Why Conservatives Should Embrace Solar + Storage
Originally published on RenewEconomy.
When new Australian prime minister Malcolm Turnbull promises a government that will embrace and even pursue new disruptive technologies, one senses that the principal roadblock will be those vested interests about to be disrupted, and their supporters in the conservative right.
Conservatives, by their nature, do not easily accept change. But as Turnbull notes, change is happening, and Australia has got to get in board. This is particularly so in the energy sector, where rooftop solar and battery storage and other smart technologies are promising a revolution that will sweep aside the business models of incumbent networks, generators and electricity retailers.
The pace of that revolution could be accelerated by Turnbull, or it could be slowed. Much will depend on the attitude his government adopts to regulatory reform, and whether his Coalition government continues to try and dismantle institutions like the Clean Energy Finance Corporation and the Australian Renewable Energy Agency.
Both these bodies are playing key roles in developing new business models that could make solar and storage more accessible to lower income families, apartment dwellers and community groups. It includes such concepts as power purchase agreements and “virtual power plants” (where the output of many households are pooled and traded).
Conservatives are dismissive of such ideas, as they have been of much of what the CEFC and ARENA have tried to do. But even if they don’t get inspired by the actions of the so-called Green Tea Party in the US, which has taken up rooftop solar and the power it gives the individual consumer as a conservative cause, they might like to heed the words of one of their own, the current energy minister and treasurer of Western Australia, Mike Nahan.
When Dr Nahan was elected to the WA parliament in 2008, his views seemed pretty much unchanged from the days he headed the ultra conservative think tank, the Institute of Public Affairs, and many others in the hard right of the Abbott government, and who still sit in the Coalition ranks.
Those views included skepticism about climate science, a disregard for renewables, and a contempt for the workings of environmental groups, unless they happened to be the IPA-sponsored Australian Environmental Foundation group which campaigned against concepts like Earth Hour and Environment Day whaling and forestry bans.
But since Nahan became the state’s energy minister, in 2013, and then the state’s treasurer as well, he’s had to change his tune.
The WA energy market, he has discovered, is anathema to everything that Nahan has ever stood for. Actually, it is a basket case, created by an ideological blindspot towards renewables, and an equally blind attachment to fossil fuel solutions.
It is a market that is heavily subsidised by the government – which pays more than $600 million a year, or more than $500 a households – to keep electricity prices at an artificially low level. Without them, electricity bills would be 30 per cent higher. As recently as 2008, the government subsidised 72 per cent of the cost of electricity.
The WA energy market also has lousy regulation that are gamed by participants. A so called “capacity market” has resulted in taxpayer’s money being used to build fossil fuel peaking plants that have not, and will not, ever been switched on.
And the state policy making has been built around an attachment to base load fossil fuels, even blowing $300 million on trying to extend the life of a 45-year old coal generator, and it has a complete blind spot on renewables. Unlike the main market in Australia, the WA market operator has no effective wind forecasting mechanism.
When the first utility-scale solar farm in Australia was opened in Geraldton north of Perth in 2012, the then energy minister Peter Collier gave the impression he hoped it would be the last. Even Nahan said the following year that the hoped no more wind and solar projects would be built in the state. Solar was not even mentioned in a government-mandated review of the state’s energy choices, which came up with the bizarre proposal of importing coal from Indonesia to keep its ageing coal plants running.
Now, Nahan concedes, solar will dominate the future of the grid. Within a decade, he said earlier this month, the bulk of the state’s daytime demand could be met by solar, most of it generated on the rooftops of the state’s households and businesses.
The energy of the future was not just cheap, it was democratic too. And it was likely to force out coal-fired generation. “It’s low priced, it’s democratically determined, and it’s something we are committed to facilitating,” Nahan declared at a conference in Perth.
His former colleagues at the IPA might have thought so, but Nahan wasn’t hallucinating when he made those predictions. The state’s Independent Market Operator, which manages the main grid in the south-west corner of the state, predicts by 2035, 90 per cent of homes and three quarters of all businesses could be producing their own electricity.
Within a decade, there could be 2371MW of rooftop solar capacity in the local grid, more than average demand. The peak would shift from mid to late afternoon until after 7.30pm.
