Why is Alberta’s Carbon Levy (‘tax’) a Blessing in Disguise?
December 8, 2016
A Note to the Reader
The following research paper was prepared by two independent Alberta economic and energy consultants, Mark Anielski (an ecological economist) and Krzysztof Palka (a mechanical engineer and renewable energy expert) to help inform the debate about Alberta’s energy future and the new carbon price that will impact all Albertans come January 1, 2017.
The purpose of our research is to help Albertans become better informed about what for many is a complex and even emotional subject; the imposition of a carbon levy. Our hope is that this research and our observations will provide decision makers and all Albertans with a common-sense perspective on this issue. Our goal is simple: do we believe the new carbon levy or tax on carbon emissions provides a positive, neutral or negative impact on the overall well-being and future of Albertans?
We have drawn from publicly available statistics for our analysis. Our analysis was completed based on what we believe are reasonable analytic protocols and assumptions. The opinions and conclusions we have arrived at are our own based on our professional disciplines in accounting, economics and engineering. We were not influenced by the opinions or positions of political parties, think tanks, energy sector organizations or lobbyists, or by the energy industry.
PartI: Making Alberta more competitive now and in the future
The introduction of Alberta’s carbon levy (not a tax per se) of $20/tonne CO2e in 2017 and rising to $30/tonne in 2018 is creating all kinds of anxiety and fears. Will the carbon levy, tax or price that is expected to raise almost $2 billion per annum be as scary and damaging to Alberta’s economy as some people believe? Or will pricing carbon result in an important opportunity for Alberta to make the shift to a sustainable and renewable energy future, make our oil & gas resource more competitive in the changing global landscape, make our economy more resilient and increase our quality of life and happiness?
What do Albertans think about the new carbon tax or levy that will be introduced in January 2017? Abacus Data asked Canadians about a carbon tax in April 2016. In this survey, 73 per cent of Albertans indicated “putting a price on carbon” is a very good, good or acceptable way “of encouraging people and businesses to reduce emissions.” However, in that same Abacus survey, when asked their opinion of a “carbon tax,” Albertans’ support dropped to 51 per cent. Other recent polls have showed Albertans’ support as low as 37 per cent. However, in the same Abacus poll Canadians said that they would support spending any carbon taxes on 1) investing in research and development and clean energy; and 2) investing in infrastructure.
We believe Alberta’s new carbon levy is an important opportunity to build clean and renewable energy capacity, achieve greater social acceptance for our oil and gas outside of Alberta, reduce carbon emissions and Alberta’s carbon liability, and improve Alberta’s economic well-being.
In this research paper we hope to provide you with a common-sense assessment of this complex issue, revealing the trade-offs, costs and benefits of Alberta’s efforts to diversify our energy economy. We will use current statistics on Alberta’s electrical energy infrastructure, planned renewable energy projects, energy efficiency opportunities and estimate the real costs of moving Alberta to a green energy future.
It’s a Carbon Levy not a Carbon Tax!
There is much confusion regarding Alberta’s carbon pricing; some refer to it as a levy and some as a tax. Is it just semantics or should we be concerned with the name and how the money is collected and spent?
Both terms describe an almost similar mechanism for collection of fees that are imposed on individuals and corporations by the government. The difference is how the money is allocated and spent.
Taxes are general fees consolidated into a single fund and allocated towards the government budget. They are collected to deal with a current liability. As budgets may be allocated differently every year, there is no guarantee where the money will go. But one thing is sure, you will always pay taxes, the amount may change but the requirement to pay will not.
On the other hand, levies are a temporary tax collected for a specific purpose to deal with a future liability. They are collected to provide for a social purpose or to mitigate an impending crisis which is understood and supported by society. For example, if our government were to collect a flood levy, all the money would go to building flood defences and helping to relocate individuals and businesses from flood prone areas. This would ensure that when the flood comes, there would be no loss of life or property and minimal disruption to social and industrial activities.
It is our understanding that the guiding principle behind establishing the Carbon Levy in Alberta is to redirect all the collected money towards energy efficiency and minimizing GHG emissions from personal and industrial activities in our province.
While there is no exact formula or plan available from the government at this time, by choosing the name “Levy” the government signals its clear intentions to direct the funds towards a specific purpose. The money will be spent to build greater personal and industrial resiliency which is often associated with increased energy efficiency as demonstrated by many jurisdictions and organizations around the world.
Alberta’s $13.7 Billion Carbon Liability
We’ve estimated that the cost of Alberta’s carbon emissions as a liability imposed on Canada and the world at $13.7 billion valued at $50/t CO2e. This $50 price is not only a reasonable proxy for the global social cost of carbon but is also the future price of carbon the federal government is putting on carbon and which Alberta recently agreed to. In addition, reinsurance companies such as Munich Re have estimated the future costs to their insurance business from current levels of carbon emissions; using their global estimates of risk we’ve calculated an average carbon cost of US$55/t CO2e. So our rough estimate of $50/t CO2e as a societal cost of Alberta’s carbon emissions is quite reasonable.
The emission of carbon into the atmosphere as a result of our modern lifestyle and industrial behavior imposes what we call an unfunded liability. This liability is unfunded in the sense that it does not appear on the balance sheet of Alberta, Canada or oil companies as a monetary burden or cost to the planet and the well-being of our children and future generations.
A proper balance sheet for Alberta should include a valuation of the future risk imposed by carbon emissions on the well-being of future generations.
Alberta is certainly a contributor to this liability, as Alberta’s emissions of 274 megatonnes of CO2e (MT CO2e) in 2014 contributed to over 37% of Canada’s total carbon emission. While most of other provinces are on a steady path to lower their carbon footprint, both total and per capita, Alberta’s GHG emissions have grown by 17% since 2005 primarily due to the expansion of the oilsands. In the changing world, this trend will put us at an economic disadvantage.
The vast majority of Alberta’s emissions come from industrial sources and the majority of industrial carbon emissions are from the oil and gas sector. Using Statistics Canada estimates from 2009 of the average Canadian household carbon emissions of roughly 10.06 kt CO2e per capita, we estimate that Alberta households emitted roughly 42.2 Mt CO2e or 15.4% of Alberta’s total of 273.8 Mt CO2e emission in 2014. These estimates are based on converting household spending on both direct and indirect carbon emissions. By contrast, Alberta’s oil and gas sector (including fugitive emissions from refineries) emitted an estimated 108.23 Mt CO2e or almost 40% of Alberta’s total GHG emissions in 2014.
