Blog Posts | Pembina Institute

Rapid innovation in the oilsands: a worthy challenge

Blog - Oct. 31, 2013 - By Matt McCulloch

“History repeating itself” isn’t typically a positive expression. It usually refers to a series of errors or oversights typically resulting from leaders failing to learn from past efforts. It is with this in mind that Alberta’s forthcoming innovation plans will want to avoid past mistakes and repeat what Alberta has done well.

The Alberta government recently commissioned an esteemed panel to inform its new approach to applied research and commercialization in the province, i.e., a new innovation system. But, this is not the first time the province has implemented such a process and, considering the optimism that was pinned to those previous efforts, it’s fair to wonder how much hope we should have for this one.

Let’s be clear, we are not starting from scratch. Alberta can proudly claim to be highly innovative, with many successes within many sectors — from education (Smart boards) and health (Cold-FX), to construction (the ceramic brick) and resource development (steam-assisted gravity drainage, or SAGD). We also have new institutions that have been specifically created to accelerate innovation in the resources sector, such as the Climate Change and Emissions Management Corporation (CCEMC) andCanada's Oil Sands Innovation Alliance (COSIA).

In many ways, Alberta’s future prosperity will be defined by whether we, as a province, will continue repeating past missteps, or whether we will be bold enough now to design a new strategy to make Alberta a global leader in innovation.

The real challenge

The oilsands, near Fort MacMurrayIndeed, the challenge at hand is not whether Alberta can be more innovative — of course we can be, and we will be. The challenge is whether we can make that shift rapidly, and in a way that succeeds in attaining Alberta’s holy grail of growth through “economic diversification” while also improving our environmental performance and global reputation.

The question, of course, is how?

Despite important discrete initiatives, there are major challenges with the current “innovation system.” Tellingly, no one seems to be able to articulate what this “system” is. This is not surprising, given the lack of common vision among a broad array of institutions all supporting innovation in Alberta — uncoordinated and fragmented actors within the province (who are often acting at odds and even competing for resources) with no metrics or benchmarks to measure success or improve performance.

While there have been different tactical developments and initiatives in the recent past, these have failed to produce material results. Ultimately, Alberta must develop an overarching innovation strategy that’s based on tomorrow’s opportunities, not today’s realities.

Opportunities for innovation

Some revealing insights have emerged from our own work at the Pembina Institute on clean energy technology (also here and here and here). We’ve also had many discussions with thought leaders from industry, government, and academia and with independent consultants who we specifically asked for their thoughts on this topic. With that research in mind, there are nine ways for Alberta to improve its innovation system, while achieving the desired economic and environmental benefits:

  • Develop a vision for innovation
    Identify deliberate goals and metrics for the province among government, academia, and industry associations that help to focus the innovation system and improve the ability to measure outcomes
  • Ensure governance of the broader system
    Have an independent body accountable to the government that rationalizes the system, coordinates the discrete innovation support providers and intermediaries, ensures they are connected with the governments central innovation body, and have them focused on a common vision and goals
  • Perform an effective diagnostic review of the system
    Use historical diagnostic information as a basis for better coordination of the system; past attempts have either been inadequate or no body has effectively used the information.
  • Set “aspirational regulations”
    Have a vision of something to strive toward, something to be motivated for and a way to mobilize creativity and new technologies (e.g., Tailings Directive 074 — while industry has yet to meet this Directive, by any measure, it has likely incented a vast amount of technological solutions that would not have otherwise come to bear)
  • Develop public policies that create appropriate market signals
    Use public policy as a core tool to spur innovation and look to other jurisdictions for good examples
  • Ensure the market, led by the oilsands sector, is adequately engaged in “pulling” solutions that address needs
    Just as Einstein once quipped that the invention of the laser was a “solution looking for a problem,” Alberta has too many technology developers “pushing” solutions without a sense of real needs and priorities
  • Focus on small and medium enterprises
    Innovation typically comes from smaller, more nimble organizations — the overwhelming majority of Sustainable Development Technology Canada’s and CCEMC’s portfolios are small and medium enterprises
  • Engage the supply chain, led by the oilsands sector
    Supply chains are the greatest “market” to help scale existing commercial technology and the resource sector supply chain is the “thickest,” as it purchases in high volumes from across all sectors. To date, however, supply chains are only in the very early stages of thinking about clean technology — some further ahead than others. They don’t know the landscape and some operate under the false assumption that clean technology is high cost and underdeveloped.
  • Treat innovation as a human system, not a technological one
    Ensure key sources of creativity and critical relationships are developed and maintained. The innovation system will need features that accommodate complexity and expect non-linearity in how innovation occurs. Do not approach innovation too intellectually or too objectively.