WA – with its ageing infrastructure, dependence on expensive fossil fuels and lop-sided subsidies, is emerging as ground zero for the energy revolution that everyone is predicting. Like Hawaii, which has a huge fuel import bill, the authorities are realising that cheap energy can only be provided by renewable energy, solar and storage in particular. Already they are talking about cutting off regional towns from the grid and powering them with renewables and storage to save costs. Some businesses are already doing it.
Everyone is watching with interest with how Nahan goes about his reforms. The man who would have been in the back row of the push to renewables, is now at the cutting edge of adopting it.
Already, Nahan’s has been damming when presented with evidence that the state-owned electricity retailer, Synergy, had effectively banned solar households from adding battery storage and electric vehicles. What was really banned was the ability to export electricity back into the grid if those technologies were installed, but the standard contract was worded so badly it gave the impression they were not allowed.
Nahan called it “red tape gone mad”, and promised a review. He said regulators were being too slow to adapt to the “revolution” in the energy market, which includes not just rooftop solar, but also battery storage and EVs.
The next moves are going to be just as intriguing. In broad terms, Nahan wants to remove the government subsidy on electricity bills and throw open competition to the monopoly-government owned utilities.
The removal of the government subsidy – and the resulting surge in electricity bills – will likely accelerate the uptake of solar and storage even more attractive. Synergy rival Alinta Energy has already forecast that it will offer solar and storage to customers.
It could be a test case for what happens in the rest of Australia. Already, networks and retailers are starting to look at battery storage, but only on their own terms, and they want competition to be kept out of the market.
The national regulators are also slow moving, postponing reforms that could have saved customers billions in avoided network costs. They are all likely to get a big shock as solar costs continue to fall and battery storage enters the market. A decade ago, consumers had no choice. Now they do. That should fit into the conservative narrative.
Reprinted with permission.
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The word “conservative” has lost any clear meaning. There are still a few old-style Tories, in England stereotypically country squires, who value tradition, community, habit and heritage, and are suspicious of innovations that threaten them like wind turbines and same-sex marriage. Them there are free-market liberals, who are opposed to tradition and want to speed up capitalist change: that’s people like Nahan and Abbott. Both groups should be receptive to the energy transition, on different grounds. The traditionalists because climate change will destroy the natural heritage, as the internal combustion engine has destroyed our towns and cities with noise, danger, and pollution; the economic liberals because clean tech is the winning technology that will destroy the fossil fuel dinosaurs by Darwinian competition.
I’m a traditional conservative and I’m completely fine with replacing fossil fuels with renewables. For the most part, free market forces have driven down the cost of solar and will do so with storage too. The problem is people keep acting as if putting solar panels on a roof is some kind of ‘social movement’. It isn’t, plain and simple. Solar panels are just like any other major appliance that we put in our homes, like air conditioning. The decision to go solar at this point is completely an economic choice now. Solar is not going to change society because we will still use electricity as we have been using it. The only difference is that we now can purchase solar as an appliance just like we could a natural gas generator. Unfortunately, not all conservatives realize or want to admit that the free market tradition includes technological and market innovation. Newer technologies, like solar (sort of), don’t change the way we are supposed to treat people by any metric. Therefore, any new technology has no implications on social morals whatsoever.
“The problem is people keep acting as if putting solar panels on a roof is some kind of ‘social movement’. It isn’t….”
I disagree. First, not everyone is operating with the same motivation or set of motivations. But I suspect there are many people who have installed solar, even paying extra for their electricity than what they would have spent for grid power, because they wanted to do something, personally, to help fight climate change.
Then, I suspect there are many people who have put panels on their roof because it was their way of helping plus is saved them some money.
Those are the people who helped build the installation industry to the point at which other people began installing simply for economic reasons.
Market forces drove down the cost of panels and installation, but first the market had to be created. Subsidies and people paying ‘a little extra’ for electricity created the market. The invisible hand stayed in the pocket until solar became a good economic deal.
I understand that people have different motivations, but installing solar to address environmental concerns is not inherently a social movement by itself. I’m sure there are some people who have installed solar or other renewables because they are fascinated by the technology, which is a motivation that does not necessarily engender a movement either.