Based on our estimate of Alberta’s unfunded carbon liability of $13.7 billion per annum, we estimate that:
- $5.4 billion (39.5% of the total) attributed to Alberta’s oil, gas and mining sector.
- Of the oil and gas sector total, an estimated $3.3 billion is attributed to Alberta’s oilsands extraction and production.
- $1.3 billion (9.4%) is attributed to the burning of coal for coal-fired electricity plants.
- $2.1 billion (15.4%) is attributed to household energy use, including electricity, home heating, transportation and other costs of living that includes energy costs (that’s an average carbon cost of $1,518 per Alberta household).
- $4.9 billion (36.5%) remaining balance is attributed to other sectors in the economy including other electricity and heat generation, manufacturing, construction, forestry, agriculture, service industries and other sectors.
To put Alberta’s carbon liability of $13.7 billion into perspective the annual carbon liability is 5.5 times greater than the Alberta Government’s projected oil and gas royalty revenues of $1.3 billion in 2016–17.
From an accounting perspective, it is important to note that this estimated $13.7 billion carbon liability is not posted on either the province of Alberta’s balance sheet or Alberta’s oil and gas company balance sheets. Reinsurance companies like Munich Re and Swiss Re, as well as Canada’s The Co-operators Insurance, have been testing how to treat carbon risk and liabilities as part of their internal risk-analysis planning in response to climate change risk; they have used a carbon liability or risk cost of $50/t CO2e in their risk analyses. When the reinsurance industry begins to express risk to its industry in terms of carbon pricing, we know that carbon emissions have become a real liability.
We believe that at some point the insurance industry will most certainly consider placing a carbon price on existing client insurance premiums commensurate with the carbon footprint their corporate and residential clients impose on the planet.
In this context, Alberta’s carbon levy of $20/tonne CO2e beginning January 1, 2017 and rising to $30/t CO2e in 2018 and the proposed federal government carbon tax of $50/t tCO2e seems like a reasonable proxy for the societal cost or risk of carbon emissions that all citizens should share. Consider that Norway has placed a $94/t CO2e price on carbon and Sweden a $221/t CO2e price.
A Price on Carbon can be a Powerful Tool to Make the Economy Stronger
Alberta’s carbon levy is projected to generate an estimated $9.6 billion over the next five years once the $30/tonne CO2e price is fully in place by 2018. Of this total $6.2 billion will be invested to diversify Alberta’s energy industry and create new jobs:
- $3.4 billion for large scale renewable energy, bioenergy and technology
- $2.2 billion for green infrastructure like transit.
An additional $645 million will go to fund the new Energy Efficiency Alberta enterprise, a new provincial agency that will support energy efficiency programs and services for homes and businesses.
The remaining estimated $3.4 billion will go to help households, businesses and communities adjust to the carbon levy:
- $2.3 billion for carbon rebates to help low- and middle-income families (about 67% of Alberta households)
- $865 million to pay for a cut in the small business tax rate from 3% to 2%
- $195 million to assist coal communities, Indigenous communities and others with adjustment.
Estimates of the impact of the carbon levy on households suggest it will amount to roughly $470 in increased heating, electricity and transportation costs for an average household in 2018, assuming that household consumes the same amount of fossil fuels as it did in 2015. For many households, with annual incomes of less than $95,000, the tax will be rebated (about 67% of Alberta’s households).
When the $20/tonne CO2e carbon levy comes into effect January 1, 2017 it will increase gas prices by 4.5 cents per litre and 5.35 cents per litre for diesel. That’s about the same increase we experience every long weekend. It will also affect our utility bills and in other places where we use fossil fuels. The Alberta government has estimated the impact will be $191 to $338 per household.
However, individual Albertans that make $47,500/yr or less will receive a rebate of $200 whether they pay income tax or not. Families making less than $95,000 will receive a rebate of $300. Essentially, after the rebate there will be no monetary impact on the majority of Alberta families.
In addition, small business tax rates will be cut by one-third from three to two per cent. More than 95 per cent of business in Alberta are small businesses. This cut will mean $185 million in tax reductions. The levy will not apply to marked gas or diesel used by farmers. And there will be a series of programs to help farmers, businesses and individual Albertans save energy.
Albertans and Alberta businesses that participate in energy efficiency programs funded by the levy will actually wind up in a better economic position.
Measures differ for each sector, but for example the installation of one simple device such as a programmable thermostat by home owners can save between 10 and 30 per cent on heating costs.
Other Benefits: What hasn’t been included in the carbon levy calculations are the expected well-being benefits of investing some of the carbon levy revenues in building Alberta’s renewable energy capacity, diversifying Alberta’s energy industry and reducing Alberta’s $13.7 billion carbon liability. While there will certainly be short-term pain which we will experience at the pump when gassing up our vehicles on January 1, 2017, the long-term benefits to Alberta in ensuring a more resilient and green-energy future are going to benefit future generations.
The Scandinavian Experience
Norway demonstrates an important example of how nationally taxing carbon can be used to make a country’s own oil and gas industry more resilient to the low pricing environment and be successful in the low carbon economy of the future. In 2013, Norway petroleum production and natural gas extraction carbon tax was increased to US$71.84 per tonne CO2e (C$94.50/t CO2e). In Sweden, the price of carbon is even higher, now at US$168/t CO2e or C$221/t CO2e. Norway’s climate policies, along with the carbon tax, are resulting in economy-wide energy efficiency improvements and a clear shift toward electrification including investment and incorporation of renewable electricity in offshore petroleum extraction.
Some of the new policies under consideration will result in Norway moving away fully from petroleum-based transportation maybe as early as in 2025 and will minimize its future consumption of petroleum products, however this will not diminish Norway’s ability to continue to export oil and gas. Norway is well positioned to benefit from continuing consumption of natural gas and oil in Europe during their transition to a low carbon economy. When considering the cost and full lifecycle GHG intensity per barrel, pursuing low upstream GHG emissions and energy efficiency resulted in very low operating costs, and has made Norway’s oil and natural gas one of the best options for Europe. Additionally, investment in wind projects by the oil industry is diversifying Norway’s energy production. Norway is well on it’s way to becoming a renewable electricity powerhouse of the future while benefiting the most from their oil and gas exports.
