Energy Drivers - What is the future of hyperloop transportation systems in the Canadian energy transition?

32 mins 17 secs | 03 April 2024

00:00:00 - 00:01:00

Lance Mortlock

Welcome to the next episode of our Energy Drivers podcast. My name is Lance Mortlock and I’m the host of today’s discussion with Sebastien Gendron, the co-founder and Chief Executive Officer at TransPod. TransPod is a Toronto-based leading technology company that is developing the next generation of affordable and sustainable, ultra-high-speed transport for a better-connected and carbon-neutral society. Throughout our series, we invite Canadian energy sector leaders to discuss pertinent issues, provide thoughtful insights and ask challenging questions. As we continue to explore the subject of the energy transition and its impact on our country, it’s impossible to avoid a discussion about the future without talking about transportation systems. Sebastien, thank you for joining our podcast.

00:01:00 - 00:01:03

Sebastien Gendron

No, thank you very much. Happy to be there.

00:01:03 - 00:01:37

Lance Mortlock

Good to have you finally on the show. I know we’ve been planning this for a few, a few months now. Why don’t we kind of kick off with a bit about your organization? I mean, I’ve been looking forward to this discussion. A good acquaintance of mine made a reference to your organization. And maybe to kick things off for our listeners, can you tell us a little bit about TransPod, the journey and how that journey began?

00:01:37 - 00:02:57

Sebastien Gendron

So TransPod is a Canadian company. We’re based in Toronto. We created the company in 2015, so it’s almost more than eight years old now. And with the objective, our objective is to develop the next generation of ground transportation. And people may have heard about hyperloop. So we’re working to develop a tube transportation system. And so hyperloop is kind of the fancy word Elon Musk proposed in 2013, but we’re basically talking and developing a concept which have been around for more than 100 years as initial designs started in the 1900s. So it’s not something new, but kind of Musk in 2013 started to popularize this concept, like remove all the dust from it. And now there’s an entire ecosystem and we are kind of the only Canadian company developing that and with the objective definitely to take the lead in the next years, if not months.

00:02:57 - 00:03:21

Lance Mortlock

Hyperloop technologies, for many of our listeners, me included, seems quite novel. And there could be a couple of people out there that aren’t familiar with it. So maybe for their benefit, could you briefly describe what is hyperloop transportation in laymen’s terms?

00:03:21 - 00:04:03

Sebastien Gendron

The concept consists of having vehicles the size of a train coach or bus in a tube where you remove most of the air, like 99% of the air. And by doing that, you allow the vehicle to avoid aerodynamic friction. And in theory, by doing that, you don’t have any limitation, physical limitation to go at higher speeds. So we’re talking about vehicles traveling in a tube at 1,000 km an hour. So pretty much traveling at the same speed as an aircraft in a low-pressure steel tube.

00:04:03 - 00:04:13

Lance Mortlock

Like a bullet train almost, in a tunnel floating on magnets, moving at super high speeds. Do I have that right?

00:04:13 - 00:05:04

Sebastien Gendron

Yeah. Yeah, you have it right. Then, you mentioned magnets for the propulsion and levitation system. That’s what we’re doing. So it’s literally having an aircraft without wings traveling in a in a tube at the same speed as an aircraft. Sounds like a bit crazy like that. But just for our listeners, we already travel at that speed on an airplane. And being in a tube, you’re actually protected from weather conditions. So we’re talking about a guided system propelled with magnets. So it’s definitely the improved version of a high-speed train because it’s kind of three times, if not five times faster than a train.

00:05:04 - 00:05:22

Lance Mortlock

Wow. That’s crazy. So for example, if you, let’s say for argument’s sake, traveling from Calgary to Edmonton, how long would that take? Like an hour and a half?

00:05:22 - 00:06:05

Sebastien Gendron

No, no. It would take less than an hour. We’re talking about 40, 45 minutes. The good reference point, and even if we’re talking about Toronto, Montréal, or any other cities in North America, worldwide, the good reference point is the amount of travel time we need by air, like if you are flying, how much time it’s going to take you to fly from Calgary to Edmonton. And I have to say that’s kind of less than an hour. So same amount of time. But in a way I would say easier way. The goal is really to bring the frequency of the subway with the speed of the aircraft.