Here’s what I’m trying to say: be careful how a motivation as a social imperative to implement a technology is received. I completely agree that concerns over climate change is valid reason to install solar panel, but it is not the sole reason to endorse solar both politically and to encourage other people to invest in the technology. I know that you understand that; however, not all solar advocates really understand this.
Endorsing solar by heavily emphasizing a moral imperative to address environmental concerns has unintended consequences to the perception of the solar industry. For example, several people in my state have installed solar and have gone off grid because they are doomsday prepers or conspiracy theorist fearing some government plot. I know this is a ridiculous comparison, but this is how some conservatives perceive environmentalist. This is the case because everybody does not prioritize environmental issues, so they get inundated with politically driven denial that comes from sources that are typically more trustworthy.
Thankfully, the economic standpoint for solar is finally gaining traction, which can entirely render climate change denial useless. This is why I use economic arguments for renewables instead. As the number of people who work in the industry grows, the economic standpoint will completely solidify the solar industry. Especially if the ITC is retired and solar competes without subsidies.
To answer your last point; I understand the role that government research can play in technological development. Government spending on research is practically a margin of error when compared to other spending, so it really isn’t that big of a deal. However, subsides to support business is an entirely different matter. If they weren’t taxed so much already subsides would not be necessary. — Speaking on that point, I just realized something. Improving air quality, improves overall general health. Improvements in general health reduce the necessity for healthcare expenditures, like Medicaid. Burning fossil fuels reduces air quality. Therefore, burning fossil fuels increases government spending on Medicaid. (haha couldn’t resist making that point).
Your first three paragraphs, we generally agree, if I read you correctly. The differences are details.
Here I don’t agree –
” If they weren’t taxed so much already subsides would not be necessary.”
The high cost of wind turbines and solar panels was not due to taxes. The reason was low volume manufacturing and since these are “replacement” technologies there was no market demand that was willing to pay a premium price. (Outside a few extremists – like off the grid people such as me. And some specialized uses where grid power wasn’t available.)
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There are conservatives and there are conservatives. I’m going to leave aside the people who vote Republican because that’s where the racists, homophobes, and religious zealots have largely gathered.
The fiscal conservatives, the people who want the government to spend as little as possible – seems like they should be strongly behind renewable energy and electric cars.
Coal pollution costs the US taxpayer between $140 and $252 billion dollar per year. We pay that either through our taxes (Medicaid, Veterans benefits) or our health insurance premiums.
We don’t need to spend that money. We can get rid of coal very quickly if we want to. We might have to spend a bit more money but let’s look at how much we’ve spent on wind and solar so far.
From the time we started subsidizing wind and solar until the end of 2013 we spent a total of $25 billion.
We spent over all years 9% to 18% of what we spend in a single year to deal with coal health problems.
I can’t give you a dollar amount, but some amount of spending could get coal shut down in a few years and then we’d save that $140 billion to $252 billion every year going further.
Say an average of $200 billion a year. $1 trillion in 5 years.
How much do you think we could wisely invest in order to save a couple hundred billion a year?
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Now electric cars. EVs.
We’re spending a lot of health dollars for tailpipe pollution health damage.
And we spent $9 trillion (?) on three oil wars.
We could quit using most of the oil we now use. Stop buying oil from people who don’t like us. Stop pumping money into the pockets of people who want to harm us. Stop sending dollars overseas, keep them at home.
And the cost of driving an EV would make for much wiser spending on us individually.
The average US car gets about 25mpg. With $3/gallon gas that’s 12 cents a mile.
The most efficient car gets about 50mpg. With $3/gallon gas that’s 6 cents a mile.
EVs use 0.3 kWh/mile or less. With $0.12/kWh electricity that’s 4 cents a mile. Plus no oil/filter changes, fewer brake rebuilds, lower maintenance costs.
And cleaner air.
Fiscal conservatives, especially the ones who understand investing, should be totally behind renewable energy and EVs.
