Canadian Transit Think Tank CUTRIC Riddled With Conflicts Of Interest – CleanTechnica

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Four weeks ago, I didn’t know the Canadian Urban Transit Research and Innovation Consortium existed. If I’d seen mention of it, I probably would have assumed it as an innocuous little organization full of pleasant Canadians working diligently for the good of Canadian transit. But the onion keeps being peeled. Today’s subject is the full extent of the conflicts of interest that CUTRIC’s funding model creates for Board members, and how they just keep doing nothing about it.

As a reminder, CUTRIC is the organization that did a $9 billion cost workup of a three-scenario bus decarbonization study for the City of Brampton, a reasonably big suburban city in the Greater Toronto Area. The scenarios were battery-electric only, hydrogen-only, and a blended fleet. Oddly, despite the hydrogen fleet having the highest costs and requiring the largest number of buses, the blended fleet came in cheaper than the battery-electric fleet by a non-material $10 million dollars. That’s 0.1% of the projected cost, hence a rounding error.

Global strategy and sustainability consultant and author and co-author of several books on strategy and innovation Michael Raynor and I identified $1.5 billion in bad underlying assumptions and modeling failures that overpriced battery-electric buses and underpriced hydrogen buses. The report is so bad that I consider it an existential threat to CUTRIC’s continued existence.

Despite some gentle guidance in an open letter to the Board from me, CUTRIC responded to criticisms with doubling down and ad hominem.

So what’s going on?

I had already identified some problems in their funding and Board membership. Ballard, as a large private enterprise, pays the biggest fees to join the consortium. It also has a seat on the Board. Given that Ballard has lost an average of $55 million every year since 2000, a total of $1.3 billion as of the end of 2023, and is on track this year to lose money again, one has to wonder what they are getting out of being a transit think tank member and Board member. As a note, there’s no battery manufacturer on the Board, so why is a fuel cell manufacturer present?

Three natural gas transmission and distribution firms, Fortis BC, Fortis Alberta, and Enbridge, are all members, paying the next highest tier of membership fees. Enbridge has a seat on the Board too. This seems odd. Perhaps CUTRIC is a generic transit think tank, not one focused on decarbonization?

Well, no. That’s a direct quote from the landing page for CUTRIC, the first thing they say about themselves. “Zero emission” and “decarbonized” are both present. So what are fossil fuel companies doing as members and as a Board member? The Enbridge representative to the Board is purported to be the renewable natural gas lead, but as I documented recently, after 13 years of developing and bragging about its renewable natural gas, Enbridge has managed to edge up to 1% of its utility gas and 0.02% of the total transmitted gas in North American being renewable natural gas. That’s greenwashing scale, not decarbonization scale.

Anything else that’s somewhat odd? Yes, major North American bus manufacturer New Flyer is also a top dues-paying member and has a seat on the Board. Normally a transit equipment manufacturer being there wouldn’t be too odd, except that New Flyer is the only manufacturer of hydrogen buses in Canada and gets more money for each hydrogen bus than it does for its diesel or battery-electric buses. If a Canadian city buys hydrogen buses, it has to sole source them from New Flyer. Manufacturers love sole sourcing agreements and they are heavily discouraged in governmental procurement because they have historically been rife with padding and more by the vendors.

That a sole source, non-compete vendor who gets more per bus for hydrogen buses than battery-electric buses is on the Board of the think tank recommending hydrogen buses should be disqualifying and grounds for investigation.

In the open letter to the Board, I suggested that they have a full and frank discussion about this, as at minimum the optics were horrendous, that they remove Enbridge and Ballard from the Board, and ring fence members with clear agendas to prevent them from paying more than basic dues to avoid them from effectively turning CUTRIC into a marketing and sales organization for their efforts. Clearly the recommendation should have included New Flyer as well given its deep conflicts.

