

The Foundation’s efforts have also extended to the Ukrainian-Canadian community, with the Displaced Ukrainians Appeal funding over 1,000 displaced children to attend summer camps in Canada.

Through its various charitable initiatives and the dedication of volunteers, the CC&L Foundation continues to make a positive impact in the lives of Ukrainians affected by the conflict, providing necessary help and hope for a better tomorrow.

Learn more about the work of the CC&L Foundation.

Connor, Clark and Lunn Infrastructure (CC&L Infrastructure), EDP Renewables North America (EDPR NA), and Hoosier Energy are celebrating American Clean Power Week as construction winds down at the 200-megawatt (MW) Riverstart Solar Park in Indiana, which will be the largest solar array in the state upon completion.

Located 80 miles northeast of Indianapolis, the solar park has brought hundreds of jobs to Randolph County with approximately $180 million in capital investments. When operational, Riverstart Solar Park will power the equivalent of more than 36,000 average Indiana homes annually.

Over the project’s lifetime, millions of dollars in property tax payments will be disbursed to school districts and local governments. Riverstart has a 20-year purchase power agreement (PPA) with Bloomington-based Hoosier Energy, which will use energy produced from the project to power communities throughout central and southern Indiana and southeastern Illinois. The agreement will help diversify the electric grid and add to Indiana’s growing portfolio of renewable energy projects.

“Riverstart Solar Park will provide an economical source of renewable energy for the next two decades and is a great fit for our members’ long-term needs,” said Donna Walker, Hoosier Energy President and CEO. “Hoosier Energy appreciates the collaboration with EDPR and CC&L Infrastructure and looks forward to working with them to make this project a success.”

Hoosier Energy is a not-for-profit generation and transmission cooperative that provides electric power and services to 18 not-for-profit electric distribution cooperative owners. The 18 cooperative members serve more than 760,000 consumers.

The solar project’s construction has already created hundreds of jobs for Hoosiers and continues to bring well paying jobs to the area. Riverstart has also led to millions of dollars of spending within 50 miles of the project— boosting the local economy and supporting local businesses and families. The project will also complement the area’s agricultural resources with a stable, weather-proof cash crop in the form of landowner lease payments.

“CC&L Infrastructure and our investment partner, Desjardins Group, are pleased to own and operate this largescale solar project alongside EDPR,” said Matt O’Brien, President of CC&L Infrastructure. “As long-term investors, we believe in responsible investment. CC&L Infrastructure is focused on investing in essential infrastructure projects that support local communities while creating value for customers, employees and investors. We look forward to working together to supply Hoosier and Randolph County with solar power for the decades to come.”

“EDP Renewables is proud to bring investments, jobs, economic growth, and renewable energy to Indiana,” said Miguel Prado, CEO of EDP Renewables North America. We are grateful for the collaboration with Hoosier Energy and CC&L Infrastructure, who made the Riverstart Solar Park possible, and we are thrilled to see the positive impact solar power has had on the Randolph County community and the state of Indiana as a whole.”

Riverstart Solar Park is expected to begin operations before the end of 2021. EDPR NA has 1,199 MW of operational renewable energy capacity in Indiana, which represents one-third of all renewable energy capacity installed in the state. Through the company’s dedication to sustainability measures, Indiana is one step closer to a cleaner, brighter future.

About Connor, Clark & Lunn Infrastructure

CC&L Infrastructure invests in middle-market infrastructure assets with highly attractive risk-return characteristics, long lives and the potential to generate stable cash flows. The firm has been an active investor and owner of traditional and renewable energy assets for more than 15 years. Its portfolio includes more than 60 hydro, solar, and wind facilities totaling 1.4 GW of clean energy generating capacity globally. CC&L Infrastructure is a part of Connor, Clark & Lunn Financial Group Ltd., a multi boutique asset management firm whose affiliates collectively manage approximately CAD$100 billion in assets.

For more information, please visit www.cclinfrastructure.com.

About EDP Renewables North America

EDP Renewables North America LLC (EDPR NA), its affiliates, and its subsidiaries develop, construct, own, and operate wind farms and solar parks throughout North America. Headquartered in Houston, Texas, with 58 wind farms, eight solar parks, and seven regional offices across North America, EDPR NA has developed more than 8,300 megawatts (MW) and operates more than 8,000 MW of onshore utility-scale renewable energy projects. With more than 800 employees, EDPR NA’s highly qualified team has a proven capacity to execute projects across the continent.