Perhaps some enterprising company in the South will market solar panels with Confederate flags or NRA slogans stencilled into the glass. Also T-shirts labelled “Wind turbine high iron sissy”.
http://thumbs.media.smithsonianmag.com//filer/Lunch-atop-a-skyscraper-631.jpg__800x600_q85_crop.jpg
Maybe not a confederate flag, but a sponsored NASCAR driver and a joint SEIA – NRA target shooting event would not be a bad idea. Bring as many sharp-shooting, blue collar solar workers to both and you’ll win them over for sure. Haha
” It really comes down to investments from venture capitalists and incumbent industries or government loan guarantees.”
A loan guarantee is a subsidy. It is an acceptance of risk which we commonly call “insurance”. A taxpayer provided loan guarantee is a gift of insurance.
“By that, I’m still trying to determine what I think in this category of gov’t spending.”
How about communication satellites? Venture capitalists could have never paid for Cape Canaveral and all the ground work needed to put the first generation or generations of satellites in orbit.
Some advancements simply don’t have the clear path and short enough path to profits to attract private money.
” The wind PTC is a prime example of what happens to an industry when a poorly designed tax credit system is implemented.This graph from the AWEA shows what happens when the tax credits expire.”
I think if you’ll look more closely you’ll see that the problem was not the PTC, but the politics played with the PTC (and ITC).
The tax credit was a ‘year at a time’ program that was not renewed in a timely fashion. Companies were unable to create multi-year programs but were jerked back and forth by having the program turned off and then turned back on every year, sometimes very late in the year.
Politics created great uncertainty over and over and over. It’s hard to run a business or line up financing when uncertainty levels are high.
Building wind farms is big business. You can’t contract for materials and equipment, sign leases if you can’t determine if the support will be available or not.
“The solar industry is exhibiting the same characteristic as the ITC expiration looms in the future.”
No, what is happening/will happen with the solar industry will be entirely different.
What we will likely see between now and the end of 2016 is a ‘rush to install’.
It won’t be a “bubble”, it will just be a lot of people pushing to get their systems (private and utility) up and running while they can get a 30% rebate.
When the rebate expires (or decreases to 10% in the case of utility solar) we’re likely to see a large drop in installations.
And following that drop we’re almost certain to see installation prices drop.
There’s going to be little to no motivation for installers to drop their prices until the subsidies expire. Increased demand will probably cause some to raise their prices. But during the post-subsidy slump we should see installers working hard to bring their prices down in order to increase demand.
Remember, it’s the installation costs that are elastic. Other parts of the world are installing for less than US prices and everyone buys hardware for the same price.
Following the early 2017 slump we should see installation prices start to fall and installation rates start to recover.
Remember, the subsidy program has done what it was designed to do. It’s created supply and installation companies. Those companies want to survive. With the subsidy ‘training wheels’ gone they will work very, very hard to make themselves successful..
The solar subsidy program has done its job and done its job in a responsible fashion unlike the wind subsidy program.
“The biggest caveat in this argument is that both tax credit systems were poorly designed. The ‘off switch’ for the tax credit did not include a step down to transition the industry off the subsides smoothly. ”
The wind subsidy program was terrible. The solar program, not so bad.
The solar program probably could have stepped down sooner, but the price of solar has moved far faster than anyone could have foreseen.
IMHO the best program would be an open-ended FiT program in which the tariff would automatically scale down as prices drop but be set high enough so that new entries (customers) would be guaranteed a large enough profit to bring them into the game.
It would need to be terminated at some point but that point should should require action by the controlling body (Congress in the US case). Runs until actively stopped and it would be set up so that the stop date was known in advance.
Germany’s and Spain’s FiT programs were wildly successful in getting a lot of solar installed, but didn’t scale down rapidly enough and ended up being more expensive than the needed to have been.
“What! I can put solar panels on my roof, quit paying for electricity, and make 3% on my investment? Get ‘er done!”
The problem for Spain and Germany is that installation prices dropped and the “3%” unnecessarily grew to 4%, 6%, ….
“Unfortunately, fossil fuel subsidies also contribute to the problem as well. Renewables are subsidized to compete with simultaneously subsidized fossil fuels, so the true market price isn’t even reflected in what we pay for.”
Absolutely. I don’t know the history of fossil fuel subsidies but I think the major reasons were to support US industry and raise the standard of living for citizens by making energy cheap at the meter/pump.
There’s nothing wrong with that. A second legitimate role for subsidies is to increase use/consumption if that increase benefits society.
