Durham Region's Energy Cluster: A Case to Ponder
Kamiel S. Gabriel, PhD, M.B.A., P.Eng.
Over the past forty years, a vibrant energy cluster formed organically in Durham. From the establishment of the Pickering Nuclear Generating Station in 1965, community and industry participation in the International Thermonuclear Experimental Reactor (ITER) initiative, through to the 2003 launch of the University of Ontario Institute of Technology (UOIT) with a strong focus on energy and more recently with the establishment of the Durham Strategic Energy Alliance (DSEA) in 2005, energy-related industrial activity has grown steadily in Durham making it Ontario’s premiere energy industry cluster.
Clusters as economic drivers
“Today’s economic map of the world is dominated by what are called clusters: critical masses – in one place – of unusual competitive success in particular fields. Clusters are not unique, however; they are highly typical – and therein lies a paradox: the enduring competitive advantages in a global economy lie increasingly in local things – knowledge, relationships, motivation – that distant rivals cannot match. Untangling the paradox of location in a global economy reveals a number of key insights about how companies continually create competitive advantage. What happens inside companies is important, but clusters reveal that the immediate business environment outside companies plays a vital role as well. This role of locations has been long overlooked, despite striking evidence that innovation and competitive success in so many fields are geographically concentrated.” .[1]
Clusters capture important linkages– technology, skills, information, marketing and customer needs – that cut across firms and industries. These linkages are fundamental to competition and the direction and pace of innovation. They help articulate the role of the private sector, government, trade associations, educational and research institutions. By bringing together firms of all sizes, they create a forum for constructive business-government dialogue and for identifying common opportunities. The wide-ranging networks of local actors clusters assemble are a rich source of information that provides guidance for both economic and social policy. Moreover, clusters stimulate and enable innovation by enhancing local players’ ability to perceive innovation opportunities. The presence of multiple suppliers and institutions greatly improve the cluster’s proficiency at creating knowledge, while locally available resources make experimentation relatively easy. They increase productivity and efficiency by providing easy access to specialized inputs, services, employees, information, institutions, and “public goods” (such as training programs). Coordination and transactions across firms is enhanced, and they encourage the rapid diffusion of best practices throughout the community.
They facilitate commercialization by making market opportunities for new companies and new lines of established business more apparent, clusters play an important role in facilitating commercialization. Because they aggregate a critical mass of locally available skills and suppliers available in the cluster, commercializing a new product or starting up/spinning off a new company become much easier to accomplish.
The Durham Region Case
For a cluster to be considered viable, it must have achieved significant size and diversity of composition. Most essential elements in the industry value chain should be represented. The Durham energy industry cluster exhibits these characteristics: it includes companies involved in the generation, transmission and distribution of energy, as well as the service and equipment suppliers which support it. Its history and evolution – the intentional and serendipitous events that forged it – reaches back over four decades. During that time, strong intra-cluster relationships between firms have formed and built a strong core to the cluster.
Relationships have grown between firms and the region’s research infrastructure: in particular, Ontario Power Generation, and more recently, the University of Ontario Institute of Technology (UOIT). These can be expected to spawn new research, development and ultimately, innovation and commercialization. This has culminated in the emergence of local social capital and ‘civic entrepreneurs’[2] – in particular, the formalization of the DSEA, which was formed to build on the cluster’s inherent strengths, help it mature and turn its attention outward.
Factor Conditions [3]
Across the range of factors, or input conditions, there is a strong presence of high quality specialized inputs available to firms. As the cluster grows and matures, the level of those inputs can be expected to increase:
Human resources: Durham College, UOIT, as well as other Ontario-based institutions ensure a steady supply of skilled professionals and trades.
Administrative infrastructure: there are 40 successful years of history across the administrative and managerial elements demanded by the energy industryInformation infrastructure: both specialized and general IT firms are present and active in the regionScientific and technological infrastructure: UOIT has added this previously missing, critical elementNatural resources: ready access to most natural resource inputs, including uranium Successful economic development is a process of successive economic upgrading, in which the business environment in the jurisdiction evolves to support and encourage increasingly sophisticated ways of competing[4].
To some degree, Durham enjoys all the elements Porter identifies as necessary for a viable cluster. Moreover, it aligns with his classic definition: an organic, naturally arising cluster. The Porter Model puts a strong emphasis on clusters of traded goods and services. This is a focus that Durham is now vigorously pursuing. Dynamic clusters are as dependent on strong local as strong global linkages: actively targeting exogenous markets not only reaps economic rewards, it invigorates the overall quality of the microeconomic business environment – ensuring the cluster evolves, grows and remains competitive and relevant.
Concluding Thoughts
In its simplest definition, a cluster, according to Webster Dictionary, is: “A number of similar things that occur together”. For any successful cluster, as a minimum, the following two basic elements must be strongly present:
- “A number of similar things”: which strategists translate to “a united vision”. To be a truly cohesive cluster is to have all stakeholders in the cluster motivated by the same vision, united on a course of action and devoted to work together to achieve this vision. We tend to give this most elementary, but foundational step, many exotic titles such as Strategic Plan, Stakeholders Study, Regional Development Action Plan, etc. But at its core, it is simply people who are passionately working together on a number of similar things.
- The second part of the definition is equally important: “that occur together”. It is important to have the same vision, but equally important is the method of deployment of this vision. It must take place in some form of “togetherness”. That is, it is not enough to have the right vision if each partner working on a different agenda to reach it! It needs to be deployed with all partners working together for the same goal.
Durham is Ontario’s most well-developed and credible energy cluster. To achieve this, the Durham Strategic Energy Alliance (DSEA) was formed in May 2005 to become the focal point of the cluster. DSEA has established itself as the source of informed opinion with respect to energy issues in the province of Ontario. It has become a critical network node in Canada’s energy network and a vigorous, respected actor internationally.
Kamiel S. Gabriel, PhD, M.B.A., P.Eng.
Associate Provost-Research at the University of Ontario Institute of Technology, and Chair of the Board of Directors of the Durham Strategic Energy Alliance (DSEA). Dr. Gabriel’s research work in the area of energy conservation and heat transport systems for terrestrial and non-terrestrial applications has earned him a US patent and several international awards.
For more information on UOIT, please visit (www.uoit.ca)
For more information on the Durham Strategic Energy Alliance, please visit (www.dsea.ca)
[1]Michael E. Porter, “Clusters and the new economics of competition” Harvard Business Review; Volume 76, Issue 6. Boston; Nov/Dec 1998. http://polaris.umuc.edu/~fbetz/references/Porter.html
[2] David A. Wolfe, Ph.D., “Policies for Cluster Creation: Lessons from the ISRN Research Initiative”, Program on Globalization and Regional Innovation Systems, Centre for International Studies, Innovation Systems Research Network, University of Toronto. Presentation to the Breakfast on the Hill Seminar Series, Centre Block, Parliament Hill, February 17, 2005.
[3] Laura Williams and John Male, “Durham Energy Industry Cluster Study”, Final Report, Disruptor, June 2006.
[4] Michael E. Porter, “Clusters and Regional Competitiveness: Recent Learnings”, Institute for Strategy and Competitiveness, Harvard Business School, International Conference on Technology Clusters, Montreal, Canada, 7 November 2003.