Canadian Transit Suppose Tank CUTRIC Riddled With Conflicts Of Curiosity

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4 weeks in the past, I didn’t know the Canadian City Transit Analysis and Innovation Consortium existed. If I’d seen point out of it, I in all probability would have assumed it as an innocuous little group stuffed with nice Canadians working diligently for the great of Canadian transit. However the onion retains being peeled. In the present day’s topic is the complete extent of the conflicts of curiosity that CUTRIC’s funding mannequin creates for Board members, and the way they only preserve doing nothing about it.

As a reminder, CUTRIC is the group that did a $9 billion value workup of a three-scenario bus decarbonization examine for the Metropolis of Brampton, a fairly big suburban metropolis within the Larger Toronto Space. The situations had been battery-electric solely, hydrogen-only, and a blended fleet. Oddly, regardless of the hydrogen fleet having the very best prices and requiring the most important variety of buses, the blended fleet got here in cheaper than the battery-electric fleet by a non-material $10 million {dollars}. That’s 0.1% of the projected value, therefore a rounding error.

International technique and sustainability marketing consultant and writer and co-author of a number of books on technique and innovation Michael Raynor and I recognized $1.5 billion in unhealthy underlying assumptions and modeling failures that overpriced battery-electric buses and underpriced hydrogen buses. The report is so unhealthy that I think about it an existential menace to CUTRIC’s continued existence.

Regardless of some mild steerage in an open letter to the Board from me, CUTRIC responded to criticisms with doubling down and advert hominem.

So what’s occurring?

I had already recognized some issues of their funding and Board membership. Ballard, as a big personal enterprise, pays the most important charges to hitch the consortium. It additionally has a seat on the Board. On condition that Ballard has misplaced a median of $55 million yearly since 2000, a complete of $1.3 billion as of the top of 2023, and is on observe this 12 months to lose cash once more, one has to marvel what they’re getting out of being a transit suppose tank member and Board member. As a word, there’s no battery producer on the Board, so why is a gasoline cell producer current?

Three pure gasoline transmission and distribution corporations, Fortis BC, Fortis Alberta, and Enbridge, are all members, paying the following highest tier of membership charges. Enbridge has a seat on the Board too. This appears odd. Maybe CUTRIC is a generic transit suppose tank, not one centered on decarbonization?

Properly, no. That’s a direct quote from the touchdown web page for CUTRIC, the very first thing they are saying about themselves. “Zero emission” and “decarbonized” are each current. So what are fossil gasoline corporations doing as members and as a Board member? The Enbridge consultant to the Board is presupposed to be the renewable pure gasoline lead, however as I documented not too long ago, after 13 years of growing and bragging about its renewable pure gasoline, Enbridge has managed to edge as much as 1% of its utility gasoline and 0.02% of the overall transmitted gasoline in North American being renewable pure gasoline. That’s greenwashing scale, not decarbonization scale.

Anything that’s considerably odd? Sure, main North American bus producer New Flyer can be a high dues-paying member and has a seat on the Board. Usually a transit gear producer being there wouldn’t be too odd, besides that New Flyer is the one producer of hydrogen buses in Canada and will get more cash for every hydrogen bus than it does for its diesel or battery-electric buses. If a Canadian metropolis buys hydrogen buses, it has to sole supply them from New Flyer. Producers love sole sourcing agreements and they’re closely discouraged in governmental procurement as a result of they’ve traditionally been rife with padding and extra by the distributors.

{That a} sole supply, non-compete vendor who will get extra per bus for hydrogen buses than battery-electric buses is on the Board of the suppose tank recommending hydrogen buses needs to be disqualifying and grounds for investigation.

Within the open letter to the Board, I prompt that they’ve a full and frank dialogue about this, as at minimal the optics had been horrendous, that they take away Enbridge and Ballard from the Board, and ring fence members with clear agendas to forestall them from paying greater than primary dues to keep away from them from successfully turning CUTRIC right into a advertising and gross sales group for his or her efforts. Clearly the advice ought to have included New Flyer as properly given its deep conflicts.

