five fault lines in a clean-tech portfolio
06-Jul-25
Across Canada, billions are being poured into clean-tech projects: carbon-free aluminum here, blue hydrogen there. After looking at two dozen of these ventures, a pattern emerges. When projects fail, it’s rarely because the core technology doesn’t work. Instead, it’s the messy realities where technology meets geology, markets, and communities that trip them up. The same five fault lines appear again and again, and any serious investor needs to watch for them.
Fault Line 1: Feedstock & Supply Chain Interdependency
Projects fail when feedstock assumptions prove incorrect.
Blue Hydrogen’s Dependency: Air Products and Suncor-ATCO’s ATR-based projects require verifiably low-leakage gas supplies to maintain “blue” credentials. Industry-average fugitive emission data is insufficient; failure to secure audited low-methane gas renders Net-Zero claims technically invalid and creates regulatory exposure. This dependency contributed to Air Products’ cost overruns.
Critical Minerals Chemistry: E3 Lithium’s DLE technology depends on proprietary sorbent performance with Leduc Formation brines. The question isn’t laboratory efficacy but operational durability across thousands of cycles with complex field chemistry. Without long-duration pilot data using actual brines, economic assumptions remain unproven.
Fault Line 2: Infrastructure Coordination Dilemma
Projects become stranded assets without enabling infrastructure.
Stranded Carbon Capture: Heidelberg Materials and Lafarge Exshaw’s CCS facilities require CO₂ pipelines to sequestration sites. Both depend on infrastructure like the Open Access Wabamun Carbon Hub, whose viability suffered when anchor tenant Capital Power cancelled. Capture plants and CO₂ hubs must be analyzed as co-dependent systems; neither is de-risked until pipeline FID with synchronized construction.
Grid Prerequisites: Hydrostor’s A-CAES requires IESO storage contracts for bankability. ArcelorMittal Dofasco’s EAF conversion creates enormous grid loads requiring System Impact Assessments. Unexpected transmission upgrades frequently derail projects.
Fault Line 3: Pilot-to-Plant Scale-Up Gap
Commercial scale reveals non-linear risks in heat management, materials durability, and process control invisible at pilot scale.
Inert Anode Challenge: Rio Tinto-Alcoa ELYSIS’s revolutionary aluminum smelting anode faces thermal expansion stresses and electromagnetic forces only at industrial potline scale. Diligence must evaluate mechanical fatigue and micro-cracking risks emerging under full-scale, long-term operation.
Lithium Processing Lesson: Nemaska Lithium’s creditor protection resulted from scaling an electromembrane process where commercial-scale impurity buildup and membrane fouling created massive overruns. First-of-kind chemical processes carry inherent scale-up risk until demonstrated at semi-commercial levels for extended periods.
Fault Line 4: Market and Offtake Commercialization Hurdle
Projects without binding, long-term offtakes are demonstrations, not businesses. MoUs aren’t contracts.
Carbon Capture Economics: Pathways Alliance’s $16.5B CCS network depends entirely on carbon pricing value. IEEFA analyses demonstrate non-viability without massive subsidies. Proponents lobbying against carbon pricing creates internal contradiction and investment red flags.
Green Fuel Premiums: LanzaJet’s SAF facility requires significant price premiums over conventional fuel. Viability demands binding, long-term agreements with creditworthy counterparties including firm pricing and volume commitments, not spot prices or MoUs.
The Bottom Line
The energy transition requires successful execution of complex, interconnected systems, not just technological breakthroughs. These fault lines interconnect: feedstock risks trigger infrastructure problems; scale-up gaps create overruns invalidating market models.
Successful projects will be managed by teams thinking systemically, viewing ventures as nodes in networks of suppliers, customers, infrastructure, and communities. Technical diligence must impose this systemic thinking before major capital deployment, anchoring ambition with rigorous, dispassionate reality.