Untapped potential

With Canada’s GDP growth rate projected to be 2.5 per cent next year compared to over five per cent for emerging markets, Canada is at an obvious competitive disadvantage. The root of the rapid innovation challenge is the unique and significant constraints facing the resource sector — namely having capital-intensive sunk assets (such as the oilsands) that cannot be put at risk from the testing of new ideas. Instead, some of the biggest opportunities for innovation are with new — and clean — technologies that are capital intensive, which generate slow returns and thus make it difficult to attract already limited capital.

Our untapped potential lies in our ability to learn how to rapidly innovate in the resource sector. Resource-based industries are our jurisdictional advantage, and there is already a history of innovation to be embraced and leveraged to open the doors to major economic opportunities and environmental benefits. The oilsands can lead the way for Alberta, and Alberta can lead the way for Canada.

Will Alberta’s current process for developing an effective innovation strategy get it right this time? Will all the opportunities be realized and seized? There is really only one sure test: will the new process design for innovation itself be innovative?

Having spent the last 15 years on Pembina’s consulting team, Matthew McCulloch has largely focused on innovation, clean technology and collaboration. This November, he will join the Canadian Oil Sands Innovation Alliance to work on innovation and collaboration in the oilsands full-time.

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Rodger Hamilton — Nov 01, 2013 - 10:38 AM MT

I am also interested in seeing Pembina's response to David Boyd's question.

Jim Sullivan — Nov 01, 2013 - 03:04 AM MT

Lots of polemics but zero specifics about the hundreds of collective innovations made in this industry. I am disappointed that theres simply no attribution to the geological, process and chemical and environmental science that has shown a multitude of efficiencies across this vast resource industry. Pembina has studied it through binoculars and NOT a magnifying glass. Get boots on the ground and get out there. I did for 33 years. Its akin to the history of flight.
Thanks for this opportunity to comment.

Jason Switzer — Nov 05, 2013 - 10:24 AM MT

Thank you Jim, for highlighting the compelling story of innovation that enabled commercial development of the oilsands. It is indeed akin to the story of flight in that it took pioneers with vision and willingness to fail forward to create a new industry. Globally, AOSTRA is studied as an example of a public-private innovation partnership that’s worked.

Where we differ, perhaps, is on the choice of eyewear. Far from the Pembina Institute looking at the industry with binoculars, it's the industry's most vocal advocates who seem to wear blinders, that is, by failing to acknowledge the environmental challenges of oilsands development let alone taking action before these challenges became a matter of global concern.

Even the architects of AOSTRA ruefully admit that the environmental elements of oilsands development received the least attention, when getting a single project up and running successfully was the focus (for example, see the paper by Leah Lawrence on AOSTRA for the Inter-American Development Bank). Today, it is the cumulative impacts of that success that have brought international scrutiny to Alberta.

In a world of environmental limits, when market access is increasingly predicated on not just relative cost but also on comparative upstream impacts, the OS industry needs a new focus on environmental innovation; Canada can use this focus on innovation in the resource sector to create the basis for longer term prosperity in a low carbon world. And it is in this regard, that Matt’s blog offers some hope.

bruce jackson — Oct 31, 2013 - 05:14 PM MT

Innovation and development of sustainable environmental low carbon energy systems will in my humble opinion come from innovations such as SAGD and tar sand developments. The hoped for outcomes can not come from within what Alberta needs to move away from.
"Our untapped potential lies in our ability to learn how to rapidly innovate in the resource sector. Resource-based industries are our jurisdictional advantage, and there is already a history of innovation to be embraced and leveraged to open the doors to major economic opportunities and environmental benefits."
A cheerleading narrative on our own greatness and innovation is what topples empires with good intentions. This is especially true when ones thinking and rationalization excludes the option of replacing the very thing that is destroying us is not considered as possible options for the future.
Why bet on the oldest weakest horse in the race?? Maybe rabbits can run faster and cleaner. Visioning a future does not mean that we continue to go faster and faster down the declining side of the life-cycle. Often dreams are only dreams when reality requires a total shift to alternatives. Like fish in water - we sometimes fail to understand the context of our reality.

David Boyd — Oct 31, 2013 - 03:52 PM MT

I'm unclear as to how a slower rate of growth in GDP constitutes a competitive disadvantage.
Does the fact that humanity is surpassing the ecological limits of vital natural cycles (Carbon, water, nitrogen, etc.) not requires us to strive for a steady-state economy, or perhaps even negative growth?
I'd be interested to know Pembina's position on these questions. Thank you.

Ed Whittingham — Nov 05, 2013 - 10:07 AM MT

Thanks for your thoughtful comment, David, and certainly worth a discussion. One could write a thesis on steady state economies. If you’re interested, we’d be honoured to publish a guest post by you on this topic.

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