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Free Minds & Free Markets

Renewable Energy Mandates Are Making Poor People Poorer

Escalating electricity prices are regressive—poorer people pay a higher proportion of their incomes heating and cooling their houses than do richer people. Low-income folks also tend to live in draftier dwellings and retain older, less energy-efficient appliances and climate-control systems. Consequently, anything that raises the price of power will impose bigger relative costs on the poor.

As renewable energy mandates and rising "ecological" taxes have driven up electricity prices, an increase in energy poverty has become a problem in countries such as Germany and the United Kingdom. There are varying definitions for the term, but the newly launched European Union Energy Poverty Observatory defines energy poverty as not being able to afford adequate warmth, cooling, lighting, or the energy to power appliances that guarantee a decent standard of living and health. One shorthand rule is that a household is energy poor if it must spend more than 10 percent of its income on power. The Observatory estimates that 50 million European households now qualify.

Due largely to Germany's Energiewende—a government-mandated transition from coal and nuclear to wind and solar power—German residential electricity rates have doubled since 2000. Today, households pay about 36 cents per kilowatt-hour (kWh). About 11 cents, or well over half the increase, comes from a renewable energy surcharge and an ecological tax. In Britain, the price of residential electricity has increased by 27 percent in just a decade. Households now pay nearly 22 cents per kWh, with energy and climate change policies accounting for about 10 percent of that amount.

A 2017 study by Christian-Albrechts University energy economist Dragana Nikodinoska found that the proportion of households in Germany spending more than 10 percent of their incomes on energy tripled from 7.5 percent in 1998 to 22 percent in 2013. The U.K. changed the way it measures fuel poverty in 2012, but a rough calculation suggests that the proportion of households paying over 10 percent rose from 6 percent in 2003 to around 20 percent in 2015. In February, the National Energy Action nonprofit estimated that the U.K. experiences 32,000 "excess deaths" each winter and that 9,700 of them are attributable to living in cold homes.

Meanwhile, according to the U.S. Energy Information Administration (EIA), the average real price of residential electricity in the United States fell by nearly half, from 22 cents in 1960 to 12 cents in 2005. Since then, the price has stalled at around 13 cents per kWh.

"Despite increases in the number and the average size of homes plus increased use of electronics," the EIA noted in 2012, "improvements in efficiency for space heating, air conditioning, and major appliances have all led to decreased consumption per household." As a result, net electric power generation has been essentially flat since 2005.

Still, the EIA's residential energy consumption survey found in 2015 that "about one in five households reported reducing or forgoing basic necessities like food and medicine to pay an energy bill." A 2014 white paper released by the Senate Committee on Energy and Natural Resources calculated that for every 10 percent increase in home energy costs, 840,000 Americans would be pushed below the poverty line.

Without the recent proliferation of state and federal renewable power mandates, it is likely that the price of electricity would have continued its decline and fewer American households would now be unduly burdened by their energy bills. On the other hand, electricity prices in Germany and the U.K., which are being driven up by such mandates, show that the situation could definitely be worse.

Photo Credit: AzFree/iStock

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  • SQRLSY One||

    Oh, bu the Europeans are SOOOO much smarter than us; poverty is a small price to pay for being morally superior to everyone else!

  • Earth Skeptic||

    Silly Squirrel. Everyone knows that poverty is caused by evil capitalists. If the enlightened German government added a green tax, then the power companies should provide electricity for free. Duh.

  • albo||

    They're creating their Progressive Eden on Earth. Stop criticizing.

  • Scarecrow Repair & Chippering||

    I wonder how much of Britain's problems are leftover from WW II rationing. IIRC, the Brits kept some rationing in affect for 15 years after the war ended, whereas West Germany was in such desperate straits that they couldn't. West Germany boomed, Britain lost its empire. Probably an exaggeration, of course. As much as I can understand the rationale for rationing during war*, even though I think it would be far more efficient to simply tax the daylights out of people and let inflation rear its ugly head, continuing rationing after the war seems entirely misguided. You want those greedy capitalists investing in rebuilding and importing, you want to interest foreigners in loaning yet more money. I've often wondered how much faster Britain would have recovered if they had simply opened the flood gates.

    *Assumes, for the sake of argument, that governments have any kind of right to force everyone into a war by majority rule.

  • Earth Skeptic||

    A NYT piece today bemoans the impact of austerity on the British welfare state. But the Conservatives point out that even with spending cuts, the government barely avoids deficits.

    Something about running out of other people's money...

    (and how much longer for Germany?)

  • gaoxiaen||

    Barely avoids deficits? If only the US could do so well.

