The cleantech industry looks for new opportunities in AI and energy
On the eve of MaRS Climate Impact, these are the ideas and trends shaping a sector in flux.
Canada’s cleantech industry is in the midst of a major transformation. In the past two years, entrepreneurs whose pitch decks once talked of net-zero goals and meeting the targets of the Paris Agreement have seen the sands shift beneath them as these priorities have dropped down governments’ agendas. A recent report from the Auditor General made clear the extent of this change. Canada will miss its 2030 emissions reduction targets by a wide margin, “with several planned measures intended to reduce emissions having been cancelled or weakened.” The government, it noted, has been silent about how it intends to get back on track.
Today, cleantech entrepreneurs are learning to speak the language of sovereignty, defence, artificial intelligence and data infrastructure as they follow national priorities and funding sources. This new order is creating winners and losers as investors focus on a narrow range of businesses perceived as capable of meeting this demand. Even as global investment in cleantech in the first half of this year hit the highest level since 2022, the number of deals dropped by nearly a quarter.
With Canada’s cleantech industry set to convene in Toronto on November 17 and 18 for MaRS Climate Impact, here is a look at five key trends and big ideas shaping an industry in flux.
Cleantech tries to ride the AI investment wave
The hottest thing in climate tech right now is keeping servers cool. AI’s gravitational pull is being felt in cleantech as acutely as in the rest of the economy, and funding is flowing to the technologies needed to keep it running.
“AI is having an impact on the availability of funding, and it’s leaving a bigger gap between the haves and have-nots,” says Jeanette Jackson, national director of cleantech at RBCx. “The opportunity is for AI to push into these hard tech sectors.”
While global climate tech venture funding hit $26.1 billion in the first half of this year, up 55 percent from 2025, a third of that went to companies with technologies linked to making data processing more efficient. Among the big winners are companies that can power the servers and climate control systems on which AI depends.
That is leading to the fast-tracking of projects to develop geothermal power and even small modular nuclear reactors. Calgary’s Rodatherm, for example, has signed a memorandum of understanding to develop next-generation geothermal in Utah with potential for about 200 megawatts of generating capacity.
Jackson says that companies that can store or manage energy, help optimize chips and processing power and create efficiencies are also gaining, while those less closely linked to data centres are in “a holding pattern” waiting for demand to return.
More at MaRS Climate Impact: Jeanette Jackson will lead a conversation with investors focused on AI and cleantech. November 17 at 3:40 p.m.
Entrepreneurs are finding their way around tariffs
The trade war with the U.S. has prompted some problem-solving among Canadian cleantech startups. With complex supply chains and export-focused models, cleantechs are vulnerable to being hit by tariffs multiple times as components and finished products cross borders. Some companies, including Mississauga battery maker e-Zinc, are continually recalibrating their supply chains to sidestep added costs. But others are redesigning their products to avoid components subject to tariffs. For instance, Aslan Renewables, a Toronto startup that develops modular hydropower plants, was facing a major crisis due to the fact that the company procured a vital element of its system — a $111,000 steel part called a T-intake screen — from a U.S. supplier. With no made-in-Canada equivalent available, the company designed a cheaper alternative made of fibreglass instead of metal and had it in production with a local company within two weeks.
“Tariffs forced us to think deeper about our solutions,” says CEO Andrew Murray. “And what came out is a much more sustainable answer.”
Smaller, greener data centres emerge
Hyperscale data centres have now reached such stratospheric levels of unpopularity that OpenAI has decided to rename them “compute campuses.” A dose of corporate-speak seems unlikely to detoxify the brand for the 68 per cent of Canadians who oppose large AI data centres near their homes. Top concerns include higher utility bills, excessive water use and light and noise pollution.
But growing numbers of cleantech entrepreneurs are finding ways to make data centres better neighbours and less damaging to the planet. One idea gaining ground is what Jackson calls “niche data centres” that focus on a specific AI application. These specialized servers can be smaller than the behemoths currently in development. “I’ve seen some as small as a 40-foot trailer up to the size of a single commercial building,” she says.