As one other word on New Flyer, they nearly went bankrupt a few years in the past, and $200 million of governmental loans and credit from a few ranges of presidency had been used to bail them out. Their inclusion of hydrogen of their combine is a strategic blunder, as each hydrogen bus they promote implies that they seemingly lose three battery-electric bus gross sales to opponents like BYD. That’s as a result of their battery-electric buses are inferior as a consequence of lack of focus, and costlier as a consequence of company expenditures on a number of drives. They’re delivering costly, inferior merchandise, creating buyer sick will and shedding market share. The mix of monetary desperation and unhealthy technique results in good individuals and corporations doing unhealthy issues, so no matter their unique motivations and status, they must be thought-about a danger.

New Flyer is placing itself within the place of Quantron in Europe. It was promoting inferior battery-electric vans as a result of it was additionally promoting hydrogen gasoline cell vans. Its battery-electric vans value a 3rd greater than Daimler’s equal battery-electric van and had 40% much less vary. Transit companies in Canada are placing themselves within the place of IKEA of Austria, which had bought the inferior Quantron battery-electric vans, discovered that they didn’t obtain the required vary for all deliveries, and so purchased Quantron gasoline cell vans. Now Quantron has, inevitably, gone out of enterprise, leaving IKEA Austria with no guarantee or elements for its battery-electric or gasoline cell vans.

CUTRIC’s governance has struck me as odd since I first checked out its Board and membership a month or so in the past, however extra has emerged that makes your complete scenario stink like takeout forgotten within the fridge for a month.

Let’s pull on the funding thread. As I famous in an earlier evaluation, Canada’s Infrastructure Fund has a sub-fund, the Zero Emissions Transit Fund (ZETF). The ZETF can pay for as much as 50% of the capital prices of a transit bus system with zero emission buses. Of their definition, “ZEBs are automobiles which have the potential to provide no tailpipe emissions resembling battery-electric and hydrogen gasoline cell powered automobiles.”

That’s clearly the results of lobbying by gamers like Enbridge, as a result of grey hydrogen constructed from pure gasoline is zero emissions from tank to wheels (aka zero tailpipe emissions), however removed from zero emissions from properly to wheel. In truth, with pure gasoline and hydrogen leakage alongside the worth chain, a gasoline cell bus powered by grey hydrogen is prone to have roughly equal greenhouse gasoline emissions to a diesel bus. I documented that actuality primarily based on international hydrogen leakage and international warming potential research which have emerged prior to now couple of years.

Inexperienced hydrogen is best, however the base assumption needs to be that it’s made with the identical electrical energy as will get put in battery-electric buses, and as making, storing, pumping, and utilizing hydrogen is a 3rd as environment friendly as simply placing the electrical energy into batteries, the greenhouse gasoline emissions are 3 times as excessive as battery-electric. It’s not likely a win if there’s an possibility of utilizing battery-electric buses as a substitute.

In different phrases, empirical proof would have led to a properly to wheel low-carbon requirement for the ZETF, however a tank to wheel requirement was created as a substitute, and the one motive that may very well be there may be to help grey hydrogen. Lobbying, not an evidence-based coverage, brought on that.

As a word, Enbridge is the most important quantity gasoline utility in North America, an enormous pipeline agency that operates pipelines throughout Canada and may be very properly positioned and funded as a lobbying group. As Enbridge says itself:

Lobbying

Enbridge actively participates within the political course of to assist inform the event of public insurance policies essential to our enterprise aims, our workers, our business, and different key stakeholders. Enbridge employs and engages registered lobbyists in Canada and the USA to help its legislative and regulatory actions. These lobbyists are fastidiously chosen, anticipated to behave with the very best integrity and engaged solely with the approval of our senior enterprise unit authorities affairs officer or Enbridge’s senior chief answerable for Exterior Affairs in Canada and/or the USA.

I’d beforehand famous its odd and apparently lively presence as a stakeholder in Ontario’s remarkably unhealthy hydrogen technique. It’s unlikely that both its position within the hydrogen technique or Board member in CUTRIC is taken into account lobbying, however the outcomes are the identical.

Was Enbridge immediately concerned in forming the ZETF coverage relating to tank to wheel? Maybe, maybe not. However Canada’s fossil gasoline industries relationships and revolving door with Canadian paperwork is well-documented. There are various inside the federal government who look out for the business understanding that in lots of circumstances the business will look out for them later.