Let’s compare the economic performance of Canada to Norway and Sweden. The current account balance is an important economic indicator of the health of an economy as it compares a country’s net trade in goods and services, plus net earnings, and net transfer payments to and from the rest of the world. It provides insight to the results of the type of approach Norway and Sweden have embraced. The current account balance for Norway in 2016 is +$23.6B or +5.3% of GDP and Sweden’s is +$25.4B or +5% of GDP. In contrast, Canada’s account balance is -$51.1B or -3.4% of GDP. Clearly, a high carbon price has not impacted the competitiveness of these economies or the quality of life of their citizens, and many economists familiar with the approach would suggest that the carbon tax was an important factor in building the economic resilience of those countries. When we look at how to improve our economic performance we should look at the best examples in the world and learn from them; a price on carbon can help us to look in the right direction.
Economic impact modelling for Alberta completed by Alberta Finance economists project a short-term reduction in Alberta’s GDP of 0.3 or 0.4 per cent by the year 2022, which translates into slower growth of .05 per cent per year during that time. However, what these GDP forecasts ignore are the other net positive impacts to Albertans including improved health and quality of life benefits associated with expected reductions in greenhouse gas emissions and pollutants that will result from increased renewable energy capacity, elimination of coal-fired electricity, and improvements in energy efficiencies.
If these other societal and environmental benefits were properly accounted for Alberta’s economy is likely to show a net positive well-being return on investment from the carbon levy.
Alberta’s Efficiency Opportunities
Alberta is currently creating its own Energy Efficiency Alberta agency to be funded by $645 million from carbon levies. Early estimates of energy efficiency savings by the Alberta Energy Efficiency Alliance have estimated a total of $510 million in annual energy savings, 3,000 more jobs, $550 million in increased GDP, and the equivalent of taking 900,000 vehicles off the road.
Dunsky Energy Consulting estimated that efficiency savings for Alberta in 2015 could range from 6.35 to 14.45 MT per year. Estimating the societal cost of carbon savings based on $50/t CO2e could amount to between $317 million and $722 million per year, which would mean as much as a 5% reduction in Alberta’s total current carbon liability.
To enrol every Albertan in energy efficiency improvement efforts, we need to make the cost of energy and the associated carbon levy very transparent, based on real and easily verifiable measurements. For example, utility bills should have a carbon levy attached to every monthly statement that is directly connected to our consumption of electricity and natural gas, water and cost of waste disposal. It is easier to understand a 4 1/2 cent carbon levy attached to the price of gasoline at the pump since we know exactly how much are are pumping and we should extend this approach to all major activities that consume energy. We should measure and be aware of energy consumption on a personal, municipal and regional level. Today we do not have easily visible regional and city level statistics on the total amount of gasoline and diesel consumed in Alberta. Nor do we have an annual summation of the amount of electricity being consumed at the neighbourhood level or city level; most of the statistics are modelled rather than using more powerful measured data.
Knowing what the carbon levy is in relationship to personal consumption, will motivate each citizen and their household, each municipality and each region to pursue energy efficiency options and ultimately renewable energy options that will affect their bottom line and will actually reduce the cost of living and improve disposable income.
Without a high level of transparency and awareness, our concern is that the tax on carbon will become another source of political rhetoric and fail to achieve the overall goal of reducing the carbon liability on the planet and for future generations.
Following Nova Scotia’s Lead
Alberta could learn from Nova Scotia’s energy efficiency efforts. Nova Scotia is a Canadian leader in improving energy efficiency and creating a lot of economic benefits along the way. In Nova Scotia, energy efficiency retrofits are expected to reduce provincial energy demand by as much as 20–30% over the next few years.
Over $110 million has already been saved in energy costs in 2016 by an estimated 225,000 Nova Scotians (or 28% of the adult population), in both households and businesses who have participated in Nova Scotia’s energy efficiency program (EfficiencyOne). The result has been an 8 per cent reduction in total electricity load.
The megatonnes in carbon emission reductions and the estimated reduction in the carbon liability of Nova Scotia has not yet been calculated. However, Stephen MacDonald who oversees the program says he expects greenhouse gas emissions to be “12 per cent lower than they otherwise would have been if not for energy efficiency.” Nova Scotia emitted an estimated 16.6 MT of CO2e in 2014 so we could say that Nova Scotia will realize a net reduction of almost 2.0 MT of CO2e emissions, and valued at $50/t CO2e that would mean annual societal savings of almost $100 million per year.
If you add these societal cost savings ($100M) to the estimated energy cost savings ($110M), Nova Scotia has seen a $220 million per year economic benefit, not counting the value of lower health-care costs, from their energy efficiency program, to date. Energy efficiency initiatives are the easiest and most obvious yet often overlooked opportunities to lower cost and improve competitiveness.
Through this initiative Nova Scotia has effectively doubled its return on investment!
Embracing the Carbon Levy
By embracing the carbon levy, Alberta can reap similar benefits as demonstrated by our sister province of Nova Scotia, and by other jurisdictions that have embraced carbon pricing without negative impacts on their long term economy. In Alberta, the carbon levy is designed to cover the cost of implementing energy efficiency initiatives. The inevitable transition to a low carbon economy will leave us with a large liability if won’t address it today. In the short term, this may look scary and costly, however by analogy an investment in your child’s education may seem expensive and with little short term returns but the long term benefits of an independent and successful adult are worth the short term efforts.
This is what we need to do for each other, for our children and for our province.
PartII: Making Alberta resources more competitive during the transition to a low carbon economy
Alberta’s $5 Billion Unfunded Oil Sands Carbon Liability
Currently Alberta oil sands operators are producing 2.36 million barrels per day (861 million barrels per year) of bitumen (MMbbl/d) while emitting 66MT of greenhouse gases, or a carbon/GHG intensity of roughy 77 kg per barrel of oil produced . We estimate the social cost of carbon emissions (@$50/t CO2e) to be $3.3 billion per annum in 2015. This unfunded carbon liability is 5 times greater than the projected $656 million in oil sands royalty revenues for 2016/17. At the carbon levy of $20/t CO2e that will be introduced on January 1, 2017 Alberta’s oil sands emissions should be booked as carbon liability on Alberta’s balance sheet at $1.45 billion for 2017 oil sands production projected to reach 948 million barrels (assuming the same GHG or carbon intensity as 2016.