00:06:05 - 00:06:48

Lance Mortlock

I was in Phoenix this past week with a client facilitating a workshop for a few days, and I traveled back last night. The flight was delayed, got into Calgary at, like, midnight. I was not, I was not a happy chappy. So if we can create something that improves that, it’s the thing what you’re saying, it’s the time leading up to travel and it’s the time leading, you know, the other side of travel that if you can speed up some of that as well, potentially a massive impact.

00:06:48 - 00:07:53

Sebastien Gendron

No, you’re totally right. When we started the company with Ryan, my associate, we said, you know what, if we have to develop a fifth mode of transportation, it must be better than existing ones. Otherwise, what’s the point? And more than the speed is the is the convenience. So the main goal is really to remove all the stress we have when we travel, knowing that, oh I’m stuck in traffic, I’m going to miss my plane, or my train and I’ll have to rebook. It’s going to cost me money. And it’s a painful process every time. Even if you’re used to travel anyway, it’s always annoying. And if you know that you have a vehicle available every two minutes to go to your destination. You’re removing all, most of the stress of, I would say short-haul flights travel I would say.

00:07:53 - 00:08:02

Lance Mortlock

Yeah. So without breaking any confidentialities, what are some of the major projects that you and your company are currently working on that, that’s keeping you busy?

00:08:02 - 00:09:13

Sebastien Gendron

So you touched on the first one. So between Calgary and Edmonton, we’ve been working on this one since 2017, ’18, started to kind of accelerate in 2020 after we signed an initial agreement with the government. The second one around the corner is in Texas. We’re working to develop a line between Dallas and San Antonio. And then the two other markets we are active, I would say, are the Middle East and Australia. In the Middle East, there are two countries to be more specific, the UAE and Saudi Arabia. And then in Australia we have some initial discussion with the City of Melbourne. So we aim to accelerate those two countries in 2024 and definitely trying to materialize some, I would say tangible work in Alberta and Texas at the same time.

00:09:13 - 00:09:24

Lance Mortlock

And what does that tangible work look like? Is that a proof of concept? Is that a pilot of some kind? Like how do you, how do you go to the next stage?

00:09:24 - 00:11:27

Sebastien Gendron

Yeah, so looking at the Alberta one, in 2023, we signed some initial agreement with the City of Edmonton and the airport of Edmonton. Just for our listeners, the way we structured or broke down the project in Alberta, we were dividing the project in two phases. There’s a first phase consisting of connecting the airport of Edmonton to the south end of the city or to downtown Edmonton. It’s literally a test track for those who know a bit the geography of Edmonton,. the airport is located 30 km south of the city, which makes it a good candidate for an airport connection. So the plan this year is to do all the admin work. So construction permits, securing the right of way, getting some public consultations done, and also the infrastructure cost estimates to have pretty much the blueprint for the construction company to start hopefully in 2025. So that’s purely admin work to get that done in order to start construction again in 2025. And in Texas we need to we already have some initial approval from some cities like Dallas and some others. And the plan is to get the green light from the state itself. So we kind of started discussion with the head of transportation in Texas. And we need actually, we need to confirm their interest. Our goal is not to rely on public funding, but to attract private funding investors to finance such a project.

00:11:27 - 00:11:30

Lance Mortlock

Yeah. You’ve got to have a willing customer at the end of the day.

00:11:30 - 00:11:33

Sebastien Gendron

Confirm the demand.

00:11:33 - 00:12:04

Lance Mortlock

Absolutely. Let’s discuss some of the macro-related questions. So when you think about what you’re trying to do with hyperloop, how different do you think the future of transport will be? You know, in 50 years’ time and in 100 years’ time? Do you envision a world where transport looks very different, or is this really on the fringe?