As another note on New Flyer, they almost went bankrupt a couple of years ago, and $200 million of governmental loans and credits from a couple of levels of government were used to bail them out. Their inclusion of hydrogen in their mix is a strategic blunder, as every hydrogen bus they sell means that they likely lose three battery-electric bus sales to competitors like BYD. That’s because their battery-electric buses are inferior due to lack of focus, and more expensive due to corporate expenditures on multiple drives. They are delivering expensive, inferior products, creating customer ill will and losing market share. The combination of financial desperation and bad strategy leads to good people and firms doing bad things, so regardless of their original motivations and reputation, they have to be considered a risk.

New Flyer is putting itself in the position of Quantron in Europe. It was selling inferior battery-electric trucks because it was also selling hydrogen fuel cell trucks. Its battery-electric vans cost a third more than Daimler’s equivalent battery-electric van and had 40% less range. Transit agencies in Canada are putting themselves in the position of IKEA of Austria, which had purchased the inferior Quantron battery-electric trucks, found that they didn’t achieve the necessary range for all deliveries, and so bought Quantron fuel cell trucks. Now Quantron has, inevitably, gone out of business, leaving IKEA Austria with no warranty or parts for its battery-electric or fuel cell trucks.

CUTRIC’s governance has struck me as odd since I first looked at its Board and membership a month or so ago, but more has emerged that makes the entire situation stink like takeout forgotten in the fridge for a month.

Let’s pull on the funding thread. As I noted in an earlier assessment, Canada’s Infrastructure Fund has a sub-fund, the Zero Emissions Transit Fund (ZETF). The ZETF will pay for up to 50% of the capital costs of a transit bus system with zero emission buses. In their definition, “ZEBs are vehicles that have the potential to produce no tailpipe emissions such as battery-electric and hydrogen fuel cell powered vehicles.”

That’s clearly the result of lobbying by players like Enbridge, because gray hydrogen made from natural gas is zero emissions from tank to wheels (aka zero tailpipe emissions), but far from zero emissions from well to wheel. In fact, with natural gas and hydrogen leakage along the value chain, a fuel cell bus powered by gray hydrogen is likely to have roughly equal greenhouse gas emissions to a diesel bus. I documented that reality based on global hydrogen leakage and global warming potential studies that have emerged in the past couple of years.

Green hydrogen is better, but the base assumption has to be that it’s made with the same electricity as gets put in battery-electric buses, and as making, storing, pumping, and using hydrogen is a third as efficient as just putting the electricity into batteries, the greenhouse gas emissions are three times as high as battery-electric. It’s not really a win if there’s an option of using battery-electric buses instead.

In other words, empirical evidence would have led to a well to wheel low-carbon requirement for the ZETF, but a tank to wheel requirement was created instead, and the only reason that could be there is to support gray hydrogen. Lobbying, not an evidence-based policy, caused that.

As a note, Enbridge is the largest volume gas utility in North America, a massive pipeline firm that operates pipelines across Canada and is very well positioned and funded as a lobbying organization. As Enbridge says itself:

Lobbying

Enbridge actively participates in the political process to help inform the development of public policies important to our business objectives, our employees, our industry, and other key stakeholders. Enbridge employs and engages registered lobbyists in Canada and the United States to support its legislative and regulatory activities. These lobbyists are carefully selected, expected to act with the highest integrity and engaged only with the approval of our senior business unit government affairs officer or Enbridge’s senior leader responsible for External Affairs in Canada and/or the United States.

I’d previously noted its odd and apparently active presence as a stakeholder in Ontario’s remarkably bad hydrogen strategy. It’s unlikely that either its role in the hydrogen strategy or Board member in CUTRIC is considered lobbying, but the results are the same.

Was Enbridge directly involved in forming the ZETF policy regarding tank to wheel? Perhaps, perhaps not. But Canada’s fossil fuel industries relationships and revolving door with Canadian bureaucracy is well-documented. There are many inside the government who look out for the industry knowing that in many cases the industry will look out for them later.

Why would a natural gas distributor care about a hydrogen carve out in the ZETF policy?

