China’s clean-power needs paying dividends in B.C.

Local companies back from China trade mission with multimillion-dollar deals signed
Premier Christy Clark (right) led a 200-strong trade mission of business, government and NGO leaders on a trade mission to China October 30 to November 7 | B.C. government

Never mind all the reports you might have read about all the opportunities that China presents for B.C. companies and technology, especially in the natural gas and clean-energy space.

For B.C. business leaders who took part in a massive trade mission to China earlier this month, a few days of breathing Beijing’s semi-solid air would have underscored just how bad China’s air pollution problem is.

And bad is good if you are in the clean-energy business.

“Clean energy is going to play such an important role as a result of everything from air quality to [greenhouse gases] and climate change issues,” said Greg D’Avignon, CEO of the Business Council of British Columbia.

D’Avignon was one of about 200 business, government and non-governmental organization leaders who took part in the trade mission, which took place from October 30 to November 7 and was described as the largest trade delegation B.C. has ever led.

Although a wide range of sectors were represented, the mission’s main theme was energy, which is not surprising given the opportunities China presents for both B.C. natural gas – in the form of liquefied natural gas (LNG) – and clean-energy technology.

In China, air pollution can be so bad it can go above 300 on the Pollution Standards Index – a point considered a serious health hazard.

While he was in China,  D’Avignon said there was “an apocalyptic moment” in one of China’s cities where the index reached 400.

So for China, the drive to reduce its reliance on coal isn’t just a climate action measure – it’s a human health imperative.

China, which meets 66% of its energy needs through coal, has committed to reducing that to 62% by 2020.

Despite that commitment, it continues to build new coal-fired power plants at an alarming rate.

But that build-out presents opportunities for Canadian technology that cleans up emissions or captures and stores carbon. And it offers potentially large markets for B.C.’s nascent LNG industry.

“That’s another significant piece that people miss on this whole LNG story in B.C. – that we’re actually helping large economies that are continuing to grow to create new transition fuels to get out of older fuels into cleaner-burning fuels,” D’Avignon said.

One of the agreements signed in Beijing was between Pacific Oil and Gas – the company behind the Woodfibre LNG project in Squamish – and Guangdong Yudean Group Co. on a joint venture to build an LNG peak-shaving terminal in the Yangjiang High-Tech Zone.

An offtake agreement, yet to be finalized, would be for one million tonnes of LNG per year, which is about half of Woodfibre LNG’s proposed annual production.

One other area with huge market potential in China for B.C. companies is clean technology.

While in China, Ballard Power Systems (TSX:BLD) inked a $3 million deal with Tangshan Railway Vehicle Co. for a hydrogen-fuel-cell-powered tram. That deal was just the latest in five key deals this year in China worth $40 million for Ballard fuel cell technology for both buses and trains.

Earlier this year, Ballard received an order for fuel cells for 33 buses in China, followed in September with a second order for 300 more.

Ballard is now developing a new business and market that, so far, is exclusive to China – trains powered by hydrogen fuel cells. When new hydrogen fuel cell trams go into operation there, they will be the first of their kind in the world.

To put China’s market potential in perspective from a clean-tech standpoint, Ballard CEO Randy MacEwen said his company has sold 150 fuel cells for buses over a period of 24 years.

“This year already we’ve signed up 400 new fuel cell buses,” MacEwen said. “[It’s] an extraordinary change in volume, and I think there’s a lot more to come, based on what I’ve seen from different cities. From a revenue perspective, we would expect China to be our No. 1 market in 2016.”

In addition to fuel cells, one other B.C. specialty with good market potential is industrial-scale batteries, he said.

“There are quite a few lithium battery companies in B.C., and so energy storage is another important aspect both for commercial and industrial applications.”

MacEwen added China’s drive to improve the quality of its water also provides potential markets for B.C. clean-tech companies in the water remediation and purification space.

“Clean energy is going to play such an important role as a result of everything from air quality to [greenhouse gases] and climate change issues,” said Greg D’Avignon, CEO of the Business Council of British Columbia.

D’Avignon was one of about 200 business, government and non-governmental organization leaders who took part in the trade mission, which took place from October 30 to November 7 and was described as the largest trade delegation B.C. has ever led.

Although a wide range of sectors were represented, the mission’s main theme was energy, which is not surprising given the opportunities China presents for both B.C. natural gas – in the form of liquefied natural gas (LNG) – and clean-energy technology.

In China, air pollution can be so bad it can go above 300 on the Pollution Standards Index – a point considered a serious health hazard.

While he was in China,  D’Avignon said there was “an apocalyptic moment” in one of China’s cities where the index reached 400.

So for China, the drive to reduce its reliance on coal isn’t just a climate action measure – it’s a human health imperative.

China, which meets 66% of its energy needs through coal, has committed to reducing that to 62% by 2020.

Despite that commitment, it continues to build new coal-fired power plants at an alarming rate.

But that build-out presents opportunities for Canadian technology that cleans up emissions or captures and stores carbon. And it offers potentially large markets for B.C.’s nascent LNG industry.

“That’s another significant piece that people miss on this whole LNG story in B.C. – that we’re actually helping large economies that are continuing to grow to create new transition fuels to get out of older fuels into cleaner-burning fuels,” D’Avignon said.

