some early thoughts on field-agnostic dd for cleantech

11-Jul-25

Disclaimer: This is my personal analysis. I’m sharing some thinking on how I evaluate cleantech opportunities, using the Canada Growth Fund as a case study. The assumptions about CGF’s internal processes are my own educated guesses based on public information.

Key Takeaways

  • Deployment Capacity: CGF can likely deploy $0.5B - $2.4B CAD in 2025, constrained by a $750M liquidity floor.
  • Investment Framework: A 7-layer evaluation process can systematically identify high-impact, catalytic cleantech opportunities that align with CGF’s apparent mandate.
  • Top Picks: DEEP Geothermal ($95M), and Heidelberg Cement ($275M) appear to meet all inferred investment criteria

Why This Matters

If you’re:

  • A founder → See which projects get funded and why.
  • An investor → Understand CGF’s apparent strategy to de-risk co-investment.
  • A policy maker → Learn how public capital can be deployed to catalyze private investment.

This analysis gives you a framework to think about large-scale climate finance.

🎯 Part 1: Decoding the CGF Playbook

How does a $15B fund decide where to invest? Here’s my best guess at their internal process.

Financial Guardrails & Portfolio Patterns

CGF appears to operate with a highly structured model. They likely set aside $215M - $230M in mandatory reserves (for opex, working capital, and CfD settlement for the P-95 tail risk1) before deploying any capital.

1 95th percentile worst-case scenario for contract payouts.

Critical Assumption

The $750M liquidity floor is inferred from deal timing patterns and standard institutional risk management practices, not confirmed CGF policy.

This financial discipline seems to produce three strategic themes:

  1. Industrial Decarbonization Focus: 60%+ of capital targets heavy industry (CCS, cement, etc.).
  2. Western Canada Bias: Leveraging regional expertise in energy and resources.
  3. Revenue-Backed Structures: A clear preference for projects with contracted cash flows.

This suggests a financially conservative approach prioritizing de-risked, near-term impact over moonshots.

Investment Gates (Inferred)

Based on public deals, any investment likely must clear seven gates before final approval.

The Seven Gates
  1. Regulatory certainty: Clear pathway and timeline
  2. Validated economics: External verification required
  3. Canadian counterparty: Local entity with strong credit
  4. Leverage threshold: Private capital ≥ 60% of total
  5. MRV ready: Measurement and verification protocols signed
  6. Climate impact: Quantifiable CO₂ reduction per dollar
  7. Indigenous engagement: Meaningful participation and benefits

🔬 Part 2: Field-Agnostic Framework

To make sense of this, I rely on a portable 7-layer framework.

graph LR
    A[Deal Flow] --> B[Layer 0: Triage]
    B --> C[Layer 1: Physics Check]
    C --> D[Layer 2: Readiness]
    D --> E[Layer 3: Impact Score]
    E --> F[Layer 4: Risk Map]
    F --> G[Layer 5: Structure]
    G --> H[Layer 6: Options]

    style B fill:#f9f,stroke:#333,stroke-width:2px
    style H fill:#9f9,stroke:#333,stroke-width:2px

The 7 Layers of Diligence

Layer 0: Quick Triage (2 hours) - Kill low-impact, high-risk deals fast.

The Test: Impact ÷ Cost ÷ Policy dependency. - Must exceed 1 tonne CO₂ per $150 CAD invested. - Policy dependency risk score must be < 3/5.

Tools: Excel TEA template, 5-question checklist, carbon price scenarios ($50-170/tonne).

Example: A project requiring new grid regulations (policy risk = 4/5) with marginal CO₂ impact gets killed here.
Layer 1: First-Principles Sanity Check - Screen out unscientific claims. The Test: Energy & mass balance, thermodynamic limits. Tools: Basic Aspen/Hysys models, Carnot efficiency checks, NREL/NETL reference models. Example: A hydrogen process claiming efficiencies that violate thermodynamic laws gets killed here.
Layer 2: Dual Readiness Matrix - Determine if the need is technical, commercial, or both. The Test: Plot TRL2 vs. CRI3. Tools: Public TRL definitions, ARENA’s CRI scorecard, a 9x9 scatter plot. Example: A TRL 8 technology with a CRI of 2 reveals a commercialization gap, not a technical one.