For more information, visit www.edpr.com/north-america.

About EDP Renewables

EDP Renewables (Euronext: EDPR), is a global leader in the renewable energy sector and the world’s fourth-largest renewable energy producer. With a sound development pipeline, first class assets, and market-leading operating capacity, EDPR has undergone exceptional development in recent years and is currently present in 17 international markets (Belgium, Brazil, Canada, Chile, Colombia, France, Greece, Hungary, Italy, Mexico, Poland, Portugal, Romania, Spain, the United Kingdom, the United States, and Vietnam).

EDPR is committed to furthering social advances in terms of sustainability and integration. This is reflected by the inclusion of the company in the Bloomberg Gender Equality index and the fact that it has been certified as a Top Employer 2020 in Europe (Spain, Italy, France, Romania, Portugal, and the United Kingdom) and a Top Workplace 2020 in the United States, both of which recognize its employee-driven policies.

Energias de Portugal, S.A. (EDP), the principal shareholder of EDPR, is a global energy company and a leader in value creation, innovation, and sustainability. EDP has been included in the Dow Jones Sustainability Index for 13 consecutive years.

About Hoosier Energy

Founded in 1949, Hoosier Energy is a generation and transmission cooperative (G&T) with headquarters in Bloomington, Indiana. The G&T provides electric power and services to 18 member distribution cooperatives in central and southern Indiana and southeastern Illinois. We are a community-focused organization that works to efficiently deliver affordable, reliable and safe energy. Collectively, our 18 members serve more than 760,000 consumers. Hoosier Energy is an equal opportunity provider and employer.

For more information, visit www.hoosierenergy.com.

Contact:

Kaitlin Blainey
Director
Connor, Clark & Lunn Infrastructure
(416) 216-8047
[email protected]

New mandatory climate-related disclosure rules are on the horizon. The European Commission is conducting a review of its rules on non-financial disclosure, which covers climate risk reporting.[1] Last year, the UK said it would begin requiring certain companies to include emissions and climate risk information in annual reports by 2025, in accordance with the Task Force on Climate-Related Financial Disclosures (TCFD) framework. Both the United States (US) Securities and Exchange Commission and the Canadian Securities Administrators are also working on new reporting requirements. Currently, only high emitters of greenhouse gases in the US and Canada are required to report emission data. However, the requirement scope is expected to expand.

Recently in Japan, a new initiative from the Financial Services Agency (FSA) was announced, making it mandatory for about 4,000 companies (including those listed on the Tokyo Stock Exchange) to report their greenhouse gas emissions, and make other climate-related disclosures, effective April 2022. The FSA will require companies to make disclosures in accordance with the TCFD framework, which is structured around four thematic areas: governance, strategy, risk management, and metrics and targets.

In April 2019, Global Alpha became a supporter of the TCFD. We are committed to disclosing our approach to identifying, assessing, and managing climate-related risk in our investments on behalf of our clients. On the Global Alpha website, we published our TCFD-aligned report. There are also quarterly Climate Impact Assessment reports on our Global and International Small Cap strategies.

In previous commentaries, we have highlighted many holdings that are having a positive impact on carbon neutrality, such as Iwatani (8088 JP), Hexagon Composites (HEX NO), Clean Energy Fuels (CLNE US), Ormat (ORA IT), Biffa (BIFF LN), Aurubis (NDA GY), Primo Water (PRMW US), and Innergex Renewable Energy (INE CN), etc. This week, we are profiling Daiseki Co., Ltd., a new addition to the international small cap strategy that benefits from the upcoming new mandatory climate-related disclosure rules, as it can help industrial companies mitigate climate impact significantly.

Daiseki Co., Ltd. (9793 JP)

www.daiseki.co.jp

Business Overview

Founded in 1945, Daiseki is the largest processor of liquid industrial waste in Japan. The company mainly treats and recycles waste oil, waste water, and sludge. Its facilities are nationwide, serving about 6,500 corporate customers, and many of their customers are in the automobile, electronics, machinery, and chemicals industries.

