Calculating the buoyancy of Atlantic Canada’s ocean technology supercluster
On October 10th the Honourable Navdeep Bains made an announcement that has private enterprise in Atlantic Canada gearing up for a deep dive into ocean technology research and development (R&D). The federal Minister for Innovation, Science and Economic Development (ISED) was in Halifax with news that, out of 50 original submissions, the Atlantic Region Ocean Supercluster made the short list of nine regional candidates vying for a share of $950 million in R&D funding under the Innovation Supercluster Initiative (ISI). That money will be divvied up among a final list of four or five.
Response was immediate and buoyant. “This will allow us to build on existing capabilities and make the region a world leader in these technologies,” wrote Alan Clarke, the new CEO of Petroleum Research Newfoundland & Labrador (PRNL). “If selected as one of the final five,” wrote Clarke, “the initiative will give us an opportunity to match the funds committed by partner companies with federal investment dollars.”
This will allow us to build on existing capabilities and make the region a world leader in (ocean) technologies.
PRNL’s COO Dave Finn, believes it is not just those with deep pockets who stand to benefit. In an email sent in September he wrote: “If we’re successful as a cross-sectoral cluster, it won’t be the oil and gas industry working alone. The point, and ISED’s expectations, are for initiatives that benefit the broader ocean economy. Each major sector will commit to the matching industry funds.” He said members of the oceans cluster will “collectively identify common business needs and the community will respond with innovative ideas. Or that’s the plan.”
Casting a wide net
While Randy Gillespie is a pioneer of ocean technology, he defines it much more broadly than many in the sector. “Technology doesn’t necessarily need to be hi-tech or sexy,” wrote the recently retired director of the Marine Institute’s Centre for Applied Ocean technology. In his opinion, fishing nets qualify as ocean technology. “Ships are ocean technology. Heck, even ropes, chain and anchors are ocean technology,” he wrote. “…The community at large has a perception of the ocean technology ‘sector’ that is too narrow; 99.9% of the members of NOIA (N.L.’s oil and gas industry association) supply technology to the offshore oil and gas industry but are not widely seen to be part of the ocean technology ‘sector’.”
A former publisher of the Journal of Ocean technology, and a manager of applied R&D at the Marine Institute’s marine base in Holyrood, Gillespie agrees with the ocean community that Atlantic Canada is a hub for the ocean technology industry in Canada including the private sector, academia and related government departments, agencies and institutions. Together they constitute a Canadian supercluster of innovators—world leaders in the adaptation of technology for sustainable, safe, efficient and profitable use of maritime operations.
A shore thing
If natural resources automatically conferred a competitive advantage, then Canada—with a 200,000+ km. coastline on three oceans—should generate a great deal of economic activity from its oceans-related industries. And, as a result, Canadians should be well positioned to take advantage of the phenomenal growth in ocean-related activity that, according to estimates by the OECD, will reach CDN$3.7 trillion annually by 2030. But Canada has not translated its ocean frontage into an advantage. In fact, ocean-related industry accounts for just 1.2 per cent ($25 billion) of direct GDP nationally, compared with the global average of five per cent. So Canada, with its industrial heart farther inland, is underachieving in oceans industries.
Atlantic Canada, where ocean-related industry accounts for approximately 15–20 per cent of the region’s direct GDP, accounts for two-thirds of all oceans activity in the country. Atlantic Canada companies are recognized internationally as innovators capable of the R&D necessary to deliver ocean technology that can perform in the harshest environments, to a wide range of ocean sectors, such as offshore oil and gas and renewable energy, surveillance, the fishery, aquaculture, ship building, tourism, conservation, navigation and mapping, biotechnology, transportation, safety and training, naval architecture, and remote sensing.
According to a recent report by the innovation subcommittee of the Atlantic Growth Strategy, ocean technology in the region constitutes a supercluster. It is a knowledge- based industry and its ability to identify niche opportunities and innovate gives it a competitive advantage.
In its broadest sense it includes all four Atlantic provinces, but on closer inspection it’s obvious that the supercluster is centred in two locations: the Greater Halifax region in N.S. and St. John’s, N.L.—the latter of which is now connected via submarine fibre optic cable to the two offshore oil production platforms on the Grand Banks. The cable bundle includes a business fibre for high speed communications and an independent science fibre that, according to industry insiders, could “potentially be lit up over the medium to long term” for R&D such as ocean observation, environmental monitoring, and testing of subsea sensors. Is this the first stage in a move towards controlling offshore platform operations from onshore? If developments in the North Sea are the model, look for significant digitalization of the offshore management and production model.