2 Technology Readiness Level - NASA’s 1-9 scale for technical maturity.

3 Commercial Readiness Index - ARENA’s market readiness metric.

Layer 3: Catalytic Score - Ensure alignment with a public-good mandate. The Test: Score Abatement, Leverage, and Additionality (each 0-5). A composite score >10 advances. Tools: Pre-filled scoring sheet with clear rubrics, auto-plotting spider chart. Example: A deal with high leverage (5/5) and additionality (5/5) but low abatement (1/5) may still be a pass.
Layer 4: Risk Compass - Map risks and identify mitigation instruments. The Test: Fill a six-box register (Tech, Market, Policy, Execution, ESG, Tail). Tools: Issue-tree template, Monte-Carlo simulation for drawdown, standard ESG red-flag list (SASB, OECD). Example: High market price risk is paired with a recommendation for a Contract for Difference (CfD).
Layer 5: Instrument Match Matrix - Determine the right financial structure. The Test: Plot Price Risk vs. Capital Risk on a 2x2 matrix. Tools: One-pager with sample term-sheet clauses, look-up table from past deals. Example: A project with high capital risk but low price risk points towards subordinated debt, not a price-based contract.
Layer 6: Option-Value Lens - Justify small bets on tech with massive scaling potential. The Test: Apply real-options logic (capped downside, unlimited upside via replication). Tools: Basic Black–Scholes option value worksheet, learning-curve slider (e.g., 20% cost reduction per doubling). Example: A $10M bet on a novel Direct Air Capture (DAC) pilot is justified by the potential for 1,000 future plants.

📈 Part 3: Recommendations

Note

Clean-Tech Projects I Like (Despite the Hair on Them), that’s the reality of clean-tech. But some projects are worth backing despite their flaws.

ELYSIS Inert-Anode Aluminum

Ask: $200M | Impact: 1 Gt CO₂/year globally | Leverage: 10x

The Promise: Aluminum smelting emits about one gigatonne of CO₂ annually, making inert anode technology a global game-changer that drops process emissions to zero while cutting operating costs by eliminating baked carbon anodes, a transformation uniquely advantaged in Canada through Quebec’s hydropower providing both structural cost and carbon benefits, with the catalytic payoff being that zero-carbon aluminum removes 1 tonne of CO₂ per tonne of metal produced while underpinning the critical supply chains for EVs, solar panels, and transmission infrastructure.

The Reality Check:

  • Technical risk: Inert anodes must survive 960°C cryolite bath for 2.5 years (vs 30 days for carbon). Past attempts failed from corrosion and thermal cracking. ELYSIS claims 30x improvement but lacks industrial-scale proof.
  • Scaling risk: Current 100 kA demo must scale to modern 300-600 kA cells. Non-linear effects at scale could kill economics if voltage drops or current efficiency degrades.
  • Adoption risk: Smelters have decades-long lifespans. Retrofitting unlikely until major refurbishments, pushing deployment to 2030s despite Rio Tinto’s mid-decade plans.

Heidelberg Materials Edmonton CCUS

Ask: $275M | Impact: 1 Mt CO₂/year | Leverage: 7x

The Promise: Heidelberg represents a first mover in an unavoidable sector where calcination emissions cannot be avoided with fuel switching, capturing 1 Mt per year from a 1950s plant to prove a template for six other Canadian kilns and hundreds worldwide, with Ottawa ring-fencing up to 275 million CAD in March 2025, and if this integration works, the recipe can be copied to Lafarge Exshaw with far less grant intensity.

The Reality Check:

  • Technical complexity: Cement flue gas with dust, SOx, NOx threatens amine scrubber performance. The 100 MW thermal demand for regeneration could require additional fuel burning.
  • Infrastructure dependency: Relies entirely on Enbridge’s Wabamun Carbon Hub, already shaken by Capital Power’s cancellation. No CO₂ pipeline = expensive stranded asset.
  • Economic reality: Cement’s slim margins can’t support CCUS without massive subsidies. US Mitchell, Indiana project collapsed when DOE funding disappeared.
  • Execution risk: Bolting a chemical plant onto 1950s infrastructure on aggressive 3-4 year timeline when pilots rarely exceed 50,000 t/year.

DEEP Geothermal Power

Ask: $95M | Impact: 125 kt CO₂/year | Leverage: 4x

The Promise: Tapping Saskatchewan’s proven geothermal resource with PPA-backed revenue. First baseload renewable power in the province using oilfield expertise for clean energy.