Simple incineration of one ton of waste oil produces 2,920 kg of CO2, but this can be reduced by 99% to 31.3 kg by recycling it as heavy oil. Through the oil-water separator and fuel conversion treatment, Daiseki reduced CO2 by 102,000 tons in fiscal year 2021/2. Similarly, the simple incineration of one ton of waste solvent generates 1,491 kg of CO2, but by recycling it as supplemental fuel, the emissions can be reduced by 99% to 3.7 kg. The company reduced CO2 emissions by 437,000 tons by recycling waste solvent in fiscal year 2021/2. The total reduction of 539,000 tons of CO2 is equivalent to emissions from 190,000 households in one year.

Target Market

  • Demand for industrial waste management has been increasing due to Japan’s 2050 carbon neutral initiatives. High greenhouse gas emitters prefer recycling to incineration, and there is also a higher demand for recycled fuels to replace coal or crude oil.
  • The liquid industrial waste market in Japan is very fragmented with many regional players. Daiseki is number one with a 10% market share. The number two has a 3% market share.

Competitive Advantages

  • The largest liquid industrial waste treatment company in Japan and the only one with a national network.
  • Superior technologies (chemical and biological) in both waste-to-energy and recycling areas.
  • It has a high recycling rate of about 90%.
  • High entry barriers due to license, land, and equipment requirements. Obtaining licenses can take 2-3 years or longer for specific treatment types and types of services offered. Land and equipment require capital outlays, which can be significant.
  • Solid balance sheet: net cash.
  • Strong relationship with customers.

Growth Strategy

  • Distribution: expanding to more regions.
  • Adjacent businesses: treatment of copper and nickel, soil pollution.
  • New business: waste plasterboard recycling, pipe cleaning, and tank cleaning.

ESG

  • Daiseki has very comprehensive ESG reporting and has identified five priority areas: environment, people, safety, communities and society, and compliance, which are in line with the United Nations Sustainable Development Goals (SDGs).
  • Stable management team: Chairman Hiroyuki Ito is the son of the founder. President Hideki Hashira has been with the company since 1990. Insiders own 10% of the company.
  • Regarding governance, Daiseki not only meets the requirements of the Tokyo Stock Exchange, but also meets more stringent requirements set by Global Alpha. For example, it has over one-third of board directors as independent, separate board Chair and CEO, and one female board director. Daiseki is a member of the MSCI Japan Empowering Women Index.

[1] https://www.ft.com/content/77a8292d-2e7f-43a1-9062-2e639c1e6b2a

In last week’s commentary we discussed how green hydrogen can help reach net-zero carbon by 2050. This week, we focus on decarbonization within the aviation sector and how technological evolutions will help reduce carbon emissions.

The transportation sector is a huge contributor to carbon emissions, and is responsible for 29% of the total carbon dioxide (CO2) emissions in the United States (US) and close to 27% in Europe. Compared to the aviation sector, the road transportation sector is far ahead on its decarbonization path.

While other sectors decarbonize quicker, the commercial aviation sector is under pressure to show greater transparency and start establishing greater initiatives in order to cut down its carbon emissions. Two weeks ago, the International Air Transport Association announced that its member airlines, which represent 82% of the world’s airlines, agreed to achieve net-zero carbon emissions by 2050.

The road map to decarbonization will essentially be driven by newer and greener technologies, and by increasing the mix of sustainable aviation fuel. Sustainable aviation fuel would certainly be part of the solutions, but that cannot be the only one. Current availability of sustainable aviation fuel represents only 0.1% of the total fuel supply needed.

Technology, which will continue to evolve, will also help reduce the sector’s carbon emissions. Pratt & Whitney designed GFT engines, which is one of the most sustainable engines in service for single-aisle planes. The GFT engine family, as an example, allows the reduction of up to 20% fuel burn and carbon emissions, while reducing the noise footprint by 75%. Today, more than 1,000 airplanes are equipped with that engine. When considering there are approximately 26,000 airplanes in service globally, the carbon footprint of this sector would be improved as older airplanes get replaced with newer and more efficient aircraft programs.

Another means of transportation for regional and urban travel could emerge in the coming years. Electrical Vertical Take-off and Landing (eVTOL) is a new type of light commercial aircraft currently under flight testing or prototyping. This new transport mode is potentially disruptive to other modes of transportation but should not be a threat to commercial airlines or the automotive sector. Conversely, it represent a sustainable alternative for inner city, short regional travels, air ambulance, and cargo transport.

Thanks to sizable investments made over the past two years, the odds of having eVTOL operating in the future has increased significantly. Since 2019, the eVTOL sector benefited from a capital inflow of approximately $10 billion.