Steering for the horizon
A 2012 federal study of the ocean sector in N.S. determined that between 2009 and 2011, annual revenues for its 60-plus ocean technology companies doubled from $500 million to $1 billion. Similar rates of growth (though less in terms of actual dollars) occurred in N.L. The local impact of this knowledge- based industry is significant, but companies cannot depend on the small Canadian market. They must be export driven. That takes investment that some believe is hampered by the region’s aversion to the risks of R&D investment.
A study of the Atlantic Canada ocean technology sector, released by Canmac Economics in 2005, found that, on average, regional firms devote 31.1 per cent of fulltime employee time to R&D. But it also found that investment by the private sector is below the international waterline. Some attribute this to an unwillingness by SMEs to risk investing in R&D and to their inexperience in venture capital.
In his “Field Guide” to innovation, produced for the N.S. government in 2016, the lead author, a longtime Liberal strategist and innovation advocate, Dr. Peter Nicholson, pointed out that business expenditure on R&D in Atlantic Canada is the lowest in relative terms in Canada, and Canada is among the lowest business R&D investors in relative terms, in the developed countries of the OECD. For a knowledge- based industry dependent on innovation, this is a problem.
At presentations leading up to the release of the Field Guide, Nicholson was reported to have observed that N.S. was actually the third-ranked province in the nation for general expenditures on R&D (GERD). But, the expenditures on R&D from private industry (BERD) were the lowest in the country. Tim Bousquet, writing in the Halifax Examiner, observed that in N.S., innovation is government-directed with much of it concentrated in universities. And the situation is much the same in the other three Atlantic provinces.
Nicholson writes that this situation has resisted policy remedies but is untenable if Canada’s trade-exposed businesses hope to remain competitive. He believes the transformative pressure that comes from the global marketplace will force Canadian companies to give greater priority to R&D. Is the Atlantic region supercluster ready to adapt?
From the sea-bound coast…
In the 2011 report, Defined by the Sea: Nova Scotia’s Oceans Technology Sector Present and Future, the authors recognized that of the province’s 300-plus companies in ocean-related businesses, 20 per cent are ocean technology firms. These account for 20 per cent of all applied R&D in N.S. And they provide services for other sectors of the ocean industry. Examples include the 30-year, $25-billion naval defence contract at Irving Shipbuilding as well as renewable and non-renewable offshore energy.
If we’re successful as a cross-sectoral cluster, it won’t be the oil and gas industry working alone.
R&D-based institutions in N.S. make the province a national player in the advancement of ocean-related knowledge. Among these is the Bedford Institute of Oceanography which, with a team of more than 600 scientists, engineers and technicians, is Canada’s largest centre for oceans studies and science. The National Research Council and the Institute for Marine Biosciences are there too, as is the Defence Research and Development Canada Atlantic Laboratory. All of these require the support of an increasingly sophisticated cluster of smalland medium-sized companies that, in order to remain competitive in the digital world, must continue to refine and redefine products and services.
A bright light for R&D in the Halifax cluster is Dalhousie University. With more than 25 per cent of all federal National Sciences and Engineering Council of Canada (NSERC) oceans research grants, it is a crucible for innovation. The university hosts more than 100 researchers whose focus is on oceans science and technology. The Ocean Frontier Institute (OFI) at Dalhousie is a partnership with Memorial University of Newfoundland (MUN) and the University of PEI. This $250-million-plus initiative focuses on the Northwest Atlantic Ocean carbon sink and its effects on climate change.
Under newly-established PhD and post-doctoral programs funded by OFI, more than 220 personnel will be trained at all three universities. “By working together, we expect to reduce costs and accelerate the speed at which research is conducted,” said OFI’s scientific director Dr. Marlon Lewis in a published statement.
The Canada Excellence Research Chairs in Ocean Science and Technology are also based at Dalhousie. They work closely with Marine Environmental Observation Prediction and Response and the Institute for Ocean Research Enterprise (IORE), both housed on campus.
IORE, self-described as a “member-driven not-for-profit corporation of industry, academic and government partners,” supports technology commercialization. The organization oversees the newly created Centre for Ocean Ventures and Entrepreneurship (COVE). With $20 million from the federal and provincial governments, COVE is transforming the former Canadian Coast Guard facility on Halifax’s Harbour into an R&D incubator for ocean technology with space for offices, shops and laboratories, and a pair of kilometre-long deepwater piers. An additional $4.5 million from Irving Ship Building will support initial operations and programs.