  • Marcus Aurelius||

    Germany thrived because they had to build from the ground up, weren't allowed to have a military, and had plenty of foreign investment/aid.
    Britain had... Britain, and the labour party (business as usual).

  • Scarecrow Repair & Chippering||

    Read up on West Germany introducing a new post-war currency against the wishes of the three Western powers -- they didn't have enough bureaucracy to do it gradually, so they just introduced it without any micromanaging, and that incidentally pissed off the Soviets so much that they blockaded Berlin.

    (It's been a long time since I read of this. I no longer remember exactly what was so unusual or unexpected about the new currency, or exactly why it pissed off the Soviets so much. I do remember that the Soviets wanted to cripple Germany back to an agrarian society, even if that meant half the population had to die, and the new currency someone made this policy impossible. They had had enough of Germany starting wars.)

  • H. Farnham||

    "About one in five households reported reducing or forgoing basic necessities like food and medicine to pay an energy bill."

    Of those one in five, I wonder how many made sure to pay their smartphone or cable bill? A survey of people's budgeting priorities probably isn't very indicative of their financial means.

  • Stilgar||

    Agreed. Just like suburban parents who cry they can't afford to put Johnny through college but have been tearing around town in their BMW/Lexus/LandRover for 20 years.

  • CatoTheChipper||

    I was told that ObamaCare made health care a right. If one has a government-guaranteed right to health care, why would higher energy costs force one forego medicine?

    Of course, energy should be a right as well.

  • H. Farnham||

    Hey free electricity seems to have worked out pretty well for the Venezuelans.

  • Johnimo||

    Shouldn't all "necessities" be "free." And, hey! What is NOT a necessity? Everything should be free. We'd all be so happy, huh?

    I'd offer to sell you the Brooklyn Bridge, but it too should be free: yours for the taking. Enjoy!

  • H. Farnham||

    Free might be more than I'm willing to pay for an asset in New York City.

  • The Last American Hero||

    I was also told $2,500 of savings per year. Well, where's my $20,000?

  • chemjeff radical individualist||

    Of course the proper solution is to get rid of all of the subsidies for the entire energy sector (and beyond!).

  • Johnimo||

    Oh, the humanity!

  • Linux||

    Can we stop acting like this is a flaw in the design as opposed to a feature? It's the first step in the 5 step process:
    1. Create regulations which funnel money to connected individuals and drive up costs that disproportionately affect the poor, since they lack the resources or influence to absorb the costs.
    2. Blame the wealthy and, if in the U.S., racism
    3. Get the poor people who were screwed by your policy on public assistance and use that as an excuse to raise taxes, making sure to funnel some of that money to connected individuals
    4. During elections paint your opponent as the enemy of the poor because they want to reduce government
    5. Repeat

  • Unicorn Abattoir||

    It's a feature. Here's Michael Bloomberg say how raising taxes on the poor is a good thing

  • Unicorn Abattoir||

    say saying

  • Mark22||

    Well, I'm glad to see Reason at least talks about some libertarian issues now.

    Now tell us how "renewable energy mandates" relate to "lost migrant children" and "the nightmare of dreamers"! Come on, I know you want to!

  • SQRLSY One||

    The dreamers would be busy working on clean, nearly unlimited controlled thermonuclear power... Each Olympic-sized swimming pool full of sea water has enough deuterium in it to fuel ??? like half the USA's households for a year... But instead, the dreamers are worrying about La Migra chasing them all day!

    Which is more important to you, affordable, clean, nearly unlimited controlled thermonuclear power, or avoiding the cooties of illegal humans?

  • Old Mexican - Mostly Harmless||

    Re: Mark22,

    Now tell us how "renewable energy mandates" relate to "lost migrant children" and "the nightmare of dreamers"! Come on, I know you want to!


    All are crimes commited by the State, in the name of some moral imperative springing from authoritarian assholes such as eco-crazies and xenophobic, paranoid Trumpistas who --like John, for instace-- see vaginal mutilators hiding under his very bed, or simply harvor a dislike for immigrants because "they takum er jebz!" or some other economically ignorant justification.

    Your question has been answered, Logan Five.

  • Old Mexican - Mostly Harmless||

    harbor.

  • Scarecrow Repair & Chippering||

    It continually amazes me how many self-declared libertarians endorse State collective action for such an imaginary concept as the government owning all the land and thus considering foreigners as trespassers. If individual property owners want to deal with trespassers, more power to them. To assert that the State must do so because the State is the property owner -- it boggles my mind.

    If the State owns all land, then everything we do with that land is with the State's permission. How can that be any form of libertarianism?