00:12:04 - 00:13:56

Sebastien Gendron

So it will look different, but at the same time, we’re not talking about, for us, it’s more, so for some people, what we’re doing may sound like science fiction and really different. But when we step back a little bit, we see that more as an evolution. I mean, cars have been around for many years, but they don’t look the same from 100 years ago and now, and same for ground transportation. So we had steam trains 100 years ago and then we had diesel trains and then we had high-speed trains. And we see what we’re developing as the next generation of ultra-high-speed trains, just in a slightly different form. And so the way we see to the future, like 50, 100 years down the road is really the emergence of a new network. So same as how the railway sector started 150 years ago, where they didn’t have a full network right from the beginning. They started with a few corridors and then expanded. So our goal is really to start with initial lines like the one I mentioned in Alberta, Texas and others, and then gradually we’ll see that network. Now are we going to see one, multiple players? Probably more than one. But at the beginning, for the first 50 years, we may see just one or two major players. But this is how we foresee the market. And definitely our goal is to be one of the major ones.

00:13:56 - 00:14:09

Lance Mortlock

When I was in Holland, I had an opportunity to visit the hyperloop company there. Do you know that one?

00:14:09 - 00:14:12

Sebastien Gendron

Yeah. Yeah, they’re doing well. Yeah, they’re doing well.

00:14:12 - 00:14:14

Lance Mortlock

What’s their name again?

00:14:14 - 00:14:28

Sebastien Gendron

I think it’s a spinoff from a university. So I don’t know if you’ve visited the Delft University or, I think our competitor’s name is Hardt Hyperloop.

00:14:28 - 00:14:38

Lance Mortlock

Yeah, that’s where I went. I went to their facility, to their pilot facility. Pretty interesting. So are they the real deal like you guys as well?

00:14:38 - 00:16:48

Sebastien Gendron

I’m not sure. So I’ll try not to be biased in there. I think we’re lucky to be in North America. It’s a huge market for us and the fact that we are a Canadian company, tapping into that market is giving us a huge opportunity to grow. In Europe, they already have a pretty dense high-speed rail network. So like we’ve said, the demand is not that high as in North America. So as of today, I think they’re doing a. they’re doing well better than others. After the kind of, the close-outs of Hyperloop One in the US, I think they remain our main competitors. But at this stage we need our competitors to stay alive and to continue to push with us the development of this ecosystem. It’s critical at an early stage. I think the biggest threats we see are more well-established companies like Alstom or Siemens doing high-speed trains. As soon as they see us as a real threat, they will have the financial capability to try to catch up. I don’t think they will, but they will try. And if we put aside those kinds of private companies, the biggest competition is probably coming from South Korea. The government, I would say, of South Korea and China who are investing in this technology. I would say South Korea, they started to develop that since 2011. So even before Musk came out and China is pouring in lots of money.

00:16:48 - 00:16:51

Lance Mortlock

The race is on.

00:16:51 - 00:17:30

Sebastien Gendron

We also, I don’t know if you’ve noticed that, but in India, ArcelorMittal, which is one of the biggest steel suppliers, I think in 2022 I didn’t see their figures for 2023, but they made more than $7 billion in profits. So they have that financial capability. They started their own initiative in India with universities. And just for the listeners again to give a bit of context why a steel supplier will play a role in that, like 30% of the infrastructure is a steel tube. So it’s a huge market for them.

00:17:30 - 00:17:46

Lance Mortlock

I’m just thinking about the materials and what goes into building an hyperloop project. Would customers benefit from a cost perspective? Is this kind of transportation cheaper?

00:17:46 - 00:20:03

Sebastien Gendron

That’s the goal. That’s definitely the goal. Where we need to be careful, because our approach is to get it financed by the private sector. So we don’t want to rely on public funding, and we can do that because the innovation is not only on the tech, it’s also on the business model, meaning that to maximize the profitability, we can transport both passengers and freight, time-sensitive freight, so by maximizing the business case, then you can attract private players. But if the profitability is good and the demand is good, we see the risk that it becomes a transportation for rich people. This is where we want government to be involved, to have some kind of veto rights and kind of boundaries to prevent that to happen and keep that system affordable for everyone. I’ll provide an example on the Calgary-Edmonton one. Initially, we didn’t want it to have a stop in Red Deer. And so Red Deer is a small town in the middle and adding a stop in Red Deer is adding $1 billion to the overall infrastructure cost. Total amount of this project is US$18 billion. So a station in Red Deer, ok $1 billion. Does it make sense financially speaking? No. So if you’re looking only through the financial lens, it’s crystal clear, like no more spending. It’s not worth it. But if you don’t do it from a political standpoint, you’re killing the city. You’re not providing any inputs to improve the economic development of that area. This is where having governments on board to prevent or to make sure that the right decisions are made for the people is critical. So down the road, yes, the system can be affordable for everyone, but we have to be careful that, it’s balanced.

