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Getting the green to go green

Industry Spotlight
|Written By Paul Brent
Getting the green to go green
The photovoltaic array on the rooftop of Air Miles operator LoyaltyOne Inc.''s headquarters in Mississauga, Ont., is capable of producing 165 kilowatts of green electricity each hour.

The 800-panel solar photovoltaic array adorning the rooftop of the Mississauga, Ont. headquarters of LoyaltyOne Inc. produces enough electricity an hour to power 16 homes. This gives the corporate offices of the Air Miles operator the largest solar photovoltaic array in Canada, capable of producing 165 kilowatts every hour.

While LoyaltyOne did not have Ontario’s Feed-in Energy Tariff in mind when it began it’s solar quest, the program has made the project more than worthwhile. “If you look at the economics, we are being paid a much higher rate than you would pay for usage of the electricity these days, so the incentive is there for you to put all of the renewable power on the grid,” says Debbie Baxter, chief sustainability officer of the rewards company.

Ontario created the FIT program in 2009 to wean the province off coal-produced electricity by 2014, boost economic activity, develop renewable energy technologies, and create new green industries and jobs. It allows for consumers generating surplus energy to sell the power to the Ontario Power Authority.

LoyaltyOne agreed to a 20-year contract with the Ontario Power Authority to sell excess power. This agreement pays the Mississauga-based company 71.3 cents per kilowatt hour it distributes into the electrical grid.

LoyaltyOne also drew up a licence agreement with the owner of its headquarters to place the solar panels on its roof, came to agreements with consultants handling the installation, and concluded purchase orders and warranties with the solar panel providers, says Michael Kline, the rewards company’s senior vice president of legal services. The company had contract work associated with the installation of a solar hot-water system, passively using the sun’s heat to preheat water before it makes its way to the company’s water heating system. While the rooftop was completely self-funded, LoyaltyOne took advantage of eco-energy rebates from the federal government to partially offset the cost of the solar thermal setup.

“The feedback that we were getting from employees and [Air Miles] collectors was . . . green was very important to them and they really wanted LoyaltyOne to be doing leadership things that would make associates proud of the company and collectors proud of the program,” Baxter says.

The next step for the company is Leadership in Energy and Environmental Design (LEED) certification for its building, taking into account the solar innovations and other environmentally-friendly modifications such as solar tubes to bring in natural light, use of low-emission and recycled building materials, and zero-waste strategies.

FIT is just one of a dizzying array of government programs designed to support green and other investments. The LoyaltyOne initiative is one example of how larger corporations can use the incentives.

“There are a number of agencies out there” helping to finance clean tech development, says David Pamenter, who leads Gowling Lafleur Henderson LLP’s technology industry group practice. His team consists of lawyers with various specialties such as tax and securities law. It does not do work in areas people might traditionally associate with clean tech, namely alternative energy including wind and solar power production; a separate energy group works on those projects. Instead, it works with the less obvious side of clean tech, saying “almost half of the activity in clean tech is actually not in renewables, it is in everything else. It is in the process efficiency things, treatment, monitoring, radiation, that sort of thing.” A major attraction for the firm is most technology firms have a clean tech aspect to their operations.

Pamenter gives the example of an Ontario company’s development of a control device to attach to the electrical panel of a major power consumer such as a warehouse, factory, or shopping mall to reduce the amount of electricity consumed for lighting. The device is expected to reduce electricity consumption by 30 per cent and pay for itself within 18 months. “We are actually doing the full-court press for that particular client so we are doing the patent work, we are doing the distribution agreements, we are doing their manufacturing agreements, all their internal corporate stuff, licensing, and all that sort of thing.”

These are often smaller companies that face budget challenges and are too small to have in-house counsel.

One of the biggest challenges for clean tech firms is securing funding to work up prototypes or in later stages start up production. While venture capital and angel investor money is starting to flow back into clean tech, it is coming from “a very low base.” That leaves governments as the main source of funding, with the most popular being the Scientific Research and Experimental Development tax incentive program. Administered by the Canada Revenue Agency, SR&ED encourages Canadian businesses of all sizes, and in all sectors, to conduct research and development in Canada and it is the largest single source of federal government support for industrial research and development. “If you are a Canadian-controlled private company, and depending on the various provincial programs that are connected, it can refund 30 to 35 per cent of the money that you spent on scientific development,” Pamenter says. “In terms of government programs, that is as generous as almost any, anywhere.” Eligible claimants receive cash refunds and/or tax credits for research and development outlays under the SR&ED program.

Other popular programs include the National Research Council’s Industrial Research Assistance Program for research and development, and commercialization of new products and services. “Of course they get so many applications and they pretty quickly run out of their annual funding,” Pamenter says of the program. There is also the Sustainable Development Technology Canada tech fund program which “can be very good for larger projects.”

Helping to tap into public and private funding in the clean tech space is rapidly becoming an area of specialization within big law firms. “Clean tech to us is the transactions associated with the financing and the capital-raising of certain technology companies or energy companies and the acquisition matters. There is some advice but it is really the transactions they do that is how we get involved,” says Jason Kroft, head of Stikeman Elliott LLP’s emissions trading and climate change group. A knowledge of science and emerging technologies can “help,” says Kroft, “but at the end of the day what lawyers do is often very similar across industry groups. What we write and think and negotiate seems to be really transferable.”

What sets clean tech work apart is the usually key involvement of third parties such as government agencies and the requirement to guide clients through the process. “That is probably what is a bit different, understanding that there is a path and being able to give your clients an idea what the path is and not just responding to issues as they come up, actually being able to help them with strategy. With emerging or newer businesses there is more of a role to be an adviser in a broader sense and a little more strategic,” says Kroft.

He agrees with Pamenter that securing funding for clean tech businesses is a major hurdle. “That is the biggest issue in kind of anything that is innovative right now access to capital,” he says. “What we are seeing is deals get done, capital is available if you have a well-structured, well-reasoned sound project, sound company, or sound initiative. You will get the access, but things take time.”