Canadian companies are also making headway in helping data centres use energy and water more efficiently. In Calgary, Simply Silicon has built a centre that connects to the downtown core’s district heating system. The company captures the heat produced by processing chips and uses it to warm the surrounding buildings. Wafr Technologies, which has offices in Vancouver and Calgary, has developed a cooling technology that it says can cut energy requirements by up to 80 percent and water consumption by up to 95 percent. And Quebec’s XNRGY Climate Systems makes highly efficient heating, ventilation and cooling equipment for data centres and has shipped more than 10,000 units to date.
More at MaRS Climate Impact: CBC tech columnist and Solve for X host Manjula Selvarajah will lead a conversation with Chris Fazekas of XNRGY Climate Systems, Pedro Torres-Basanta of Peak Power, Irene Lam of Mantle Climate and Kate Rodger of Isometric. November 17 at 10:15 a.m.
We’re inching closer to nuclear fusion
Nuclear fusion promises limitless, cheap and carbon-free electricity from the same reaction that powers the sun. But the technical obstacles to harnessing star power on Earth are formidable. Fuel has to be heated to more than 100 million degrees Celsius and held stable long enough for the hydrogen nuclei to fuse into helium. “That’s among the hardest engineering problems ever attempted,” says Zoltan Tompa, partner and team lead at BDC Capital’s ClimateTech Fund.
But over the past four years steady progress has been made in moving fusion from a moonshot idea to reality. “December 2022 was fusion’s Wright Brothers moment,” says Tompa. That was when a U.S. laboratory produced more energy from a fusion reaction than the laser energy delivered to the fuel. The latest milestone came in October, when Canada’s General Fusion revealed it had managed to heat plasma to more than 12 million degrees Celsius by mechanically compressing it with a metal liner, a result measured jointly with the U.K. Atomic Energy Authority. Only a handful of fusion companies have reached this temperature, and General Fusion is first to do it with this slower, mechanical approach.
Investors have taken notice. There are now more than 50 fusion companies, and the sector raised a record U.S.$3.8 billion in the first eight months of 2026 according to PitchBook. Google and Microsoft have both signed agreements to buy fusion power when it is available.
Tompa expects the first fusion machines in commercially representative power-plant configurations to be operating sometime in the 2030s, with larger-scale commercial plants delivering cost-competitive power shortly after. Fusion plants are expected to be much smaller and quieter than conventional power plants, with no risk of a meltdown. That means they could be located close to cities and industrial sites, power data centres, and help move mines and remote communities off diesel generators.
More at MaRS Climate Impact: Hear Zoltan Tompa in conversation with Greg Twinney, CEO of General Fusion, Henry Gould, CEO of Daedal Systems, and Spencer Pitcher, CEO of Stellarex. November 17 at 3:10 p.m.
Quantum computers are on the horizon
According to IBM, reliable superfast quantum computers could be a reality by the end of the decade. Quantum computers operate according to the same rules that govern the behaviour of subatomic particles, which makes them both superfast and well suited to tackle complex problems that rely on quantum physics.
Writing in Forbes, Johns Hopkins University lecturer Anna Broughel posited that quantum computers could turbocharge climate simulations and the discovery of new materials for use in batteries and carbon capture. “When classical computers attempt to simulate these interactions, they rely on approximations that grow less accurate as systems become more complex,” wrote Broughel. “A quantum computer, operating under the same principles as the system it is modelling, has the potential to generate far more precise results.”
A better understanding of the quantum world could also lead to more efficient solar panels. Toronto quantum computing company Xanadu has developed a new algorithm for evaluating potential new materials for solar panels. The algorithm simulates a process called singlet fission, which is a property of some organic materials that lets one particle of light produce two packets of energy. The approach is so promising that Xanadu is one of seven finalists in the $5-million XPRIZE Quantum Applications competition.
More at MaRS Climate Impact: Hear Anousheh Ansari, CEO of XPRIZE, and Christian Weedbrook, CEO of Xanadu, in a fireside chat. November 17 at 9:50 a.m.
MaRS Climate Impact is on November 17 and 18. Tickets are available now.
Photo illustration: Stephen Gregory; images: Unsplash