00:20:03 - 00:20:19

Lance Mortlock

What about GHG? We talk a lot about the importance of using technology to help us get to net zero. How does hyperloop transportation in the future help us from a GHG perspective?

00:20:19 - 00:21:33

Sebastien Gendron

So it’s a green transportation system first. It doesn’t work with fossil fuel. It’s working thanks to electricity. However, you can get electricity from fossil fuel. So you got to be careful that the energy grid where we’re installing those infrastructure is powered by renewable energies. Otherwise, you’re missing the point. So let’s assume that this assumption is fulfilled. Then our objective is to replace all these short-haul flights between Edmonton and Calgary, for example, and remove some of the trucks from the Highway 19. And then when you do that calculation with an electrical grid powered by renewable energies, then you’re saving on CO2 emissions down the road. And this is what companies like DHL, FedEx, Amazon are looking for. They’re looking to remove some of their airplanes between those two cities and some of the trucks they have on the highway to achieve net zero.

00:21:33 - 00:22:00

Lance Mortlock

That’s the other thing that makes me think about, would you see a future where maybe the airlines are investing in this kind of technology because of the impact that it has, cannibalizing their historical domestic business? And so is there a future where major airlines approach companies like yours and say, you know, we want a piece of the action, and we want to co-invest?

00:22:00 - 00:23:04

Sebastien Gendron

Co-invest, I’m not sure. But buying some of our vehicles, definitely. And it’s going to be interesting. We’ll see. I would say. Yeah, we’ll, from a behaviour standpoint, we’ll see some conventional airlines are going to tell us oh no, we only buy aircraft. The only thing we do is flying and we’re not going to end up buying a ground transportation system. But some others are pretty open minded, and they don’t care about, okay, is it an aircraft? Is it a high-speed train? And literally speaking, what we’re doing is an aircraft without wings. 90% of the tech is coming from the aerospace industry. And for some airlines we’re facing, I mean, maybe some strikes, time to time. There’s no drivers. It’s fully automated. So at least maybe they will save some conflicts there anyway.

00:23:04 - 00:23:09

Lance Mortlock

And didn’t you come from the aerospace industry originally?

00:23:09 - 00:23:14

Sebastien Gendron

Yeah, before starting the company, I spent almost 15 years in the aerospace industry.

00:23:14 - 00:23:50

Lance Mortlock

This is way more exciting. A few weeks ago, your company and an Indigenous-led enterprise, Clean Communities Corporation, signed a memorandum of understanding in Calgary to explore ecotech opportunities in the province. How important are partnerships in this space to bring kind of viable products and services to market? And any stakeholders you think that can play a greater role in pursuing hyperloop opportunities in the future?

00:23:50 - 00:25:14

Sebastien Gendron

This is critical. I mean, as a company, if we want this project to be successful in Alberta, in Texas or tomorrow in Australia, we should, we have to, we must find a solution where it’s a win-win for everyone, for local communities, whether we’re talking about First Nations, whether we’re talking about Red Deer, whether we’re talking about the Aboriginal kind of communities in Australia, this is critical. And for First Nations in Alberta, we want them to be involved on the on three pillars. The first one is jobs, during construction. The second one is through the procurement process. How can we involve First Nations companies to be part of the construction? And the third pillar is investment. How can we get them investing or as minority investors, how can they get some skin in the game to own a piece of the infrastructure? And if we do that, a win-win situation, everybody wins, definitely.

00:25:14 - 00:25:45

Lance Mortlock

It’s interesting we, some of our listeners might know, we released a report recently on the growing importance of Indigenous relations and engagement across Canada, particularly in the energy and mining space. So I would extend that to transportation. It’s important, and having a strategy around that is critical to success.

00:25:45 - 00:25:56

Sebastien Gendron

And it’s not our land. We have to respect that. So they must be involved otherwise it’s not going to work, definitely.

