Safeguarding the future of hydrogen technology: Achieving net zero

Chris: Let the customer drive the process. Try not to let the technology drive the process. You need to come up with something that is just really fabulously wonderful and as far as the technology goes, park it for a while and then give the customer discovery process, to see if there's anybody who really cares.

Introduction: Welcome to Cleantech Forward, a Foresight podcast, where we explore cleantech customer's capital and Canada's path to net zero. Tune in to learn more about Canada's most exciting cleantech startups, industry success stories, investor insights and academic initiatives as we accelerate the growth and impact of cleantech, together.

Jeanette: Welcome to Cleantech Forward. I'm Jeanette Jackson, CEO of Foresight Canada. Today I'm on the podcast talking with Chris Reid, CEO of Ekona Power, and Brian Lee, partner at Gowling WLG. We're talking about the future of hydrogen technology, current barriers to mass hydrogen adoption and the role IP protection plays in the development and deployment of these technologies.

This Cleantech Forward podcast is supported by Gowling WLG. A global leader in intellectual property law, Gowling WLG works alongside Canadian cleantech companies to develop IP strategies that maximize business opportunities and increase market share, while protecting valuable innovation. From idea to investment, to international expansion, Gowling WLG understands the potential of your intellectual property at every stage of growth. Visit gowlingwlg.com/cleantech to learn how they can support your business today.

Chris and Brian, welcome to Cleantech Forward.

Chris: Thanks, Jeanette. Nice to be here.

Brian: Thanks, Jeanette.

Jeanette: So I'm going to start because Chris and I have a little bit of history. He is the founding EIR at Foresight Canada and has supported many ventures in the Foresight community before embarking on just another one of his many ventures. So Chris, why don't you tell us a little bit about what you're up to at Ekona Power.

Chris: Sure. That's true, Jeanette, we have some war stories that go way back. Don't we? I mean not way, way back. I don't want to date us but back a while. Yeah, so I was at Foresight, back in the early days when it was Neil Huff and you and myself and a couple of others. When we were building that ford, was working with quite a few great young companies. At the time I had been working previously with Cellex Power, which was a fuel cell and hydrogen company, which was sold to Plug in the late 2000s, and found myself at Foresight after that, with my eye always on the hydrogen business and especially around clean hydrogen production. Because when I was working at Cellex, hydrogen, never mind clean hydrogen, the cost of hydrogen for our customers was always the biggest issue. At Cellex we were converting distribution centers, large distribution centers, like Walmart, and Sysco Foods, and Kroeger, and Amazon would run over to hydrogen and fuel cells from batteries and electricity and it was all a productivity platform. It was how many pallets per hour they can move. That's why they were buying the fuel cells and the hydrogen, but it was always the hydrogen cost, which was the big gate item and drove the sales cycle the longest. So I always felt that we needed to be able to drive the cost of hydrogen down, and now that in the past few years the clean hydrogen has really come into its stride, it's even more important than ever. So in 2016, 2017, we started Ekona Power with a couple of founders that you probably know too, Ken Kratschmar and Gary Schubak and then Dave Leboe joined us afterwards, and we went to tackle that specific problem. So that's what Ekona is about. Ekona is a clean hydrogen production company, born out of customer engagement, with the oil and gas industry, with the industrial hydrogen industry, to really try to understand what was going to look like; breakthrough or high impact in clean hydrogen production. After a lot of consultation, and coming away with what we would call a customer requirements document or a specification sheet for what low cost clean hydrogen should look like for these customers, we went off into a technology formulation program where we scoured the world for technology that we felt could meet those customer requirements. In doing so came up with pyrolysis technology that we really like and we've been building the company out ever since.

Jeanette: That's incredible. I'd love to learn more about your journey, to share with the audience, but first let's jump over to Brian. Brian, you are no newbie to hydrogen. Someone told me that you have a history in this space before jumping into international intellectual property practice. Why don't you tell us a little bit about yourself and where you've come from and how you got here.

