Workers put up solar panels at the construction site of Canada's biggest solar farm, Travers Solar, near Vulcan, Alta., on Nov. 9.Todd Korol/The Globe and Mail
No investment company has more of an oil-patch pedigree than ARC Financial Corp. Over the past quarter century, the private-equity firm has raised more than $6-billion to inject into Calgary’s fossil-fuel-driven economy, and has backed some of the best known oil companies.
That’s why local business leaders felt a tremour last spring when ARC, which provided early funding for the likes of ARC Resources and Seven Generations Energy, announced it would seek investments in companies focused on the transition to low-carbon energy.
ARC is the most prominent energy-focused financial player to have widened its investment hunt to include opportunities in areas such as renewable energy and carbon capture, utilization and storage. But others have made similar changes in direction over the past year.
These moves have not been purely altruistic. Green tech is one area where Calgary’s business community and city officials see major growth in the coming years, as global investors seek the twin objectives of financial returns and impact in the fight against climate change. During the pandemic, interest in alternative energy and sustainable finance has reached a peak. At the COP26 summit in Glasgow, banks, asset managers and insurers pledged to align their US$130-trillion of assets with the goal of net-zero carbon emissions by 2050.
The big question for Calgary is: How much of this interest can the city harness to fill up its skyscrapers, which were hollowed out by the oil and gas bust?
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That gaping hole in occupancy – about 12 million square feet of vacant offices, or 30 per cent of the total supply in the city’s core – has forced Calgary to rethink how to use its downtown. The vacancy problem sent property values plummeting in the central business district, prompting the city to burden residential taxpayers with a greater share of municipal taxes. The green shift can’t rejuvenate downtown on its own, but it can at least help fill some empty space.
“I think you can backfill a substantial portion of it,” said Brian Boulanger, ARC Financial’s chief executive officer. “Interestingly, in my business right now, we’re seeing more business plans being presented, more investment opportunities being presented to us in the energy-transition space than we are in the traditional oil and gas space.”
ARC Financial CEO Brian Boulanger sees no reason why Calgary and Alberta can’t be in a position to be a dominant player in the energy-transition scene in Canada.Todd Korol/The Globe and Mail
The elevated interest in clean energy is sustaining itself despite a recent upturn in oil and gas prices that has lifted the profitability of the traditional energy sector to levels not seen in a year. The previous weak market for fossil fuels and the resulting six-year contraction in the industry was the main factor in the emptying out of Calgary’s downtown.
Even if oil and gas continue their rebound, the industry won’t have the same job-creating power it had before. Technological developments over the past decade have allowed companies to produce a barrel of oil with far fewer people. In addition, it is not clear how many of the workers who remain will return to the office once the pandemic ends.
“In my opinion, there’s no reason Calgary and Alberta can’t be in a position to be a dominant player in the energy-transition scene in Canada, and the reason I say that is Calgary and Alberta already largely have the ecosystem around energy,” Mr. Boulanger said.
The tech sector has already provided some optimism. Many Calgary startups in software and business-to-business computing have grown into unicorns – private companies with valuations above US$1-billion. Green energy and other clean-tech businesses have the potential to be an even bigger economic driver, as Canada seeks to meet its commitments to reduce carbon emissions.
Jyoti Gondek, Calgary’s new mayor, urged city council to declare a climate crisis, partly as a way to attract badly needed capital to the city for technological solutions. Councillors voted in favour of the move this month.
Investments in Calgary’s green-energy industry were already coming from a range of sources, including venture capitalists, private equity, pension funds and, notably, traditional energy companies such as Suncor Energy Inc. and Cenovus Energy Inc., which are seeking technological breakthroughs to help cut their oil sands projects’ greenhouse gas emissions.
BluEarth Renewables Inc., Greengate Power Corp. and TransAlta Renewables Inc. are among Calgary’s well-known green-energy players. But many smaller companies are developing a range of clean technologies to store energy, make useful products from captured carbon and create digital solutions to evaluate renewable-energy projects.
The industry is served by a growing network of financial specialists, such as investment bankers and venture capitalists, as well as legal experts – many of whom spent decades financing oil and gas before they made the transition.
“Calgary has been and always will be sort of Canada’s energy capital. But at the end of the day, the base of that is just going to change and we’re going to start to see these other types of industries start to grow,” said Brad Parry, the interim CEO of Calgary Economic Development. “It’s almost like a rebalancing of the portfolio, and I think the notion to a transition into different forms of energy is at the backbone of that.”
Calgary’s abundance of cheap, available prime office space is a good selling point for companies, but officials have found that attracting new industries takes a considered approach. Other cities, such as Houston, have shown economic diversification is bolstered by a base of homegrown knowledge and strong links between business and post-secondary institutions. The Texas city has done that with medical and biotech. Calgary is leaning on its energy experience.
This year, Avatar Innovations, a venture capital fund and training forum, partnered with the University of Calgary to establish an accelerator program called the Energy Transition Centre. The program provides startups with opportunities to work with researchers and gain access to investor networks, labs and carbon technology testing facilities.
The goal of the program, headquartered in a high-rise on the north side of downtown, is to foster the growth of firms capable of winning funding from XPRIZE Carbon Removal, a US$100-million purse being offered by Elon Musk for ways of permanently removing carbon dioxide from the atmosphere or oceans.
Experts warn the clean-energy industry is far less labour-intensive than oil and gas was at the height of the last boom, meaning it alone can’t support a rebound to full downtown office occupancy. Many of the players are still in the startup stage, with dozens of employees, rather than thousands.
In Vulcan County, 130 kilometres south of Calgary, Greengate Power is developing Canada’s largest solar-energy array. The $700-million Travers project will comprise 1.3 million photovoltaic panels when it is completed in late 2022. Amazon.com has purchased all of the electricity.
GreenGate Power CEO Dan Balaban at the construction site of Canada's biggest solar farm near Vulcan, Alta., on Nov. 9.Todd Korol/The Globe and Mail
Greengate CEO Dan Balaban said the bulk of the jobs related to a solar project are created are in the construction phase. Travers will employ more than 1,000 people at its peak. But once a project is up and running, it requires relatively few workers. Greengate has just 10 permanent employees.
Green energy will be an important economic driver for the city as interest surges, but in itself won’t be a panacea, Mr. Balaban said.
“I’d say we are seeing a green energy boom in Alberta right now, and I think that’s something that’s going to continue for a while. But I think no single industry in the province is going to replace oil and gas,” he said. “It’s going to be a combination of industries that we’re going to need to diversify our economy to replace the activity that we’re losing in the oil and gas sector.”
Vacant Calgary: This is part of a series on the future of Calgary’s downtown, hit by years of economic decline that has left its office towers nearly a third vacant, and the solutions that could drive a recovery.