… to the far Eastern shore
As long ago as 2008, New York-based Marine Technology Reporter recognized St. John’s as “an international epicentre of marine technology.” Offshore oil and gas has been the impetus for the expertise and infrastructure that is concentrated in the city. According to a statement issued by Chris Mitchelmore, the provincial government’s Minister for Innovation, companies in the province have “sufficient potential scale and strength to be nationally and internationally competitive,” in areas such as “integrated operations, sensing technology, environmental monitoring, simulation and training, automation, unmanned systems, environmental genomics, big data analytics and digital technologies.”
With a membership of more than 90 companies, research and technology organizations, municipal, provincial and federal governments and post-secondary academic institutions, OceansAdvance (OA) represents the ocean technology cluster in the province. Based on industry analysis, OA projected an ambitious $1 billion in annual revenues for the private-sector by 2015 (a four-fold increase over 2006 levels). That high water mark has yet to be achieved but Cathy Hogan, the executive director of OA, says industry is trending upwards. As the umbrella organization for the sector, OA doubled its modest budget last year and expects to do the same in 2018. This growth is due in part to the organization’s mandate which is evolving away from representing the cluster to something some might mistake for an industry associa-tion except for their strong research component. Hogan is quick to add they have no intentions of straying into the jurisdiction of other organiza-tions but are eager to work with them for the benefit of members. “People have realized that there are oppor-tunities that we can exploit if we work together. As our president Mike McGuire says, ‘sometimes we compete and sometimes we complement’.”
Size of Canada’s coastline, in kilometres
Canada’s direct GDP that comes from ocean-related industries
Direct GDP from ocean-related industries in Atlantic Canada
Estimated annual value of worldwide ocean-related activity in 2030
Memorial University (MUN), with a $100-million research portfolio, extensive research and training facilities and diverse academic expertise and business incubation services, has a mandate, as the only university in the province, to support economic development. Leading the charge for ocean R&D are nine oceans research chairs. And they have access to leading research facilities.
An interesting hybrid between a private business and a public institution is C-CORE. With one office on campus where it began in 1975, and another in Ottawa, C-CORE has expertise in intelligent sensors, geospatial systems, iceberg engineering and geotechnical engineering. They have supported more than 1,200 undergraduate, graduate and post-doctoral students and incubated 18 technology companies. Today it is also home to LOOKNorth, a Canadian Centre of Excellence for remote sensing innovation, and the Centre for Arctic Resource Development (CARD), a long-term R&D initiative in partnership with the oil and gas industry.
The Marine Institute functions as a kind of polytechnic insti-tute within MUN. Equipped with the world’s largest flume tank, advanced training simulators, and a small marine base, there is a strong focus on applied research. Within MI are world-leading schools in fisheries, maritime studies, ocean technology, and safety. Also under the Marine Institute’s banner is the Centre for Community Based Education Delivery, which trains personnel in ocean-related trades in places as far flung as Nunavut and Southeast Asia. The Centre for Sustainable Aquatic Resources, also based in the Marine Institute, designs and tests new techniques and technology for companies such as Clearwater Seafoods.
The National Research Council’s Ocean, Coastal and River Engineering (originally called the Institute for Ocean technology) was established in 1984 and has been a key component in the supporting infrastructure for R&D in harsh marine environments.
As with the other Atlantic Provinces, N.L. also has its share of government programs, tax incentives and support agencies. They are intended to foster R&D and speed up the process of innovation and commercialization. That was the mandate of the Research Development Corporation (RDC) until the province’s Liberal government replaced it with InnovateNL this past July. InnovateNL is an ambitious new agency with a laudable goal: to streamline access to government supports. Which in this case includes leveraging R&D resources, and fostering innovation.
A chance for competition
Mark Ploughman would be among the first to admit that there are potential economic benefits to university research over the short and long terms. In an interview at his home in St. John’s, the former head of the now-defunct RDC said university research helps advance knowledge and provides immediate benefits. “Researchers, by the nature of their work, collaborate with other researchers,” said Ploughman. But there is a caveat. “When it comes to the investment of public money in research… the drive to collaborate between [university]presidents and vice presidents is not as strong.”
“We need a more sophisticated view of collaboration,” he said. “Yes, clusters are collaborative however, that doesn’t mean competition is a dirty word.” A former assistant deputy minister of Innovation with the Government of N.L. and a long-time member of the business community, Ploughman believes competition drives the ocean technology cluster’s business. “It keeps the entrepreneurs up at night thinking of ways to advance their companies.”