Brian: Thanks, Jeanette. I'm going to feel old by saying this but I've been involved in the BC hydrogen and fuel cell sector since the 1990s when I was in-house IP counsel at Ballard Power Systems. It's been really a great ride seeing the sector grow over the last 20 or 25 years. So since I left Ballard I joined Gowling, where I've been since the year 2001, and have helped a number of BC and other Canadian fuel cell and hydrogen companies develop and protect their IP portfolio. It's been nice. The industry really surged in the 2000s. A lot of activity in the PEM area for fuel cells, hydrogen fueling. I did some of the early IP work for a company called General Hydrogen, which is now part of Plug Power, and then things kind of went quiet in the beginning of 2010s. But it's been nice to see in the last 3 or 4 or 5 years now a real resurgence in the hydrogen space, and I'm pleased to help Ekona with their IP portfolio, as well as other Canadian and BC fuel cell companies and hydrogen companies in this space.

Jeanette: So, Brian, I'm going to leave it with you for a few minutes here. We know that there's something happening globally in terms of peoples willingness to accelerate investments in everything cleantech and sustainability. Canadian companies are getting more opportunity than ever to export their products, services, business models, technologies, however you want to frame it, to new markets. Why don't you share with us your perspective on the role that strong IP protection has for ventures that are interested in becoming a globally competitive cleantech company.

Brian: For sure. It's no secret that climate change has really raised the urgency of our need to find solutions and to do things differently in terms of how we consume energy. One of the ways we're going to really lead ourselves is by developing new technologies to produce energy in a clean way and to consume energy in a cleaner way. We're really poised in British Columbia to be leaders in that area, partly because the BC Government has invested very early in hydrogen and fuel cell technologies, dating back to the 80s. As a result British Columbia is one of the worlds leading sectors in the energy and hydrogen production. Other jurisdictions have imposed clean energy mandates. For example, in the transportation sector, countries are mandating that vehicles be non-fossil fuel emitting by the 2030s. So hydrogen fuel cells, for example, is one solution to producing emissions free transportation. A lot of BC companies that I've worked with see opportunities in commercializing their technology elsewhere, for example in particular China, and as a result their IP strategy has to follow kind of where their business goes. It's important I think for these companies, in terms of protecting their business, to secure IP protection. Not just in Canada but in the jurisdictions they're going to do business. So there are strategies that we can employ, including filing international patent cooperation treaty applications to secure their rights internationally. It's something that I think is quite important for sophisticated investors that are looking at whether these companies are businesses they want to invest in, because especially at the early stage, technology really is a primary asset for these companies. So protecting that asset is critically important to growing those companies.

Jeanette: I remember myself with one of my early ventures, I'm not going to date myself on this recording, but getting that first round of patent drafted. Sitting in the shop and learning. For me I was not a patent expert and I'm not an engineer, but very quickly learned everything about electronics and provisional patents and non-provisional patents. It's a journey and a process. An IP strategy became a pretty significant colour of our activity to protect that green space. I want to move it over to you, Chris. You've talked about hydrogen, green hydrogen. You've talked about the importance of customer discovery in developing technologies that have much higher probability of success. In a customer discovery, not only from a business model perspective, but from an operational technology implementation perspective, have become fundamental components of our training at Foresight and I know that as a trainer of trainers, you started Ekona Power with that at the core. What did you learn going through that process? Where there major barriers in hydrogen that were stopping adoption and sort of some key indicators that you can share on what needed to be done to overcome that?

Chris: Yes. Sure. First, it's clean hydrogen. I think you said green. So it's just when we start talking about the colours, it's part of my big peeve, that we should be just talking about carbon intensity but that's okay. As far as clean hydrogen goes, and developing a venture based on customer engagement, the barriers, the things I didn't expect when we were doing it, was when you actually go through that engagement process you think, or at least I went into it thinking there was going to be one answer, and the actual answer with the customer, when you work with a customer and you distill down what it is that they actually are looking to achieve, is often different than what you think you were going in with. Leaving yourself open to listening to what these people are telling you, often they're in a process of discovery themselves, particularly when they're talking about things like beyond bitumen or energy transition, or whatever the case may be, it's very important that you leave your preconceived notions behind as you're listening and working with those strategic partners to decipher what it is what they're really looking for. I can give you a good example. We did a lot of work in a bunch of different areas, and when we were looking I remember we were doing one analysis on R&G, for example, you'd think it was certain elements of the technology itself which was going to drive the cost so that you could produce R&G, for example, at the same cost that you could produce and distribute fossil fuels. It turns out it's not that at all and it's all about feedstock and feedstock logistics. If you go in with certain preconceived notions you're probably going to be wrong and even when you're engaging a customer like that and you're doing something at the get-go, when we were building out the customer requirements for what clean hydrogen needed to look like, it wasn't just about cost. Obviously it was about the carbon intensity, but it was about its availability, about its dispatchability. It was about its excitability. It was about its scalability. Those are all really, really important components to the value that you're bringing to the customer and drives you in a completely different technical direction, many times, when you consider everything together. I guess the thing I learned was to listen more and park the preconceived notions right at the beginning.