If we continue growing our production at the rate as estimated in 2016 by The Canadian Association of Petroleum Producers (CAPP), in 2030 oil sands production will reach 3.67MMbbl/d, a target that is consistent with the 100MT cap at current GHG intensity. However, the 100MT emissions cap will only result in a 3.67 MMbbl/d production cap if oil sands producers don’t improve the average emission intensity of 77kg CO2e/bbl. This is highly unlikely as producers are already actively working to lower their emission intensity.
A 100MT cap on oil sands greenhouse gas emissions valued at $50/t CO2e would equate to an annualized societal cost and unfunded liability of $5 billion per annum.
If we look closer at the largest oil sands producer, Suncor, their GHG intensity in 2015 was 425kg CO2e/m3, which equals to 67.5kg CO2e/bbl as indicated in their 2015 annual sustainability report. Clearly Suncor is already achieving performance that is better than average in the industry and this translates to more competitive operational performance as GHG emissions intensity directly translates to lower operating cost. It should be no surprise to anyone that energy consumption; natural gas, diesel and gasoline fuel and electricity, is the primary driver of operating cost. Suncor plans for 54kg GHG per barrel of bitumen by 2020 which is an achievable target with the carbon levy impact of $2.70/bbl. If similar average GHG intensity was achieved by all producers, the 100MT emission cap would translate to a 5.2 MMbbl/d production cap which more than doubles today’s bitumen production. Essentially, this would allow for continuous increase in production volumes past 2040 (4.9 million barrels of bitumen per day in 2040).
The key for Alberta to achieve the full benefits from oil sands production, is the ability of oil sands producers to lower operational costs and/or for the prices to increase. As we cannot control market prices, our best bet is to ensure our competitiveness by focusing on lowering our operating cost, which is directly coupled with energy efficiency and GHG emissions.
How the Emission Cap will Help Make Alberta Oil More Competitive
As the current push for a low carbon world is gaining global momentum, there is a high probability that oil demand will peak in the near future as expressed in recent reports by Shell and Mckinsey
It is very likely that crude oil that have the highest lifecycle GHG emissions will be less desirable and will carry a significant discount during the transition of global society to a low carbon economy. This will become a reality when the majority of jurisdictions will adopt carbon pricing, or cap and trade, or introduce strong legislation to combat emissions. To ensure continuous demand for Alberta bitumen without heavy discounts, lowering upstream GHG intensity has a much higher potential for creating prosperity in Alberta than waiting for the price to recover which may not happen if Shell’s or McKinsey’s predictions are correct.
In the next 10 years, lowering the emission intensity of Alberta bitumen may be the best option to create a stable demand for our oil sands crude, eliminate production volume restrictions under the 100MT emission cap, and to create more jobs and security in the oil sands sector. The key here is heavy investment in renewable electrification by industry players. This will provide operators with an abundance of clean energy for their own operations and will lower the GHG intensity of their production. This strategy will help oil sands producers diversify their energy offering into electricity, a market that is expected to triple when society moves toward a low carbon economy. In Canada, some cities such as Vancouver and Montreal, and the province of Ontario are already moving toward full electrification of their economies and away from combustion as a source of power and heat. When the shift accelerates and spreads, which is inevitable, we will need to replace the energy we get today from natural gas, gasoline and diesel with electricity and renewable electricity will be the most likely winner. Interestingly Suncor, the largest oil sands producer is already shifting its strategy in this direction. In January 2016, Suncor applied (hereand here) for 240 MW of solar projects to be connected to the grid by March of 2018 and 440 MW of wind projects to be completed in the same time frame.
By creating a cap on GHG emissions, the Alberta government is creating a mechanism to nudge oil sands producers to become more energy efficient.
As a result oil sands producers will lower their operating cost and become more competitive and resilient in the low price environment of the future. Without improvements, and with the low global price of oil, it will be our lack of competitiveness and not the emission cap that will limit our production. The world will still need oil and gas for a long time during the transition to a low carbon future, however, oil and gas with high GHG intensity and high operating cost of extraction and processing will not be competitive.
Will Electrification of China’s Car Fleet Limit Alberta’s Oil Sands Growth?
Alberta’s prosperity today depends much more on the rising global demand for oil than the emission cap, lack of pipelines or an access to tidewater. While having greater access to new markets would certainly help in the short term, it is the growth in demand that holds the key. Our resource industry, specifically oil sands extraction, is built on the premise of a continuous increase in global demand, driving oil prices and bringing investment to our province. As land transportation is the largest user (65%) of petroleum production, any significant improvements to efficiency of land transportation will have dramatic impact on demand growth. The significant impact will come from countries which are considered the drivers of future demand, China and India.
While the growing middle class in those countries desires to own and operate personal cars, population density and heavy air pollution are creating an unique situation, not experienced by developed countries and difficult to understand. The failing health of society due to the very heavy air pollution generated by coal and other fossil fuel based electricity generation and petroleum fuelled transportation, is forcing these governments to strongly favour cleaner, primarily electrified public and personal transportation.
The country that will define the future growth of oil demand is China with its strong government commitment to decrease air pollution in Chinese cities.
In addition to shutting down the old and most polluting coal power plants and investing the most money in the world in renewable power, China has set very ambitious targets on bringing on a large number of electric cars and buses in the next 5 years. By 2020, the production capacity of electric vehicles (EVs) in China will reach 2 million electric vehicles a year with 5 million EVs already on the road (China has an estimated 184 million vehicles) and that will include 400,000 busses and public service vehicles (here). This alone will lower gasoline demand in China by 350,000b/d as per government estimates.
If electrification of transportation follows the path of renewable energy deployment in China, we should expect that China will accelerate and exceed those targets, resulting in over 400,000 b/d in oil demand drop by 2020. China, the world’s second largest consumer of oil and gas after the US using 11.32 million barrels per day, is expected to see oil demand growth decline as it accelerates investments in renewable energy alternatives and aggressive vehicle fuel efficiency targets.
China has the greatest renewable energy capacity of any nation with a total of 118 Gigawatts of installed capacity capable of producing roughly 1,300 terawatt-hours per year of electricity (here). China is the global leader in both geothermal power (45 TWh in 2011, or about 20–50% of global output) and hydropower (with 905 TWh or 26% of the world’s total hydropower capacity of 1,000 GW. China’ is second only to Germany (40 GW of solar PV installed) with installed solar electric capacity of 20 GW as of 2013. China alone accounted for almost one-third of global installations, adding a record 12.9 GW in a few years. Germany alone installed an average of 7,600 MW per year of solar PV each year 2010, 2011 and 2012; compare this with much-sunnier-Alberta’s anemic 10 MW of installed PV solar capacity as of 2016.