The eVTOL market opportunity could be massive but at this time, it is hard to assess what could be an accurate figure. Lilium, one of the leading original equipment manufacturers (OEM) in that space, estimates that eVTOL could be worth $500 billion by 2040. When taking the cargo market under consideration, this market size expectation could reach $1 trillion. Other experts believe this sector could become an even bigger addressable market. It is no surprise that established aircraft manufacturers announced their own eVTOL programs, or co-investments. Last month, Airbus launched its new CityAirbus Next Gen program to address the urban air mobility market.

Joby Aviation and Volocopter are amongst the leading OEMs that could be the first to obtain their type certification between 2022 and 2024. Other interesting emerging eVTOL developers include Archer Aviation, Lilium, Vertical Aerospace, and Kitty Hawk. Note, the aforementioned companies are not part of Global Alpha’s holdings. Every manufacturer has its own design, propulsion technology, and characteristics, but all of them want to address the future of urban air mobility, focusing on a transportation range of 0-300 miles.

There are several positive advantages to support the eVOTL development over traditional transportation modes:

  • Reduced travel time and the cost of congestion: Lilium anticipates a short distance trip, like JFK airport to New York City could take approximately five minutes, while a longer regional trip between NYC and Boston could take approximately 1hour and 15 minutes. Joby Aviation estimates that there are 4.6 billion hours wasted in traffic in the top 15 U.S. cities every year.
  • Sustainable transportation mode: Lilium estimates that its eVTOL emission footprint would represent 18g CO2 per passenger kilometers. That compares with 189g for commercial aircraft, 142g for gasoline cars, and 31g for electric cars. This is assuming the batteries are produced with renewable energy.
  • Noise reduction: Some models of eVTOLs are expected to generate less than 70 decibels, which is comparable to the noise level of a dishwasher.
  • Lower cost of operation: McKinsey estimates that the cost of operating eVTOL could drop rapidly to $2.5 per seat mile. In comparison, the cost of operating a helicopter today is around $6-$8 per seat mile.
  • Simpler infrastructure needs: The urban air mobility network would require an infrastructure that would likely be much less costly than traditional transportation infrastructure, such as airports. Many of the existing infrastructure could be converted into landing/take-off pads (rooftop buildings, gas stations, parking areas). McKinsey estimates that the cost for 10 landing/take-off pads could reach up to $24 million, which includes the cost of operations.

We understand that a new ecosystem needs to be created, and with that, comes many challenges. The success of the eVTOLs will depend on several factors, such as technical challenges, regulatory approval, the pace of adoption from clients and passengers, and the infrastructure required to accommodate this new transportation mode.

Connor, Clark & Lunn Infrastructure (CC&L Infrastructure) today announced the formation of a strategic partnership with Hy Stor Energy LP (Hy Stor Energy), which will develop, commercialize and operate green hydrogen production, storage, and distribution at scale.

Hy Stor Energy is developing a portfolio of large-scale, fully integrated green hydrogen projects in the United States. The projects will include the on-site production, storage, and delivery of green hydrogen as both a
zero-carbon fuel and a means of storing and producing electricity on demand. This combination of storage and scale will be critical in accelerating the green hydrogen economy in the United States and will support the nation’s transition to a net zero carbon emissions future.

Hy Stor Energy is already permitted for hydrogen storage at multiple locations in the U.S. Gulf Coast, which together will form the backbone of a regional hub. This hydrogen hub will have co-located production, transmission, pipeline, rail and other infrastructure, linking these components to add value while driving economies of scale and attracting end-users. The hub is also expected to attract intellectual capital, spur innovation, create jobs and stimulate the local economy. It will deliver a major source of safe, reliable and 100% carbon free energy that is flexible and available on demand.

“CC&L Infrastructure is excited to further participate in the global energy transition with this partnership,” said Matt O’Brien, President of CC&L Infrastructure. “We believe that the green hydrogen sector is nearing an important inflection point and that its growth will contribute meaningfully to the achievement of net zero carbon emissions targets over the coming decades. The partnership with Hy Stor Energy is a natural evolution of our long-term investment strategy that builds upon our existing expertise in renewable energy. Through this partnership, CC&L Infrastructure and its clients will gain access to a number of attractive investments in a rapidly growing renewable sub-sector as well as technical expertise in green hydrogen and energy storage.”