Jeanette: Brian, your history in this space, is that different than what you saw? I don't want to go back too far, when you were at Ballard in the late 90s, is this an evolution of what the market's telling people?

Brian: Yeah, for sure. I think when Ballard was first on the scene in the 90s, it was really more about the fuel cell technology itself. But the critical infrastructure to support the commercialization of fuel cells, in my mind, haven't really caught up. I think there may have been a little bit of over-promising on the viability of this technology back in the early days when I was starting out. What I've really noticed in the last recent years is a real focus on the infrastructure to support fuel cells, and in particular, on hydrogen production technologies. Such as the methane pyrolysis technologies done by Ekona, other types of clean hydrogen production technologies, and supply the infrastructure. Some of the fueling station innovations that are coming about transports so I'm really starting to see a lot of that. That gives me a lot of hope that the sector will be ready this time, I think, to deliver and there's a real niche for this technology because there are certain applications that just don't work for priority powered energy sources. You're going to need hydrogen in certain types of applications, like long-haul trucks, marine shipping and so forth. That's the biggest change that I've noticed, is more in the infrastructure side.

Jeanette: Very, very interesting. I recently switched to an electric call, full electric. I'm super happy I made that transition. I'm also learning about some of the limitations. Wanting to go more than 300 kilometers, especially if the weather's cooler and you need to heat your vehicle and your passengers and keep them warm, and allowed to use all their tools and trinkets, charge their phone, etcetera. I'm excited to see what the future of hydrogen has across all zero emission applications. Chris, we missed you at the BC Cleantech Awards. I'm not mad but it was obviously great to have some of your colleagues there, live. You won the award for Rising Star. That goes to the company in BC that is leapfrogging ahead through commercialization and scale-up and really gaining traction on solving a big problem and doing it quickly well. How did winning the award feel and was it a surprise to you and your team?

Chris: It's terrific. Thanks so much for the nomination of the award. It was fantastic. The whole team was excited about getting it. It's important that we acknowledge the sector, especially in Canada and in BC. There's a lot of great companies out here doing some real terrific things. I think Foresight's doing a great job. Shining on a light on those companies.

Jeanette: You guys have just secured 79 million in a series A round, which I would argue is probably one of the highest series A rounds in Canada I've seen in a long, long time. I'm sure you have more stats on that. Where does this take you? What opportunities and next steps does this type of funding provide for Ekona?

Chris: Great. We're at 83 now. I just closed a trailer investor for another 4 million. Yeah, so we're quite excited about it. It takes us all the way past pilot phase. So we're in the TRL 6 phase right now. We're building a 200 kilogram a day reactor. Next year we're going to build a complete system brass board around that reactor so we can enact the entire cycle. Then in 2024, by the middle of 2024, we'll commission a one tonne per day pilot facility. At the same time we have such great partners that came in in this round, syndicated customers, and we're working with them to get the location for the first commercial plant set up. Hopefully by the end of this year, and by the end of next year, with a little bit of luck we'll be starting feed engineering with these customers with the idea that in 2025, we're not doing this sequentially, we're doing it as much as we can in parallel, that we start to laydown first commercial facilities. So the money allows us to get right out to 2025, which is great, because we can put our heads down and work on the technology and the value engineering we need to do.