The aggressive investment by China in building its renewable energy and reduction of its dependency on oil imports will be the single largest force driving the flattening of global demand for oil which will directly impact demand for future Alberta oil sands production.
India will follow China as it will have no other option primarily due to the same air pollution issues as those facing China. Europe will be not far behind by shifting personal transportation towards gasoline plug-in hybrids and fully electric vehicles and phasing out production of diesel-powered cars (here). While due to much lower population density in North America and resulting much cleaner air we may not appreciate the challenges facing other countries, there is and will be a strong and sustained push to decarbonize transportation around the world, including in North America. This will affect us first by flattening of demand and will follow by creating a drop in demand for oil and GHG intensive oil will be the first to go. It is inevitable that we should attempt whatever it takes to not only be ready but to benefit from this change.
Lowering upstream intensity of our oil and lowering our operating costs are the most rational things to do.
Decarbonizing Alberta’s Oil Production May Not be that Difficult
Decarbonizing Alberta oil production cannot happen without decarbonizing the Alberta grid. The easiest way to start is to commit to rapid investment in energy efficiencies of households, businesses and other enterprise energy use. The first order of investment should be towards reduction of absolute demand for energy by investing in energy efficiency retrofits of our entire infrastructure. The good news is that the Alberta Government recently established a new government agency, Energy Efficiency Albertaand is in the early stages of moving forward to reinvest the carbon levy into energy efficiency projects.
Alberta’s power generating capacity in 2015 was 16,241 MW which generated 81,621GWh of electricity. However, Albertans only used 54,877GWh or 67% of all available power generated in 2015; that is only 10,982 MW of total available power generating capacity, which we generated but not used or sold to others (here).
The majority of Alberta’s coal-fired generating capacity will be converted to natural gas or be shut down. The Alberta Government recently announced that it will compensate Alberta’s three largest coal-fired electricity producers (ATCO, Capital Power and TransAlta) a total of $1.3 billion ($97 million per year) over the next 14 years, to 2030 to achieve this conversion.
We estimate that this investment will result in the reduction of coal-fired CO2 emissions of at least 27MT of CO2e that valued at $50/tonne would result in an absolute and permanent reduction in Alberta’s carbon liability of $1.35 billion per annum, or 10% of Alberta’s $13.7 billion total carbon liability. Reducing Alberta’s carbon liability to the world by 10% is not only the social responsible thing to do and would actually strengthen the Alberta Government’s balance sheet. The reinsurance industry such as Munich Re, Swiss Re and Warren Buffet’s Geico (Government Employees Insurance Company, a wholly owned subsidiary of Buffet’s Berkshire Hathaway) would surely applaud Alberta’s responsible treatment of its unfunded carbon liability and might even reward Alberta with reduced insurance premiums that reflect Alberta’s reduced carbon liability.
To lower emissions from power generation, Alberta plans to transition from coal generation to natural gas and renewables (here) thereby reducing the marginal carbon liability associated with coal-fired electricity.
This is an important first step towards decarbonizing the Alberta grid and starting renewable electrification of Alberta.
We believe the investment of $1.3 billion over the next 14 years to shut in coal-fired electricity in favour of cleaner natural gas and increased renewable energy capacity will pay long-term well-being dividends for generations to come. Using clean electricity in Alberta oil extraction as a primary source of power, will accelerate lowering emissions from oil production.
Embracing Renewable Electrification is The Key to Competitiveness of Alberta Resources
Renewable electricity may look like an expensive and threatening option in resource rich Alberta, but once the renewable generation is put in-place, operating costs will be marginal as there is no longer the annual fuel costs. The same applies to electrification of industrial and personal activities. When electricity powers the majority of industrial activities, equipment complexity and operating costs go down. This is supported by decreasing electricity costs once significant renewable electrification is achieved, and the remaining demand is supplied by load-following natural gas power generation. Like any industrial activity, it takes time and capital (money) to initially invest in the right long term solution.
Once the renewable electric capacity is in place, the benefits are everlasting, including long-last reduced health-related costs to society.
We believe that this transition can be successfully balanced with the importance of sustaining Alberta’s oil and natural gas production to meet current Canadian, US and emerging Asian market demands for our petroleum assets. Can we have our cake and eat it too? We believe so. So long as the world needs petroleum to fuel vehicles, homes and businesses, we envision Alberta’s oil will be in demand. We believe Alberta can continue to produce oil from the oil sands at the current volume of 2.36 million barrels per day; at current rates of production the oil sands will last another 190 years (based on an estimated 166 billion barrels of economic reserves remaining). At current US$50/bbl oil prices Alberta’s oil sands production in 2017 (projected to reach 948 million barrels) would be valued at US$47.4 billion in sales. This production is forecast by the Alberta Government to generate royalty revenues of roughly $656 million in 2017–18. Unfortunately, project oil sands royalty revenues will be a mere 1.3% royalty rate of return on the estimated value of oil sands production. On the positive side Alberta can reduce its $13.7 billion annual carbon liability by investing wisely in renewable energy capacity, energy efficiencies, and decarbonizing Alberta’s upstream production and permanently lower operating costs. Moreover, investing in Alberta’s abundant and under-utlized renewable energy capacity of solar, wind and geothermal represents both a wise investment and would position Alberta as one of the world’s total energy superpowers.
This is what we need to do to make the Alberta economy resilient and decoupled from existing market cycles which we cannot control.
Part III: 50% Renewable Alberta — Here’s How We Will Get There
Why Alberta Can Easily Become a Renewable Energy Leader
There are currently 18 coal-fired electricity plants in Alberta, and all but six are already scheduled to shut down before 2030 (in 15 years) with a portion converted to natural gas. An additional 4,041 MW of natural gas based electricity capacity will be added over the next 15 years offsetting much of the losses in coal-fired electricity. Estimates of the cost of converting coal-fired plants to natural gas vary however, the Alberta Government will pay three coal-fired electric generating companies (Capital Power Corp., TransAlta Corp. and ATCO Ltd) $1.36 billion or $97 million per year to close their plants earlier. When we looked at the planned shut-down schedule and at current electricity consumption (10,982 MW in 2015) and future electricity consumption trends, we concluded that natural gas generation capacity alone would be nearly sufficient to meet future annual electricity consumption of 51,915GWh as Alberta’s natural gas electricity generation is projected to reach 11,111 MW in 2030.