Why would a pure gasoline distributor care a couple of hydrogen carve out within the ZETF coverage?

Enbridge is positioning itself as a key provider and enabler of hydrogen infrastructure in Canada by means of a number of rising initiatives. Its actions at the moment rely closely on grey hydrogen, which dominates the worldwide hydrogen market and is produced from pure gasoline with out carbon seize. In 2021, the corporate launched a hydrogen mixing pilot mission in Markham, Ontario, involving as much as 2% hydrogen blended with pure gasoline for residential and industrial heating — a stepping stone towards integrating hydrogen into the nationwide power system.

Enbridge can be growing electrolyzers to provide inexperienced hydrogen utilizing renewable electrical energy, working one in every of North America’s first utility-scale power-to-gas amenities in Ontario. Moreover, it’s exploring using its current pure gasoline pipelines for transporting hydrogen blends or pure hydrogen in devoted traces. Whereas not but a serious hydrogen producer or distributor, Enbridge’s investments sign its intent to play a big position in Canada’s rising hydrogen economic system, whilst grey hydrogen’s emissions-intensive nature stays some extent of criticism.

Contacts inform me, for instance, that Enbridge is bidding on supplying hydrogen for Ontario hydrogen bus trials, hasn’t been formally awarded it but, however CUTRIC persons are already saying it’s gained the contract. As a result of Enbridge is the most important gasoline utility in Ontario and therefore a serious provider to municipalities, it has very shut relationships with cities.

As soon as once more, at minimal the looks of a battle of curiosity given CUTRIC is supporting Mississauga’s bus trial together with engaged on the grant utility for the capital prices for the hydrogen bus trial, and did the deeply flawed Brampton examine whereas having three Board members whose corporations would generate important income from the inclusion of hydrogen within the fleet.

Up to now we now have a 50% capital subsidy for costlier hydrogen buses. New Flyer makes extra per bus. Ballard doesn’t make any cash until hydrogen buses are a part of the combo. Enbridge doesn’t make any cash until hydrogen is the gasoline. Three Board members of CUTRIC symbolize organizations with a robust vested curiosity in pushing hydrogen into options.

As a word, CUTRIC has 13 workers members and a Board of 15 administrators. That’s very lopsided governance. The idea that almost all don’t do a lot, leaving a variety of latitude to the conflicted administrators to closely affect what goes on may be very simple to make, therefore the horrible optics.

However wait, there’s extra.

The ZETF recommends that transit companies have interaction impartial steerage when contemplating their decarbonization pathways for his or her fleets. That’s not fairly right truly. It particularly entered right into a five-year relationship with CUTRIC to supply that impartial steerage and funds 80% of the price of research into transit fleet decarbonization. The one group that’s governmentally permitted is CUTRIC. Different organizations which might give — undoubtedly higher — steerage must be paid in full solely by the transit group.

the Authorities is investing $10 million by means of the Zero Emission Transit Fund over 5 years to permit CUTRIC to work with transit bus operators to finish planning work, and bolster readiness to transition to zero emission transit bus fleets

The federal government was lobbied to make sure fossil grey hydrogen could be thought-about low-carbon for transit fleets. The federal government made CUTRIC the only real provider of research and steerage for transit companies. Enbridge, Ballard, and New Flyer have taken over CUTRIC to push hydrogen into bus fleets.

As a reminder, the most important examine that CUTRIC has carried out to-date, with 80% of its value funded by the Canadian authorities, discovered a blended hydrogen/electrical fleet that may solely profit New Flyer, Ballard, and Enbridge was most cost-effective by $10 million, and had $1.5 billion in errors to create that end in its $9 billion value mannequin.

Governance is definitely fairly well known as an issue for the group. It’s been identified to them time and again, per contacts who shared with me over the previous 4 weeks that they’ve advised CUTRIC this explicitly. But they don’t think about it an issue.

You do must admire the technique of whoever designed this. Nevertheless, they forgot to create the looks of lack of battle of curiosity or any cut-outs. Now it simply appears like graft, a robust disservice to transit companies in Canada and an enormous slowdown in precise decarbonization with battery-electric buses. As soon as once more, I like to recommend to members and Board members who will not be okay with this to contemplate their choices fastidiously. It will blow again on you and the organizations you symbolize.