“Hy Stor Energy is solving the unique challenges of a world transitioning to renewable energy, and we’re developing a model for producing, storing and delivering 100% carbon-free green hydrogen reliably, consistently – and at scale,” said Laura Luce, CEO of Hy Stor Energy. “Our partnership with CC&L Infrastructure will enable us to advance the large-scale development and commercialization of green hydrogen and long-duration storage.”

Green hydrogen is a zero-carbon fuel source and an energy storage mechanism. It is created using renewable energy and a process called electrolysis. Electrolysis uses only two inputs – water and renewable electricity – to produce hydrogen with zero emissions and with oxygen as the only byproduct. Green hydrogen is expected to play a critical role in the global shift away from fossil fuel based sources of energy. Specifically, it can enable the decarbonization of sectors where direct electrification is not practical, offering a viable path towards zero emissions for many industries and jurisdictions.

CC&L Infrastructure’s investment mandate targets traditional and energy infrastructure assets and companies, including power generation, electricity transmission and distribution, and energy storage, among other projects. The firm is an active investor and owner of renewable energy assets and has a current portfolio totaling 1.4 GW of clean energy generating capacity globally. The majority of these assets were acquired during development and the CC&L Infrastructure team has significant experience in both construction oversight and ongoing asset management. The partnership with Hy Stor Energy will build upon this expertise to support further decarbonization efforts and the global energy transition.

About Connor, Clark & Lunn Infrastructure

CC&L Infrastructure invests in middle-market infrastructure assets with highly attractive risk-return characteristics, long lives and the potential to generate stable cash flows. The firm has been an active investor and owner of renewable energy assets for more than 15 years. Its portfolio includes more than 60 hydro, solar, and wind facilities totaling 1.4 GW of clean energy generating capacity globally. CC&L Infrastructure is a part of Connor, Clark & Lunn Financial Group Ltd., a multi-boutique asset management firm whose affiliates collectively manage over CAD$100 billion in assets. For more information, please visit www.cclinfrastructure.com.

About Hy Stor Energy

Hy Stor Energy is facilitating the transition to a fossil-free energy environment by developing and advancing green hydrogen at scale through the development, commercialization, and operation of green hydrogen hub projects. Large, fully integrated projects produce, store, and deliver 100% carbon-free energy, providing customers with safe and reliable renewable energy on-demand. Developed as part of an integrated hub, these projects couple on-site green hydrogen production with integrated long-duration storage and distribution – using scale to reduce costs. Hy Stor Energy, led by energy storage industry and hydrogen technology veteran Laura L. Luce, has an innovative team with deep expertise and is positioned as a leader in the green hydrogen revolution. For more information, please visit www.hystorenergy.com.

Contact:

Kaitlin Blainey
Director
Connor, Clark & Lunn Infrastructure
(416) 216-8047
[email protected]

Connor, Clark & Lunn Financial Group (CC&L Financial Group) is pleased to announce it has become a Founding Participant in Climate Engagement Canada (CEC). CEC is a Canadian finance-led collaborative initiative that aims to drive dialogue between the financial community and Canadian corporations on climate-related risks, opportunities and transition to a net zero economy.

The CEC program is launching with over 25 investors as Founding Participants, collectively managing over $3 trillion in assets. CC&L Financial Group represents its three Canadian equity affiliates, Connor, Clark & Lunn Investment Management Ltd., PCJ Investment Counsel Ltd., and Scheer, Rowlett & Associates Investment Management Ltd. 

“Connor, Clark & Lunn Financial Group looks forward to collaborating with other institutional investors to address climate risk in the Canadian economy and the transition to net zero,” said Michael Walsh, Managing Director, Connor, Clark & Lunn Financial Group. “All CC&L Financial Group affiliates spend significant time researching the ESG risks and opportunities of their investments and engaging with company management teams on ESG topics, so we view CEC as an important opportunity to speak with a stronger, unified voice on the issue of climate change.”

The CEC initiative is coordinated by several investor networks including the Responsible Investment Association (RIA), Shareholder Association for Research and Education (SHARE), and Ceres. The UN-backed Principles for Responsible Investment (PRI) is also supporting the program.

The CEC’s development was inspired by Canada’s Expert Panel on Sustainable Finance, which in 2019 made a series of recommendations to align Canada’s financial system with a low carbon future. One of the Expert Panel’s recommendations was to establish a national engagement program, akin to the global Climate Action 100+ initiative, to drive a broader and more consistent dialogue with Canadian issuers around climate risks and opportunities. Climate Engagement Canada is that program.