What new projects are planned or in the cue? According to the Alberta Energy Operating System (AEOS), there are an additional 95 new energy projects that are planned or being considered totalling 11,677 MW of newelectricity energy capacity. Of this total 7,474 MW (64.0% of the total) will be renewable energy. Below are the new projects and their expected capacity:
- 18 solar PV projects 560 MW
- 42 wind projects 6,872 MW
- 1 biomass project 42 MW
- 29 natural gas projects 4,031 MW
- 1 coal-fired project 7 MW
- 4 energy storage projects 165 MW
If we the current renewable energy capacity and the planned renewable energy projects, a total of 10,553 MW of renewable energy capacity can be expected in the next 10–15 years. This would be comprised of:
- 8,331 MW in wind
- 900 MW in hydro
- 570 MW in solar PV
- 489 MW in biomass capacity
- 165 MW in energy storage
- 98 MW in biomass
When you add this all up Alberta could have as much as 21,664 MW of installed electrical capacity by 2030, of which 10,553 MW (almost 49%) will come from renewable energy (including waste heat recovery and storage).
This suggests that Alberta will not only significantly increase its renewable energy capacity and but will have twice as much total electrical capacity than the expected electricity demand.
We should note that in the case of renewable energy, such as wind and solar, not all of the capacity is available on a regular basis. For example, 2015 data shows that the net capacity factor for wind was 30.6% and 15.1% for solar PV. In comparison, the capacity factor for coal was 77%, 53% for natural gas, and 22% for hydro. By net capacity factor we mean the actual available electricity output during the course of a year from these sources as a percentage of what each sources could be capable if it were possible for it to operate at full nameplate capacity continuously over the same period of time.
Even if we use the Alberta Government’s conservative projections of 5,000 MW of new renewable energy capacity to be installed by 2030, Alberta will be in an enviable position in Canada as the renewable electricity capacity will increase from 18% to 48% in the span of less than 14 years.
Alberta Could Be 50% Renewable Energy Powered by 2030
Based on projected electricity generation capacity development to 2030, Alberta is expected to reach an important milestone: the potential that 50% of our electricity supply could come from renewable energy. The following table shows the projected electricity capacity and annual generation in 2030:
With Energy Efficiency Alberta initiatives going forward, we can expect, 1% per year energy efficiency improvement over the next 14 years throughout the province. A conservative 10% energy efficiency improvement over 2015 electricity consumption of 54,877GWh would reduce electricity consumption to 49,389GWh or 63% of expected generation by 2030. Assuming that 50% of natural gas power generation will be load-following, Alberta can be as much as 50% supplied by renewable energy by 2030.
How much will the additional 7,443 MW of renewable wind and solar energy capacity development cost Albertans? We estimate a capital investment cost of roughly $13.5 billion for the 6,872 MW of new wind energy capacity (based on costs of $2.00/W installed) and $1.4 billion for new solar capacity (based on $2.50/W installed).
These capital cost investments compare to the estimated $1.3 billion (spread over 14 years) in compensation money or grants that the Alberta Government has recently announced it will provide to major coal-fired electricity producers to convert the majority of remaining coal-fired plants to natural gas or close them entirely.
Alberta’s Environment Minister, Shannon Phillips, estimates that the 5,000 MW of new renewable energy capacity over the next few years will require investment as high as $10 billion which is very similar to our analysis based on the cost per Watt of installed renewable energy capacity.
In addition to the economic benefits of capital investment into renewables, thousands of people will be employed including the unaccounted long term benefits of reduced healthcare costs with dramatically reduced air pollution.
Could We Use Excess Electricity and Make More of Alberta Oil Available for Export?
It is obvious that we have and will have excess of electricity in Alberta for a long time even without coal power generation. Making power and not using it or having natural gas generation working only 26.6% (as shown above) of the time is not the best option for any economy. We should take advantage of the available electricity and if possible minimize our own consumption of oil so we can sell more to other jurisdictions.
We can look to examples from Norway and Ontario. The starting point should be electrification of our public transport and followed by private transportation. For example, there are 300 metropolitan areas in 43 countries who use electric public busses, some of them for almost 100 years. This is a clean and very reliable option. Trolleybuses are a very economical choice for inner city public transportation, and battery powered or hybrid busses with compressed natural gas range extenders may be the best option for long range public transportation. The City of St. Albert, for example, recently purchased 3 new electric transit buses to become the first municipality in Canada to order long-range all-electric buses to deploy on city streets for public transit use.
We expect that the biggest gain will be with purchasing of personal electric vehicles. Battery electric vehicles (BEV) are excellent city cars while Plug-In Hybrids (PHEV) are the most sensible short and long range vehicles especially since the average person drives less than 60km a day. EV’s have great performance in a cold climates like ours, as tested by numerous Scandinavian drivers over the years. Considering that the average PHEV or BEV will use only 17kWh/100km of electric driving, Alberta could accommodate a significant number of these electric vehicles without the need for additional generation capacity.
Today there are almost 3,000,000 vehicles registered in Alberta under 4,500kg (that’s over 2 vehicles for every Alberta household). The average distance these vehicles travel is 15,600km every year. If we would convert only half of these vehicles (1.5 million) to PHEVs and/or BEVs in the next 14 years, we would only need 3,978GWh of electricity, equivalent to increasing the load factor for natural gas generation in 2030 from 26.6% to 30.7%.
Albertans would charge their cars in their garage while they sleep. They will never have to worry that the price of gas goes up by 5–15% because of the coming long weekend. And with the guaranteed maximum cost of residential electricity at 6.8 cents per kWh (as legislated by the Alberta government), it would cost $180 per year to drive a single vehicle 15,600km.
That’s over $2,000 savings per vehicle in a single year! And Alberta will be able to sell an additional 79,500 bbl/d of crude oil to the outside world.
Can Albertans Achieve Energy Independence and Boost the Economy? 900,000 Alberta Solar Rooftops
Minister Phillips’ projections for new renewable energy investments do not include the untapped potential of solar PV capacity for installation on Alberta’s residential rooftops. There are currently about 886,000 single-detached homes in Alberta. Could Alberta achieve the PV solar rooftop capacity of Germany in the next 10 years?