Enbridge is positioning itself as a key supplier and enabler of hydrogen infrastructure in Canada through several emerging initiatives. Its activities currently rely heavily on gray hydrogen, which dominates the global hydrogen market and is produced from natural gas without carbon capture. In 2021, the company launched a hydrogen blending pilot project in Markham, Ontario, involving up to 2% hydrogen mixed with natural gas for residential and commercial heating — a stepping stone toward integrating hydrogen into the national energy system.

Enbridge is also developing electrolyzers to produce green hydrogen using renewable electricity, operating one of North America’s first utility-scale power-to-gas facilities in Ontario. Additionally, it is exploring the use of its existing natural gas pipelines for transporting hydrogen blends or pure hydrogen in dedicated lines. While not yet a major hydrogen producer or distributor, Enbridge’s investments signal its intent to play a significant role in Canada’s emerging hydrogen economy, even as gray hydrogen’s emissions-intensive nature remains a point of criticism.

Contacts tell me, for example, that Enbridge is bidding on supplying hydrogen for Ontario hydrogen bus trials, hasn’t been formally awarded it yet, but CUTRIC people are already saying it’s won the contract. Because Enbridge is the biggest gas utility in Ontario and hence a major supplier to municipalities, it has very close relationships with cities.

Once again, at minimum the appearance of a conflict of interest given CUTRIC is supporting Mississauga’s bus trial including working on the grant application for the capital costs for the hydrogen bus trial, and did the deeply flawed Brampton study while having three Board members whose firms would generate significant revenue from the inclusion of hydrogen in the fleet.

So far we have a 50% capital subsidy for more expensive hydrogen buses. New Flyer makes more per bus. Ballard doesn’t make any money unless hydrogen buses are part of the mix. Enbridge doesn’t make any money unless hydrogen is the fuel. Three Board members of CUTRIC represent organizations with a strong vested interest in pushing hydrogen into solutions.

As a note, CUTRIC has 13 staff members and a Board of 15 directors. That’s very lopsided governance. The assumption that the majority don’t do much, leaving a lot of latitude to the conflicted directors to heavily influence what goes on is very easy to make, hence the terrible optics.

But wait, there’s more.

The ZETF recommends that transit agencies engage independent guidance when considering their decarbonization pathways for their fleets. That’s not quite correct actually. It specifically entered into a five-year relationship with CUTRIC to provide that independent guidance and funds 80% of the cost of studies into transit fleet decarbonization. The only organization that is governmentally approved is CUTRIC. Other organizations which could give — undoubtedly better — guidance would have to be paid in full solely by the transit organization.

the Government is investing $10 million through the Zero Emission Transit Fund over five years to allow CUTRIC to work with transit bus operators to complete planning work, and bolster readiness to transition to zero emission transit bus fleets

The government was lobbied to ensure fossil gray hydrogen would be considered low-carbon for transit fleets. The government made CUTRIC the sole supplier of studies and guidance for transit agencies. Enbridge, Ballard, and New Flyer have taken over CUTRIC to push hydrogen into bus fleets.

As a reminder, the biggest study that CUTRIC has performed to-date, with 80% of its cost funded by the Canadian government, found a blended hydrogen/electric fleet that will only benefit New Flyer, Ballard, and Enbridge was cheapest by $10 million, and had $1.5 billion in errors to create that result in its $9 billion cost model.

Governance is actually quite widely recognized as a problem for the organization. It’s been pointed out to them over and over again, per contacts who shared with me over the past four weeks that they’ve told CUTRIC this explicitly. Yet they don’t consider it a problem.

You do have to admire the strategy of whoever designed this. However, they forgot to create the appearance of lack of conflict of interest or any cut-outs. Now it just looks like graft, a strong disservice to transit agencies in Canada and a massive slowdown in actual decarbonization with battery-electric buses. Once again, I recommend to members and Board members who are not okay with this to consider their options carefully. This will blow back on you and the organizations you represent.