Jeanette: I love it. I love it. Before we close off here I've got a final question for both of you. With your vast knowledge and experience as an entrepreneur, innovator, as a supporter of innovation across many sectors I'm sure, Brian. What advice would you give the next generation of entrepreneurs in cleantech sustainability so that they can become the next Ekona Power? Brian, why don't I start with you.

Brian: I'll answer it in a more focused way in terms of the area that I practice in, which is intellectual property, and I'll leave Chris to talk to the wider topics about the business perspective. But it's really exciting to see a company like Ekona succeed like it has. To go from a small start-up company to such a large series A financing to the next stage, which is developing a pilot, and hopefully soon after commercial. My advice to entrepreneurs is that your IP strategy very importantly has to follow your business strategy very closely. You can't let the IP strategy get out of sync, the rise of your commercial strategy. As you mentioned, Jeanette, early on when you're starting up, when it's just you and maybe a few partners, you might just have enough money to scrape by to file a provisional application. That's great because that's really important. Your innovation, your technology, is your primary asset back then, and securing your IP rights is critically important but you have so many other needs to devote your budget to and as you grow those concerns will have to grow with your IP strategy. You'll start to have to think about broader issues like freedom to operate as you enter into the pilot and commercial phases. You're going to have to start thinking, not just about your own patents, but also the patents of others because you'd have to obviously make sure that you're not going to be stepping on patented territory by others. As your business evolves, your IP strategy has to evolve, and as your business evolves you'll have to be working with partners. It happens over and over again, especially in this sector, where innovation rarely happens in a vacuum and rarely happens entirely in-house. You're going to have to collaborate with third parties and you have to make sure that your agreements with third parties are robust enough to make sure that you have ownership to what you've developed and you don't contaminate, if you will, your IP by partnering with another company who then has a claim to your IP. So those are some of the things to think about, as you're an entrepreneur growing your business, you have to grow your IP strategy as well.

Jeanette: Thank you, Brian. And, Chris, some closing remarks here.

Chris: Sure. I'm just going to agree, violently, with Brian to start. Your technology, in particular, your technology is very, very, important. I would just say, and Jeanette I know I'm going to sing from your song sheet, let the customer drive the process. Try not to let the technology drive the process. If you come up with something that is just really fabulously wonderful, and as far as the technology goes, park it for a while and then give the customer discovery process to see if there's anybody who really cares about it. Let that customer lead what you're doing but staying in sync, making sure that you understand where their value comes from, and sometimes you can bring their value to them in unexpected ways that even they don't realize, but the value, they certainly understand where they get their value. If you're not paying attention then you could find yourself well down the pathway with millions of dollars under your belt and then facing a very painful pivot or a brick wall. That's the case with neither of those are very pleasant. The other thing I would think about is, especially building energy tech, in the end it's always cost. Right? Cost and transparency are the two broadest pulls for the market. Having the lowest cost, or the low cost solution, is where industry will ultimately go. All the chaff from various government incentives, and other incentive programs kind of run their course, it always boils back down to cost and I'm going to add transparency in there. Customers, especially B2B customers, industrial customers, if it's a stretch for them to be able to deploy it, it will take a lot longer to commercialize. And I'm not saying that you can't have a destructive technology that's not transparent. You're just going to spend a lot of time beating that drum before it actually happens. So customer-led, cost and transparency are the things that I would think about when I'm thinking about building a venture.

Jeanette: Great. Thank you both so much. Some reflection on what both of you just said. Chris, I just recall intakes and different entrepreneurs coming in and we're saying, "How much have you invested so far?" and they'll say, "Well, I just remortgaged my house for a second time." Then we say, "How many customers have you talked to?" and they say, "None." Then all of us, our jaws drop and the face goes white, and then we said, "Okay, let's just take a pause here." So I definitely agree. Let's take a pause, reflect, get talking to customers and I think higher probability of success all the way.

Thank you both so, so much. It's been a pleasure having you on Cleantech Forward and I look forward to seeing you soon.

Thanks for listening. Join us next time when we talk to Tim Bailey, from Gowling WLG, about carbon tech innovation in Canada. Don't forget to subscribe wherever you listen and to rate and review the podcast on iTunes.

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