In less than 20 years of investing in renewable energy assets, Germany has achieved 33% of its electricity consumption from renewables. And there are days when almost 100% of its electricity needs are met with renewable energy. Germany has 4,090 times more solar electricity capacity than Alberta with the current 10.0 MW of installed solar capacity in 2016. Germany’s photovoltaics (PV) accounted for an estimated 6.2 to 6.9 percent of the country’s net-electricity generation in 2014. About 1.5 million photovoltaic systems have been installed all over Germany, ranging from small rooftop systems to barns.
In contrast, Alberta has more sunshine than Germany, therefore about 1.5 times more sunshine hour PV potential than Germany. For example, the yearly photovoltaic potential in Calgary is 1292 kWh/kW compared to Berlin’s photovoltaic potential of 848 kWh/kW. This means a one-kilowatt solar system in Calgary will produce 52 per cent more electricity than one in Berlin.
The average Alberta household in Alberta consumed about 7,200 MWh hours per year of electricity in 2015. Let’s say there are roughly 900,000 single-detached homes in Alberta with roof tops that could handle a 4.0 kW array. A 4.0 KW PV solar system would be sufficient to offset about 75% of the average household’s current electricity use, about 7,200 kWh annually. A 4kWh system (inverter size) with 4,770kW of panels (18 panels x 265W per panel) will produce 5,400kWh per year (this is based on actual data from an average installation with fixed position in Central Alberta) which is 75% of 7,200kW.
In terms of a business plan, let’s say we had a plan to install PV solar arrays on 90,000 homes per year over the next 10 years. In 10 years every household in Alberta would have a full solar array making each household an independent green power producer and which would reduce the demand for electricity from Alberta’s current electrical grid by a total of 3,600 MW
Adding 3,600 MW of additional installed PV distributed residential solar energy capacity in 10 years may seem like an ambitious goal for Alberta. It took Germany 20 years to break the ground and go from 10 MW (Alberta’s current total) to 40,490 MW of installed solar PV generating capacity. Germany’s solar electricity capacity alone is 2.5 times more than Alberta’s entire electricity production capacity of 16,200 MW. Yet in Alberta, given the technical knowledge today, this goal is certainly achievable.
Germany has about 1.5 million photovoltaic systems installed all over the country, ranging from small rooftop systems, to medium commercial and large utility-scale solar parks, that altogether contributed 35.2 terawatt-hours (TWh), or about 6.9 percent of Germany’s electricity needs in 2014 (preliminary estimate). Germany had as much PV solar capacity in 1994 (about 12 MW) as Alberta does today.
What would this cost Alberta per annum? According to solar PV Engineer Gordon Howell, the current cost of residential solar PV installed is roughly $2.50-$3.00 per watt. Germany’s average cost of PV solar (installed) is currently about 1.24 Euros/W or C$1.77/W). Applying the higher $3.00/W for installed solar PV for Alberta households, a capital investment of $10.8 billion would be required or roughly $1.08 billion per year over a 10-year period. It is likely that the cost per kW of solar PV systems would be less than $3.00/W with such a massive capital investment. That’s only 54% of the the projected $2 billion per annum from Alberta’s carbon levy. Also $10.8 billion in total capital investment in solar energy is less than one year of Alberta’s carbon liability of $13.7 billion.
The potential is tremendous as such an investment would create thousands of jobs and yield immeasurable well-being benefits to Alberta for generations to come, including a reduction in Alberta’s carbon liability.
Alberta could quickly become a model for personal energy independence as it transitions from coal to renewable energy. By promoting self-generation of renewable electricity by majority of Albertans, we can guarantee the lowest personal electricity cost for the foreseeable future.
We can Finance our Personal Energy Independence and Employ Many Albertans
Where could $10.8 billion come from over 10 years? Consider, the creation of a $10 billion fund and a crown owned corporation responsible for deployment of 3,600 MW of distributed residential solar power in the next 10 years. That turns out to be the same amount ($10 billion) that is expected to be collected from the carbon levy over the next 5 years.
The annualized cost of such a fund would be $1.0 billion which could be capitalized through part of the carbon levy revenues.
The success of such an investment would be dependent on creation of high volume contracts with essential suppliers and support for relevant education. The process would include; a high volume contract with solar manufactures to secure supply of solar panels for deployment in Alberta; a high volume contract with selected inverter suppliers, requiring a minimum 50% Alberta value added; and a high volume contract with roof mounting system suppliers for manufacturing mounting systems in Alberta, 100% Alberta made. All combined with the creation of solar training centers in collaboration with existing technical institutions to educate and train solar installers.
$10.8 billion in solar PV infrastructure could also be financed with interest-free loans or one-time grants from ATB Financial. Few Albertans appreciate the true potential of having North America’s largest public bank, with $47 billion in assets (namely loans to 730,000 Alberta households and businesses), to help finance Alberta’s renewable energy future. Since ATB Financial effectively serves as a financial services arm of Alberta Treasury Board, it could be empowered to help finance the 3,600 MW of new solar PV capital investment that would yield significant well-being returns on investment for generations to come as well as employ many of the currently unemployed or underemployed Albertans impacted by the fall in oil prices. ATB Financial’s legal mandate is to provide financial services to Albertans and it has the power to create credit or loans in support of Alberta’s economic needs. ATB could play a critical role in providing low-cost (even zero-interest) financing and demonstrate the real value of such a bold capital investment in terms of a positive well-being impact on Albertans.
This allow for up to 1.5 million Alberta households to pay the same low price for electricity as they are paying today for 20 years and after the system is paid for, they will have minimum or no electricity cost for at least another 20 years.
The most important immediate benefit during the current economic slowdown would be creation of over 5,600 full time, direct jobs in Alberta for an 10-year period or over 56,000 person-years of direct employment.
If you wonder if $10.8 billion is too much, let’s look how it compares with other projects to generate electricity in Canada.
Site C hydroelectric project in BC was budgeted at $8.8 billion and is now expected to cost over $11 billion once it is completed. It will create 10,000 person-years of direct employment. It will generate 5,100 GWh annually. A huge area of land will be flooded with a large expected environmental impact. It will require upgrades to the electric distribution system and the remote location will result in larger line loses.
Muskrat Falls hydroelectric project in Labrador is expected to cost $11.4 billion and will generate 4,500 GWh annually. It will create 9,100 person-years of direct employment during construction. Recently discovered issues with methyl mercury levels due to flooding, may in fact limit generation capacity or will result in additional cost to remove vegetation or soil from the flooded zone.