Subsidizing milk and baby food is a good thing if it means we have children who are more capable of learning.
” If all the energy subsidies are removed (through a structured step down process hopefully), it will ultimately benefit renewables in the short and long run because they are already cost competitive with fossil fuels unsubsidized.”
Yes, but you know that won’t happen. The fossil fuel industry has too much political strength for the playing field to be leveled.
Wind and solar are losing their subsidies. They’re going to have to compete against subsidized fossil fuels. And nuclear.
Two of Exelon’s financially failing reactors in Illinois recently received subsidies so that they wouldn’t close.
No valid case was made for needing their power. They won subsidies via political strength.
But, as you say, wind and solar prices are now low enough that they will win. The question we now need to face is whether wind and solar will win fast enough to help us avoid extreme climate change.
And here we may need to go back to ‘baby food’.
We no longer need subsidies to help bring down prices, but we may need new subsidies to increase use rate. We may need to tip the scales toward renewables and closing fossil fuels faster than the rate at which the FF plants would naturally die and be replaced by less expensive RE.
I think that’s a question we’ll be actively asking ourselves a few years from now.
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I haven’t proofed all this stuff – I’m not fully awake. It’s sort of flow of consciousness and I’m not fully conscious.
I’ll try to go back over and clean it up as needed a bit later.
Haha, I completely understand; I’m responding as I’m editing my thesis. I’m not fully anything right now.
I am aware that loan guarantees are a subsidy, but I’m completely on the fence on for this kind of subsidy. I still thinking through whether its a good or bad type of government subsidy. Satellites and the space program are a bit harder to answer. I view most of it as research and the rest falls into that same ambiguous category of loan guarantees. I understand that risk is a driving factor that prevents some non government investment. However, crowdfunding is a completely free market solution that can help bridge the gap for companies in the future. It is essentially a platform for donating money to start ups. Hopefully, this method of investing can grow further into the mainstream because it removes politics from the situation almost entirely.
I agree that politics played a major role in the PTC expiration. That’s
partially what I meant by poorly designed. The credit program was not
structured around market signals, so it became a political mess. The ITC
has definitely had an impact on the solar industry, but the program
lacks a step down as well. Even in your FiT scenario you include a step down process based on market signals.
I think that removing energy subsidies and removing permitting red tape from state governments is really what would speed the transition the most.
As you write and edit your thesis be extremely grateful that the US government subsidized the development of computers which allows you to cut, copy, paste, spell check, and look up information in an instant.
When I wrote my various theses/dissertation the process was to scrawl my thoughts on piles of legal pads. Then use scissors and tape to move sections around into a more coherent form. Then to write a new version that was legible enough to be typed.
Take the typed version, cut/tape/mark through and write in the blank spaces so the next version could be typed.
Information gathering meant hours and hours in the library looking for the particular bit you needed.
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Affordable computers? The internet?
Thank the taxpayers.
“crowdfunding is a completely free market solution that can help bridge the gap for companies in the future. It is essentially a platform for donating money to start ups”
Not going to create a space program.
Will only work for ideas that have popular appeal and which have relatively low budgets and fairly clear routes to completion.
Look, only the most extreme “libertarian” holds that we should not have police forces and fire departments. That each individual should provide their own protection and fire suppression services.
Almost all of us agree that there should be some “socialistic” programs. What we disagree on is when the government should participate and at what point the government should drop out and let the market carry the load.
It’s going to be necessary for taxpayers to combine some of their resources and finance some projects.
Some projects will fail. Or in hindsight could have been better designed. Or turned out to unfairly benefit certain companies/individuals.
What I think should happen is for fiscal conservatives to stop opposing all government subsidies/programs on principle but become the sharp pencil editors who look to reduce risk and look for ways to get more bang for the buck.
Straight opposition means that we don’t develop. We give innovation over the the rest of the world and we sink into being a secondary economy.
If fiscal conservatives concentrated their efforts into efficiency we could either spend less in taxes or fund more projects.
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BTW, I have never seen a liberal wish their taxes were higher. I’ve never seen a liberal wish that the government wasted more money.