According to Ploughman, governments in the region don’t understand investment or how to stimulate collaboration and innovative competition. He says that in N.L., the successful ocean technology companies are strong niche players. “That is the only way to grow. You are not going to win going head-tohead against giant companies like Microsoft or Apple—unless you go to where the gaps are. Then you have a chance by exploiting those niches.”
An outrigger for private investment
In his March budget, federal Minister of Finance Bill Morneau announced that Canada would spend $950 million over five years to support “superclusters” of innovation through the Innovation Superclusters Initiative (ISI)—the one for which the Atlantic Region ocean technology supercluster has now been shortlisted.
As part of the regulations for this federal ISI money, the government stipulated that it is to be used on a dollar-for-dollar basis to leverage private investment, which government believes will stimulate risk taking and help grow the capacity of the private sector to tolerate calculated risks.
This call for expressions of interest from superclusters attracted the attention of the ocean technology players in Atlantic Canada, triggering regional meetings and workshops and resulted in the submission of a proposal to ISI. According to Dave Finn, COO of PRNL, the authors of that proposal included a consortium of “dozens” of regional businesses, leading universities and other “very engaged” stakeholders.
In a backgrounder released before their proposal even made it to the ISI shortlist, Finn wrote that, “The Oceans Supercluster is a novel approach to innovation, and has significant potential to advance ocean industries in the region.”
Finn said that a successful bid will bring together various ocean users in Atlantic Canada including oil and gas, fishing, shipping, defence, marine renewables and aquaculture, as well as academics, ocean innovators and technology providers. Among the private sector proponents named in PRNL’s backgrounder were Clearwater Seafoods, Cuna del Mar, Emera, Aspin Kemp and Associates, Radient360, and PRNL on behalf of N.L.’s oil and gas operators. On the academic side, he named Dalhousie and MUN.
Industry partners committed over $85 million in direct funding over the next five years, with an additional $40 million-plus expected as additional partners come onboard. If the Atlantic Ocean Supercluster bid is successful, these funds could be matched dollar-for-dollar under the ISI.
Could this be the shot in the arm that SMEs in the Atlantic region need to lower their resistance to private investment in ocean R&D? Gillespie is not convinced. His major concern is that the private sector may not have the ability to come up with matching funds. “The money that will be available to the private businesses in the supercluster… that is a lot of money to move on an annual basis,” Gillespie explained. “It takes a lot of work to get the projects off the ground.”
Oil and gas, and the fishery to a lesser degree, are the only ones he believes have pockets deep enough to take advantage of a program on this scale. For small business to get in on the ISI money, they will need venture capital. But he says there is a problem there too. It’s partly due to regional SMEs’ relative lack of experience with this type of investment.
But before the regional ocean technology sector confronts those problems they have to secure their place on board the good ship ISI by moving beyond the shortlist to secure a berth at the table with ISED.
A tide taken at the flood…
In a report released this past May, the Atlantic Growth Strategy’s subcommittee on innovation recommended that the federal government, “support the established pan-Atlantic oceans cluster in its bid to become a supercluster.” This report was prepared by subcommittee MPs (Nick Whalen of N.L., Andy Fillmore of N.S., Matt DeCourcey of N.B., and Sean Casey of P.E.I.) following meetings with stakeholders across the region.
The MPs also recommended, as far as investment in the cluster was concerned, that the government ought to help “leverage their capacity” procuring a marine research vessel and providing capital assistance for new incubation and development spaces. Mark Ploughman has another suggestion in that regard: the creation of an ocean technology park.
“Newfoundland and Labrador is the only jurisdiction in Canada without a technology park,” he said. “It should be a no-brainer if we buy into the concept of a cluster. It’s not just the conferences and workshops where this growth and exchange of ideas and innovative thinking happens—it also happens at the coffee shop in the park,” he said. He admits Atlantic Canada’s supercluster is a drop in the ocean compared to places like San Diego. “But you need a critical mass. This is a globally competitive industry and you need focus.”
Is it a coincidence that the government didn’t use “Atlantic” in the recent news release that discussed the shortlisted ISI candidates? Instead it said that the “Ocean Supercluster would maximize the economic potential of Canada’s ocean economy by investing in digital ocean technologies in aquaculture, capture fishery, offshore oil and gas, and clean energy.” The Atlantic proponents might be forgiven if they mistook this omission as a directive to ensure ocean sectors in Quebec, B.C., and perhaps even Canada’s North, are included, wherever possible, in any final proposal—even though this defies the geographic definition of a cluster. But such inclusiveness may be what it takes to launch them into the tide of R&D investment that some anticipate will flow under the ISI. risks.