By comparison, 3,600 MW residential solar (4 kW systems on 900,000 rooftops) in Alberta will not require any land or improvements to distribution infrastructure and would generate about 4,860 GWh of electricity annually. The line losses would be minimal, as during the day, commercial and industrial users in immediate proximity will use the excess energy.
It can be delivered at a similar cost to large industrial solar projects and generate thousands of jobs locally rather than dramatically fewer jobs in a remote location. There will be no environmental impact as we will utilize existing and available assets — residential roofs that we already have.
Making Alberta the Canadian Renewable Energy Leader
Germany is a model for Alberta of a renewable energy superpower. In 18 years or less Germany has gone from 5% renewable capacity to 33% and most of this happens when the cost of solar and wind generation was more than 5 times higher than what it is today. The German government has set a target of 66 GW of installed solar PV capacity by 2030 from the present 40 GW, to be reached with an annual increase of 2.5–3.5 GW. Germany has set a goal that 80% of electricity will come from renewable sources by 2050.
Germany consumes about 10 times more electricity than Alberta; Germans consumed 565,731 GWh of electricity in 2013 with 171.566 GW of installed capacity compared to Alberta’s 54,877 GWh of electricity consumed and 16.252 GW of installed electricity capacity in 2015. Germany’s net energy production in 2014 was 533,200 GWh of which 47.1% is from coal, 17.2% from nuclear, 6.4% from natural gas and 29.3% from renewables (wind, solar, biomass, hydro). However, on a per capita basis Alberta consumed far more electricity than Germany; 13,236 kWh/capita for Alberta versus 7,091 kWh/capita for Germany.
As noted Germany in May of 2016, Germany set a record with 95% of its electricity demand being met by its renewable energy assets alone. Germany set a world record for solar power production on April 21, 2015 with 25.8 GW produced at midday. On midday of Saturday May 26, 2012, solar energy provided over 40% of Germany’s total electricity consumption, and 20% for the 24h-day. Relative to Alberta’s electricity use, Germany’s record solar energy day in 2012 would be equivalent to more than 2 times Alberta’s total electricity demand for any single day.
Germany solar capacity has been growing considerably due to the country’s feed-in tariffs for renewable energy. As of 2012, the German feed-in tariff (FiT) costs about €14 billion (US$18 billion) per year for wind and solar installations or roughly C$297 per German citizen. The cost is spread across all rate-payers in a surcharge of 3.6 €ct (4.6 ¢) per kWh and represents approximately 15% of the total domestic cost of electricity.
The average price for an installed PV system in Germany is currently 1,240 Euros/kW or C$1.77/W (compared to our assumption of $3.00/W installed). German prices of PV systems have decreased more than 80% in 5 years since 2006.
The German model suggests that Alberta could easily reach similar PV solar capacity for every household in 10 years or less with a similar model, even without a feed-in-tariff to incentivize investment.
Creating Another Pan-Canadian Legacy
Another unique and innovative opportunity to take advantage and sell the unutilized natural gas generation in Alberta in 2030 and strengthen Alberta’s green energy future is building a high tension DC link connecting provincial grids between BC and Quebec with participation of every province along the way. This would not be easy and would require a true Pan-Canadian electrification strategy. Connecting hydroelectricity that can be used as storage and on-demand generation would open the door to deploying new wind and solar generation primarily in Alberta and Saskatchewan.
Lets face it, this would not be an easy endeavour, yet by connecting our grid to the rest of Canada, we could decarbonize our upstream oil and gas production faster by using cleaner electricity to power our upstream operation. As Ontario is setting its goals on full electrification of the economy, Albertans have the best solar and wind resources in Canada and should take a full advantage of them. When electricity demand will grow with the decarbonization of the Canadian economy, we could dig in our heels and fight a losing battle or we can show true leadership within our confederation. Alberta has the lowest debt per capita, we should invest wisely in our future, give our oil and gas industry access to cleaner electricity and promote the transition to a low carbon economy while taking advantage of our non-renewable and renewable resources.
This can all start by Alberta taking a leading role to build a Pan-Canadian DC Power Connector.
Yes, Alberta’s Carbon Levy is a Blessing in Disguise!
We believe Alberta’s carbon levy is a great tool to transform our economy into a model of a flourishing green economy of the future and give Albertans a resilient and world-class position as a clean energy supplier for Albertans, for Canadians and for the World. We can build bridges with the growing and impatient young generation that demands a better and cleaner future. We can supply hydrocarbons with lower cost and GHG emission intensity for a long time while the global transition towards a low carbon economy is taking place. Alberta can have a leadership role in Canada, which, will require vision, perseverance, and sacrifice to make it work, but the benefits will last for decades to come.
The Carbon Levy will help us change the perception of Alberta around the world, win social acceptance for our resources and show that we are true energy leader for today and tomorrow.
We have proved many times in the past that we are capable of achieving great things and this is one of those times. Let’s embrace and champion the carbon levy. Let’s clean and decarbonize our upstream oil and gas production. Let’s become the supplier of the oil and gas with the lowest operating cost and GHG emission intensity. Let’s become the emerging renewable electricity leader of Canada.
Let’s embrace this powerful opportunity to take the lead in determining our future!
About the Authors
Mark Anielski is President of Anielski Management Inc. an Alberta-based economic advisory consulting firm that advises governments, corporations and First Nations on economic well-being. Mark is an economic strategist who specializes in the economics of well-being. He taught corporate social responsibility, business ethics and entrepreneurship at the University of Alberta’s School of Business between 2003–2012. He is schooled in economics, accounting and forestry. He served as a senior economic advisor to China between 2003–2006 in helping China develop natural capital accounts, green GDP estimates and new economic well-being indicators. Mark believes that our measures of progress should be focused on the well-being of people and the planet. He is the author of award-winning book The Economics of Happiness: Building Genuine Wealth. In 2008 Alberta Venture magazine named him one of Alberta’s 50 most influential people.
Krzysztof Palka has diverse expertise in sustainability focused business strategy, renewable energy, sustainable operations, technology development, lean manufacturing and oil and gas production optimization along with an executive education from Harvard Business School and MSc in Mechanical Engineering. Krzys is a serial entrepreneur with a keen sense for innovation, process improvement and personal bias towards applying simple, knowledge based solutions to solve complex problems. He is currently pursuing business opportunities in clean technologies, carbon-negative plasticsand energy efficiency to fulfill his passion for a sustainable future.