I am completely fine with government spending in research and
development, which is fine because the spending in this category is a
margin of error compared to other spending. I’m not saying that tax credit subsidies are completely socialist/communist government policies. Most liberals in the US are relatively fiscally conservative and desire free market principles where they see fit. I’m aware of that. Its just that subsidies have implications far beyond the original
intent of the program design. That’s why they should be developed with more care than has been typically given in the past (i.e. fossil fuels and corn). To me, it makes more sense to identify which markets already have red tape policies for a certain technology. Cut those policies, then any subsides would not need to run more expensively than necessary.
” desire free market principles where they see fit.”
You can say that about Republicans/conservatives as well. ;o)
Look at how some conservative states are not allowing Tesla to sell their cars unless they sell them to a middleman who will then resell them.
“subsidies have implications far beyond the original intent of the program design.”
No, subsidies are a tool that can be used to launch a new technology.
You’re not having a problem with the government funding research that private money won’t fund. (Not clear how profit will be made in a reasonable time.)
The same should apply to the government funding the initial startup of a promising technology. Since we, taxpayers, are possibly going to profit by having access to this new technology why shouldn’t we kick in a little money and get something going that otherwise would sit undeveloped?
“That’s why they should be developed with more care than has been typically given in the past….”
Agreed. Fiscal conservatives are probably the ones who should be eagle-eyeing the proposals and finding ways to get to the same place for less money.
Fiscal conservatives should spot the “$7 hammer” that is being outsourced and suggest finding a new vendor or bringing it in house if can be built for less. The not-so-conservative types are probably more focused on achieving the goal and not paying as much attention to some of the financial details.
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Keep in mind that the private sector is not exactly mistake free.
25% of all businesses fail in the first year, 36% by the end of the second, and 50% by the fourth.
http://www.statisticbrain.com/startup-failure-by-industry/
Oh, I just realized how that sounded: ‘desire free market principles where they see fit’. I meant it more as where liberals view free market principles as a reasonable solution. I did not mean for that to sound snippy, if it sounded that way. Now that I think about it, I hope I haven’t been coming off as rude. Sometimes I forget that internet comments provide no voice inflection. I really have enjoyed our discussion on this topic.
As far as ‘conservatives’ selecting free market when there’s no competition and government interference when there is. I would not mind calling those people out (i.e. Koch brothers grr). That’s just plain corruption.
Ok, subsidies can help in some situations. Although, all the failed businesses you mentioned failed because they either didn’t have a the business structure or bad management. This is perfectly fine. It’s just an iteration that didn’t work and the risk of failure was internalized by that business instead of spreading it over society. This could almost be considered an externality because the subsidy is shifting the costs elsewhere in society.
No, you’ve been very reasoned and this has been an enjoyable discussion. I just felt like giving you a little poke. ;o)
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Both sides are guilty of market interference when it suits their purposes. We’ve never had a free market and a free market would be an absolute disaster. We’d return to the age when the king owned everything and the rest of us would just be serfs.
What both sides want is a regulated market. And both sides complain when the regulations get in their way.
” all the failed businesses you mentioned failed because they either didn’t have a the business structure or bad management”
My point it posting that was to illustrate that the wisdom of the private market/enterprise is not always so wise. Some on the right like to claim that the government backs a lot of failures. More than half of all governmental undertakings would have to fail before we celebrate the ability of private enterprise.
And, remember, private enterprise tends to pursue the things that seem like they will work and leave the more risky for the government to back.
The problem with conservative parties, especially in countries with district voting systems, is that they are actually vested-corporate-interests parties. Their free-market ideology is a thin layer of varnish. An appeal to their ideology therefore will not work.
The fossil fuel vested interests also have a disproportionate influence over conservative energy policies. It should be increasingly clear to conservative parties and their non-fossil fuel based corporate sponsors that a realignment of influence is needed. It is in the interests of the economy and to maximise the accumulation of capital for the wealthiest. As a bonus it will even benefit the 99%.
Agreed. Free markets in utilities don’t exist. They’re complicated state-dependent oligopolies which require pregulation and co-ordination between multiple parties. On top of which the government signs up to contradictory legislation on cutting-carbon, and at the same time is in a position where it cannot let existing fossil fuel dependent utility companies go broke.