More information regarding this initiative can be found on the CEC website at www.climateengagement.ca.

About Connor, Clark & Lunn Financial Group Ltd.

Connor, Clark & Lunn Financial Group Ltd. (CC&L Financial Group) is a multi-boutique asset management firm that provides a broad range of investment management products and services to institutional investors, high net worth individuals and advisors. We bring significant scale and expertise to the delivery of non-investment management functions through the centralization of all operational and distribution functions, allowing our talented investment managers to focus on what they do best. With offices across Canada, and in Chicago and London, CC&L Financial Group’s affiliates manage over $100 billion in assets. For more information, please visit www.cclgroup.com.

Contact:

Blythe Clark
Manager, Stewardship & Engagement
Connor, Clark & Lunn Financial Group
(604) 891-2601
[email protected]

In recent weeks there has been a power crisis in China, brought about by the increase in coal prices. Over the last six months, prices have more than doubled and utility companies have been unable to pass on the increase on users (consumers and industry).

In Europe, a similar crisis is unfolding with the cost of electricity reaching all-time highs, driven by a spike in natural gas prices up 400% since the spring. Earlier in the year, we saw electric grids from Texas to California suffer major outages. Those outages have been used by some commentators to blame the investments made in renewable energy.

Green hydrogen is the best and the only solution to solve many of our energy problems as well as getting to net-zero, even though producing it today is quite expensive. Green hydrogen refers to electrolysis systems in which hydrogen is produced from water using electricity provided by renewable energy. It can also be produced from waste such as biogas, municipal solid waste, and industrial waste.

Electric vehicles may help to reduce our carbon emissions, assuming the electricity to charge them comes from renewables and that the grid can handle millions of vehicles plugging in. Steel, shipping, aviation, and trucking account for 40% of our carbon footprint, to which these are industries that batteries cannot fix.

Hydrogen can serve many objectives beyond decarbonization. Its ability to substitute for natural gas would go a long way to secure a country’s energy independence, something Europe would envy given its dependence on gas imports from Russia. Hydrogen is even exportable by pipeline or ship unlike other renewables limited by electrical grids.

Within the next decade, the scaling up of electrolyzer production and the deployment of fueling infrastructure will bring costs down to a level that is lower than fossil fuels and does not have the limitations of batteries.

The legislative framework

The 2021 United Nations Climate Change Conference (COP26) will take place at the end of October. After a historic year of extreme weather, and following a grim report published in August, we can expect a real sense of urgency and more concrete and measurable commitments following the conference. Major economies have already made commitments; we highlight a few below.

Source: Hexagon Purus Investor presentation

In terms of the hydrogen economy, below are a few of the initiatives that have been announced in Europe:

Source: Ballard Power investor presentation

China is widely recognized as a global leader in clean-energy technology: it controls 60% of the solar supply chain; is home to five of the top 10 wind turbine manufacturers; and leads the world in lithium-ion batteries. In September 2020, Chinese leaders pledged to reach carbon neutrality by 2060. It is no surprise that China wants to become a leader in hydrogen as well. 

Looking at the success of Tesla and the massive investments incumbent automakers are making to electrify their vehicles, we might think that adopting electric vehicles (EV) will be the solution to our problems. As we noted above, car and light trucks are only part of the emissions crisis, accounting for less than 20% of total emissions. But, staying with transportation, let us compare hydrogen with other technologies, as hydrogen is most competitive in heavy-duty motive applications.

The following chart shows the intersection of different technologies.

Source Ballard Power investor presentation.

The addressable market for hydrogen as a transportation fuel is huge, even excluding SUVs and cars:

  • 450,000 buses and intercity coaches,
  • Four million medium/heavy-duty trucks,
  • 8,500 Electric hybrid trains,
  • 8,000 freight ships, and
  • Off-highway vehicles.

However, even if we were to solve the problem of infrastructure (fueling stations), hydrogen for cars and light trucks presents many advantages:

  • They are lighter;
  • They can fill up in just a few minutes; and
  • Their components are more easily recyclables.

A 2017 survey of 1,000 global auto executives concluded that hydrogen fuel cell technology will dominate battery-powered vehicles. More recent comments from Toyota, Honda, Hyundai, BMW, and Mercedes Benz go in the same direction.

