A national energy strategy, with a sustained and comprehensive national approach to ER&D as its foundation, is a precondition for energy superpower status. Development of a national energy strategy is of course a challenge, given provincial ownership of natural resources and a lack of alignment of regional interests on many energy issues.

But energy technology could be the basis for a wider intergovernmental consensus because, unlike physical resources, expertise in energy technologies is much more broadly distributed across the country. A province like Ontario could benefit from a national commitment to energy technology investments due to its abundance of human, financial, and knowledge capital. These assets can translate into attractive opportunities to export and develop ER&D services and new energy-using technologies—both across Canada and to the world.

Canada’s natural resources represent an enormous opportunity to diversify our exports and become more active in the multi-billion dollar global energy technology market. Canada risks missing out on the opportunity of becoming a leader if it fails to invest.

The current suite of ER&D policies and programs is not designed to meet the needs of an emerging energy superpower. This report charts the path forward from our current approach to one where Canada builds on its natural endowments in order to meet political, economic, social, and environmental objectives domestically and abroad. Our quest for energy superpower status must strive to maximize benefits for Canadians, providing opportunities to regions across the country.

This is a moment for policymakers to act, given renewed interest in a pan-Canadian energy strategy, nascent federal and provincial efforts to reform their R&D policies, and a growing recognition that Canadian policymakers must identify and invest in those energy areas where there is a broad national consensus rather than interprovincial division.

 What We Did

In the preparation of this report we completed two distinct research components, which informed our conclusions and policy recommendations.

The first component included a detailed review of literature and available evidence to establish: whether investing public funds into ER&D is a good idea; what policy mechanisms are available for delivering support; how ER&D policies have evolved and the lessons from previous practices; examples of effective policy delivery mechanisms; and, finally, what is the current state of Canada’s and Ontario’s policy frameworks for supporting energy technology innovation.

The second component of our research was a consultation with experts in the field and key stakeholders in Canada’s energy technology space. We conducted detailed interviews with a wide cross-section of experts in order to hear their feedback on the current federal and provincial (Ontario) ER&D support frameworks, and what can be done to improve their effectiveness.

What We Learned

The two research components lead to the same conclusion: Canada needs to make improvements to its current policy framework in order to advance ER&D and improve competitiveness in energy technologies.

This report finds that direct-push policies—that is, directly funding ER&D projects within established priority areas—are the most effective tool for accelerating energy technology development, and that Canada’s current policy mix is severely underutilizing this approach. The present Canadian energy technology policy portfolio, heavily biased toward indirect-push and direct-pull policies (see pages 22-23), is not suitable for achieving significant improvements in ER&D outputs.

This report concludes that Canadian policies around energy technology need to be improved, and we examine four successful examples of policy delivery:

Finland’s national innovation system (NIS), which effectively turned the country into one of the world’s R&D leaders;the U.S. Department of Energy (DOE), that is a successful model of federal ER&D support l; the Alberta Oil Sands Technology Research Authority (AOSTRA), that was a strategic provincial energy technology agent that unlocked the oil sands; and the former U.S. Gas Research Institute (GRI), a collaborative industry-lead delivery model.

The key conclusion from this report is that Canada’s and Ontario’s current policy frameworks for supporting energy technology development are not delivering the desired results. Canada’s performance in energy technology innovation is unremarkable, despite energy superpower aspirations, while Ontario’s commitment to renewable energy is not generating sufficient improvement in commercializing new technologies. In order to achieve a measurable improvement, ER&D policies need a comprehensive overhaul. We recommend the following reforms to begin Canada’s transformation from laggard to leader in the global energy technology market:

The federal government should:

1. Create a pan-Canadian energy policy, with energy technology as its centerpiece.
2. Merge the current suite of energy-related programs run through various departments into a federal Department of Energy. 
i. Move the federal Canmet labs into the new DOE and conduct a review of their roles and responsibilities, ensuring that their mandate fits into the new comprehensive ER&D strategy.

ii. The new DOE should report annually on investments in energy technology, with a view toward continuity, sustained investments, and measurable long-term impacts.
3. Consolidate ad hoc federal programs and reroute funding from expiring programs to the new structure. 
i. Re-fund Sustainable Development Technology Canada (SDTC) and consider expanding its mandate.

For the Ontario Government, this means that:

 1. The Ontario Ministry of Energy (MOE) should adopt a whole-of-energy-system approach in order to move away from its disproportionate focus on electricity, and make ER&D a foundational pillar in provincial energy policy.
 2. The reformed MOE should consolidate ad hoc provincial programs and reroute support from deployment programs to direct ER&D funding.
3. The MOE should direct the Ontario Energy Board to develop a rate-recovery mechanism for collaborative industry research.

It is imperative that both governments also:

1. Set long-term federal and provincial ER&D intensity targets consistent with pan-Canadian energy goals.