00:25:56 - 00:26:13

Lance Mortlock

Maybe my last questions, Sebastien, would be what barriers do you think you need to overcome to see TransPod and hyperloop technologies be successful in Canada and maybe, maybe globally?

00:26:13 - 00:27:31

Sebastien Gendron

The process of developing those projects is really energy consuming. Sometimes it’s exhausting. Exhausting to kind of having to convince all the time or to tell people to look at the glass half full rather than half empty. We’re trying, we want to work with people willing to find a solution. We’re not interested to work with people telling us all the time that it’s never going to work. This is the main challenge. And we need people and government and general to be more courageous, more open minded, to accelerate the implementation of a system like ours. But more than that, it’s like if we want to, I’d say achieve net zero, we definitely need to take more risks. And again, when I’m saying that, I’m not asking a blank cheque, it’s just like, how can we have a constructive approach and being open minded to new ideas? To have the courage to actually sign at the bottom of the page. And there’s not that many people nowadays like that.

00:27:31 - 00:27:40

Lance Mortlock

You’re a true innovator. That is the innovator’s dilemma, right, is to kind of overcome some of those challenges.

00:27:40 - 00:28:15

Sebastien Gendron

Yeah. And we keep pushing. It’s nice to hear there’s more and more people. I mean, pushing for that. But it’s also sad to see that the world is not moving at the right pace. We have more and more examples, like innovation destructing the world and, and sometimes it’s affecting our societies when people are laid off because they didn’t want to be open minded enough to see some market change.

00:28:15 - 00:28:18

Lance Mortlock

That’s a topic for another podcast, maybe.

00:28:18 - 00:28:23

Sebastien Gendron

Nuclear fusion space. Anyway, there’s a lot, a lot.

00:28:23 - 00:28:32

Lance Mortlock

Yeah, there is. It’s a fascinating area. Sebastien, anything we didn’t cover that you want to conclude with before we wrap up here?

00:28:32 - 00:30:07

Sebastien Gendron

One point I want to mention. I hear a lot about the fact that Canada is not taking any risk and love to be first to be second. I have to say that no, this is not true. This is not true. First of all, it’s a human issue, whether it’s the Middle East, Europe, North America, US or Canada. There’s not enough people who wants to be to be first. And also I would like to say that Canada is lucky to have Alberta in part of their Canadian landscape, same as maybe Texas in the US, because they are they taking more risk, the culture is more entrepreneurial in the West. Even as a company based in Toronto, I have to say that Alberta is more open for business than here so far and willing to kind of find a solution and make it work. I was kind of questioning why are they doing that? And so on. It’s like, you know what when it comes to finding oil, most of the time somebody, someone from Alberta told me, you don’t find anything. So you must take more risk than usual. And when they see a good opportunity, they’re more business oriented. I’ve seen from my experience, at least, than some other parts of the world.

00:30:07 - 00:30:21

Lance Mortlock

I will take that as a compliment. That’s a, a great, great way to wrap up. Thank you for your time and insights, Sebastien. It’s been great having you on the show.

00:30:21 - 00:30:25

Sebastien Gendron

Thanks a lot. Thank you for the invitation. It was nice.

00:30:25 - 00:32:17

Lance Mortlock

It was a pleasure talking to you about your company and hyperloop technologies. And for our listeners, if you have your own questions, queries, you can reach out to EY via the attached contact details. Finishing another great conversation and episode. I would like to mention maybe a few of my own reflections on this fascinating discussion. Firstly, once again we’ve heard from the entrepreneurial side of the energy sector. We have a lot of innovation in Canada and great leaders who are not afraid to take risks and to challenge the energy system norms, which is highly important to meet our Canadian net-zero commitments. Secondly, TransPod and hyperloop technologies could offer a wide range of benefits to our transportation systems. For example, reduce carbon footprint, cost-effective transport and fast transportation options are just a few of the advantages that we could unlock in our country. And maybe finally, there are still some barriers to develop and implement hyperloop technologies, which Sebastien has mentioned, particularly around getting the costs down, government regulation. However, ecosystems and agreements are forming. We’ve talked about a few of those agreements today. So the idea is becoming more normalized. We can likely anticipate TransPod to actualize interesting projects in the near future. So once again, thank you for joining our podcast and we’ll see you at the next episode.