One market that is rapidly adopting zero-emission technology is the transit bus market. Although there have been many announcements about electric buses, many studies show that Fuel Cell buses have an advantage in terms of total cost of ownership, even at current prices.

For buses, an ICT study with data collected by the California Air Resources Board (CARB) showed the advantage of hydrogen as fleet size increases:

The Foothill transit study compared the cost of deploying twenty zero-emission buses on a 42-mile roundtrip route. Due to the range limitations of electric buses, it was determined the line would require 34 battery buses versus 23 hydrogen buses.

Orange County Transportation Authority plans to transition 100% of its fleet of 500+ buses to hydrogen.

“The 100 percent FCEBs scenario showed a slightly lower overall cost than the mixed technology fleet given current vehicle, fuel, and support infrastructure pricing. FCEBs offer an extended range and better match to OCTA’s current operating parameters. In comparison, the current range of BEBs may require more vehicles and drivers to meet similar service levels.” Orange County Transportation Authority.

How does Global Alpha participate in the hydrogen economy?

Iwatani (8088 JP)
www.iwatani.com/hydrogen-fueling 


Iwatani is a Japanese company founded in 1930 and a leader in the field of energy, industrial gases and machinery, materials, agri-bio and foods. Since 1941, the company has engaged in initiatives to encourage the widespread use of hydrogen, the ultimate clean energy source as stated in the company’s mission. Iwatani is Japan’s only fully integrated supplier of hydrogen, and presently supplies its base of light and heavy-duty hydrogen-refueling stations and industrial customers via five liquid and 10 gaseous hydrogen production plants throughout the country. In addition, Iwatani is a steering member of the Hydrogen Council, a global initiative of leading energy, transportation, and industry companies, with a united vision and long-term ambitions for hydrogen to foster the energy transition. Iwatani is developing hydrogen-refueling stations with the aim of stimulating new hydrogen demand and supporting the widespread distribution of Fuel Cell Electric Vehicles (FCEV). It currently has 64 refueling stations, a number that doubled in the last three years.

Hexagon composites (HEX NO)
www.hexagongroup.com


This Norwegian company has 1100 employees across 23 global locations. Its solution enables the storage, transport, and conversion to clean energy in a wide range of mobility, industrial, and consumer applications:

From Hexagon composites website

Clean Energy Fuels (CLNE US)
www.cleanenergyfuels.com


We profiled Clean Energy Fuels in an earlier commentary, on May 6, 2021.

Although we discussed hydrogen, renewable natural gas, which can then be reformed to produce hydrogen, is the only transportation fuel today that offers a negative carbon footprint.

Thanksgiving is the time of year when we reflect on the fortunate aspects of our lives and show our appreciation for friends, family and those who support us. At CC&L, we are thankful for our local food banks and the support that they continue to provide in the communities in which we live and work.

Food banks have come to play a vital role in many people’s lives, particularly as COVID-19 has created additional food insecurity for more families across the country. Since the start of the pandemic, food banks have seen a rise of more than 50% in the number of people requiring their services. If the current trend continues, Toronto food banks will see 1.4 million visits by the end of 2021.1

The CC&L Foundation has donated to the Daily Bread Food Bank in Toronto for a number of years and has recently furthered support with a multi-year commitment. The Daily Bread Food Bank was founded in 1983 and has become one of Canada’s largest food banks. It believes no one should go hungry or face barriers to accessing food. Its nearly 200 food programs across Toronto aim to provide healthy and nutritious meals to people experiencing food insecurity.

“Although a sense of normalcy is returning to our city, for tens of thousands of individuals living in poverty, the reality is very different. In August 2021, there were over 113,000 visits to Daily Bread member food banks – a 67% increase compared to the same time last year,” says Neil Hetherington, CEO, Daily Bread Food Bank. “We are deeply grateful to CC&L for stepping forward this Thanksgiving season with a generous donation that will help ensure that the right to food is realized for our adults, seniors and children experiencing food insecurity in our city.”

About the Connor, Clark & Lunn Foundation

Created in 1999, the CC&L Foundation is supported by CC&L Financial Group and its affiliates and it responds to requests from clients, staff and others to fund programs and not-for-profit organizations that help promote a better environment, improvements to education, advances in science and medicine, stronger communities and the arts.

1 Dailybread.ca