The Reality Check:

  • Temperature challenge: 120-125°C brine requires binary ORC turbines with poor efficiency. Marginal resource forces expensive workarounds like horizontal drilling.
  • Scaling complexity: 300,000+ mg/L brine creates scaling nightmares requiring expensive alloys. Moving from 5 MW to 32 MW risks thermal interference between wells.
  • Timeline slippage: Pushed from 2020-2021 to 2026 startup. After a decade, still years from first megawatt in province with no geothermal precedent.
  • Economic fragility: Needs premium pricing from SaskPower beyond standard renewables to achieve viability, but no precedent exists for valuing baseload.

Still on the Fence

These could go either way - lots of promise but serious question marks:

Suncor-ATCO Blue Hydrogen

Status: On the fence Ask: $400M | Impact: 2 Mt CO₂/year | Leverage: 4x

The Promise: 300,000 tonnes H₂/year with 90% CO₂ capture by 2028, creating Alberta’s hydrogen backbone for heavy transport and industrial use.

Reality Check
  • Infrastructure dependency: Requires unconfirmed CO₂ storage via ACTL or new Wabamun hub. Without synchronized pipeline development, becomes stranded asset.
  • Market uncertainty: Grid blending limited to 5% in pilots (vs 20% target). No firm offtakes beyond Suncor’s internal 180,000 t/year refinery use.
  • Policy risk: Viability depends on carbon pricing amid court challenges. Suncor’s new CEO signals potential wavering with “refocus on basics” messaging.
  • Execution risk: First-of-kind ATR at this scale in Canada. Suncor lacks hydrogen expertise, heavily dependent on technology licensors.

EverWind Green Ammonia

Status: On the fence Ask: $300M | Impact: 900 kt CO₂e/year | Leverage: 3x

The Promise: Atlantic export corridor producing 200,000 tonnes ammonia by 2025, anchoring 300 new turbines and replacing emissions in German fertilizer markets.

Reality Check
  • Grid reality: Nova Scotia’s 70% fossil-fuel grid makes “green” hydrogen impossible until new wind farms built. Critics accurately call it “greenwashed hydrogen.”
  • Environmental impact: Phase 2 requires 300 turbines in endangered mainland moose habitat, creating local opposition to “sacrifice zone.”
  • Technical mismatch: Intermittent wind feeding continuous ammonia synthesis requires massive storage or oversized electrolyzers, adding prohibitive costs.
  • Credibility issues: False partnership claims with RES, German media questioning viability, suspiciously rapid provincial approvals suggest politics over technical merit.

Things i like but likely don’t meet additionality requirements:

  • BlackRock Automation: Software is installed on existing compressor infrastructure, delivering emissions reductions and efficiency. Already deployed widely, minimal scaling risk, and easily licensable.
  • Marmen Inc: Manufactures large-scale steel towers for wind turbines, tied directly to clean energy infrastructure. Robotic upgrades support long-term use. Local manufacturing reduces emissions, clear capex use, supports domestic renewables buildout.
  • Triple M Metal: Builds and automates physical plants to process recycled metals, a foundational component of circular industrial infrastructure. High asset tangibility, carbon avoidance at industrial scale, leverages long-term materials demand.

Investment Triggers by Technology

First, a project must meet hard, verifiable triggers. Here are a few examples:

🔋 SOEC Electrolysis

Hard Requirements:

  • Cost: $2,000/kW with clear path to $1,500
  • Testing: 30,000+ hour stack data verified
  • Supply: Nickel price hedging if >$30k/t

Watch Out For:

  • Grid connection costs are often underestimated
  • Potential for nuclear heat arbitrage
🏗️ Low-Carbon Concrete

Hard Requirements:

  • Certification: CSA A23.1 pathway filed and approved
  • Durability: 2-year freeze-thaw cycle data (-40°C)
  • Performance: <10% strength reduction vs. Ordinary Portland Cement

Watch Out For:

  • Cold Weather: Winter placement protocols for Canadian climates
  • Logistics: Activator transport economics >500km from source
🌊 Ocean Alkalinity Enhancement

Hard Requirements:

  • Insurance: A-rated insurer quote for environmental liability
  • Governance: Dosing rate covenants and pause protocols defined
  • Approval: 100kt Environmental Impact Statement (EIS) approved

Watch Out For:

  • Ecology: Monitoring data must show <10% deviation in key species

❓ Open Questions

  1. Framework Complexity: Is seven layers the right number, or could it be simplified without losing its power?
  2. Calibration: How can scoring thresholds be normalized across wildly different sectors like software, hardware, and chemistry?
  3. Blind Spots: What systemic risks (e.g., geopolitical, supply chain) is this framework missing?