One of the agreements signed in Beijing was between Pacific Oil and Gas – the company behind the Woodfibre LNG project in Squamish – and Guangdong Yudean Group Co. on a joint venture to build an LNG peak-shaving terminal in the Yangjiang High-Tech Zone.

An offtake agreement, yet to be finalized, would be for one million tonnes of LNG per year, which is about half of Woodfibre LNG’s proposed annual production.

One other area with huge market potential in China for B.C. companies is clean technology.

While in China, Ballard Power Systems (TSX:BLD) inked a $3 million deal with Tangshan Railway Vehicle Co. for a hydrogen-fuel-cell-powered tram. That deal was just the latest in five key deals this year in China worth $40 million for Ballard fuel cell technology for both buses and trains.

Earlier this year, Ballard received an order for fuel cells for 33 buses in China, followed in September with a second order for 300 more.

Ballard is now developing a new business and market that, so far, is exclusive to China – trains powered by hydrogen fuel cells. When new hydrogen fuel cell trams go into operation there, they will be the first of their kind in the world.

To put China’s market potential in perspective from a clean-tech standpoint, Ballard CEO Randy MacEwen said his company has sold 150 fuel cells for buses over a period of 24 years.

“This year already we’ve signed up 400 new fuel cell buses,” MacEwen said. “[It’s] an extraordinary change in volume, and I think there’s a lot more to come, based on what I’ve seen from different cities.

From a revenue perspective, we would expect China to be our No. 1 market in 2016.”

In addition to fuel cells, one other B.C. specialty with good market potential is industrial-scale batteries, he said.

“There are quite a few lithium battery companies in B.C., and so energy storage is another important aspect both for commercial and industrial applications.”

MacEwen added China’s drive to improve the quality of its water also provides potential markets for B.C. clean-tech companies in the water remediation and purification space.

Made-in-B.C. products have cachet in China

From blueberries and geoduck to ski resorts and waterslides, China wants what B.C. businesses have got.

Several businesses recently returned from a B.C. government-led trade mission to China with millions of dollars worth of sales agreements and memorandums of understanding.

While in China, Telus (TSX:T) and Chinese telecomm giant Huawei announced a memorandum of understanding to set up a 5G lab, the first step in building out a new 5G fibre-wireless network in Vancouver.

Meanwhile, HQ Vancouver, which was established to attract international companies to locate head offices in Vancouver, signed an agreement with the Chinese arts and culture company Poly Culture Group to locate its North American headquarters in Vancouver.

WhiteWater West, which makes waterslides, also finalized deals while in China, which accounts for 40% of the company’s business.

Some of B.C.’s traditional resource sectors – particularly metallurgical coal and copper mining – have been struggling with low commodity prices since 2011, which is partly the result of a slowdown in China’s economy.

China is now at the end of a five-year plan designed to make a transition from an economy based on industrialization to one that is more domestic and consumer-based.

While that will mean less demand for certain resources, it means an increasing demand for other B.C. exports and expertise.

One of the biggest new markets is anything related to food. A growing middle class that is increasingly demanding higher food quality and higher safety standards presents a growing market for Canadian products – including seafood, agricultural products and organic food products.

“As you’ve got a middle class that’s emerging, their capacity to purchase protein and their capacity to purchase high-quality food increases,” said Greg D’Avignon, CEO of the Business Council of BC.

He said many Chinese consumers are increasingly distrustful of the quality and safety of their own produce and are looking to places like Canada for high-quality foods and beverages.

One B.C. business that has been carving out a niche in China is the Canada Berries winery in Richmond. It specializes in blueberry wine, which health-conscious Chinese consumers value for its antioxidants and low sugar content.

“In China, blueberries are selling extremely [well] because they don’t have that much production,” said winery director Tom Yuan. “B.C. has huge production for a low price. It’s a good market for berries in general – cherries and cranberries.”

While in China, Canada Berries signed sales orders with two different companies worth $900,000.

Zhiqiang Bian, president of Oriental Bonanza Enterprise, said his company sells B.C. seafood products such as black cod, salmon, geoduck and spot prawns exclusively to China. His business does about $2 million in sales annually.

“We hope it can reach $10 million in three years,” Bian said.

Trade mission’s multimillion-dollar tally

While in China, several B.C. companies used the trade mission to officially sign sales deals and memorandums of understanding with multimillion-dollar values, including:

$3 million - Order for Ballard Power Systems (TSX:BLD) fuel cells with Tangshan Railway Vehicle Co. Ltd. for a hydrogen fuel cell powered tram

$4.5 million - Value of annual orders for seafood (including geoduck, Dungeness crab and oysters) from Canada B.C. Fresh Online

$900,000 - Value of distribution agreements for blueberry wine from Canada Berries Enterprises Ltd. with two Chinese trading companies;

$3 million - Investment deal involving B.C.’s Cassiar Mountain Jade Store Ltd. and Beijing Xin Yuan Yu Cheng Trading Co. to establish a new jade trading centre in Beijing

$5 million - Follow-on investment agreement between Ironwood Clay Co. and Guangzhou Yuemen Cosmetics Co. that builds on a previous partnership agreement worth an estimated $20 million

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