    These same folks decry land zoning as one of the evils responsible for high housing costs. How can that be wrong if the State owns all land?

    These folks also decry occupational licensing, but that is perfectly consistent with the State forbidding employers from hiring foreigners.

    Then there's the incredibly expensive and intrusive bureaucracy necessary to maintain national ID cards and records of citizenship. How anyone can square that with self-ownership and individual rights is beyond me.

  • SQRLSY One||

    ^ +1 I approve of this message!

  • The Last American Hero||

    It amazes me how many people think that we would be better off letting other nations conquer the US, which, despite its flaws, is still the last best hope for freedom in this world.

  • Mark22||

    in the name of some moral imperative springing from authoritarian assholes such as

    such as people like you. Because an "authoritarian asshole" describes you pretty well.

  • Rich||

    Escalating electricity prices are regressive—poorer people pay a higher proportion of their incomes heating and cooling their houses than do richer people.

    *Electricity* prices, that is -- unlike, say, any other prices.

  • CatoTheChipper||

    Poorer people are relatively unaffected by yacht prices and caviar prices. I suppose, however, they affect the 0.001% more than they do they do the 0.000001%, but I wouldn't call that regressive.

  • Marcus Aurelius||

    Yeah, I'm curious about what wouldn't be "regressive". Seems like a obvious/bogus concept. Process ride and you have less money, you will spent more of it percentage wise.

  • Stilgar||

    First, be sure you are comparing like quantities. Some electricity prices include the cost of delivery, others do not. Second, utilities in the US are often highly regulated so what is the real market cost? Third, the utility industry is not immune to inflationary pressures. In the US, $1 in 2007 is equivalent to $1.17 today.

  • Greg F||

    First, be sure you are comparing like quantities.


    They are.

    Some electricity prices include the cost of delivery, others do not.


    Both the EIA and Eurostat provide cost to residential customers that include everything.

    Second, utilities in the US are often highly regulated so what is the real market cost?


    Depends on the generating source. Renewables add hidden costs (due to intermittency) that have to be absorbed by the system. They are still passed on to the end user.

  • Stilgar||

    First, be sure you are comparing like quantities. Some electricity prices include the cost of delivery, others do not. Second, utilities in the US are often highly regulated so what is the real market cost? Third, the utility industry is not immune to inflationary pressures. In the US, $1 in 2007 is equivalent to $1.17 today.

  • Jerryskids||

    To be sure, they may be materially poorer but think how much they benefit spiritually and morally. How can you put a price on pureness of heart and nobility of soul?

  • Agammamon||

    This is, truly, the Dark Age of Technology.

  • Unicorn Abattoir||

    Well, you can buy a stairway to heaven....

  • Marcus Aurelius||

    Sounds like the plot to Indecent Proposal.

  • mtrueman||

    Couple of observations, passive methods of heating as promoted in Germany should warm houses without increasing energy bills.

    It's not clear what is making poor people poorer. 90% of the rise in UK energy costs are not related to renewable energy mandates.

  • Sevo||

    "Couple of observations, passive methods of heating as promoted in Germany should warm houses without increasing energy bills."
    Only if you think "bills" are what you pay the the utility monthly.

    "It's not clear what is making poor people poorer. 90% of the rise in UK energy costs are not related to renewable energy mandates."
    It is to those who can read and use logic.

  • mtrueman||

    "Only if you think "bills" are what you pay the the utility monthly."

    You think energy bills are something else? You're not making yourself very clear.

    "It is to those who can read and use logic."

    You seem to have missed my point. There's a lack of information in the article, ie what makes up for 90% of UK's energy costs.

  • Sevo||

    "You think energy bills are something else? You're not making yourself very clear."
    You're a fucking ignoramus.
    Is that clear enough?

  • mtrueman||

    As I mentioned, you seem to have missed my point. According to the article, 10% of the price increases in UK energy bills can be attributed to renewable energy mandates. 90% of the increase comes from somewhere else. 10 + 90 = 100.

  • Ariki||

    As someone who has been following this "green" bullshit for at least 12 years I think that the 10% is the result of the direct subsidies paid to renewable producers as a result of the government mandates, ie the actual charge on your bill that goes directly to the renewable companies.

    However, this 10% increase does not take into account the subsequent effects caused by the renewable energy industries existence. Connecting intermittent energy sources to the grid results in the following:

    * It makes the grid more unstable and therefore more expensive to manage.
    * It requires spinning reserve i.e more reliable sources of energy (coal, nuclear, gas etc) must be online and running ready to ramp up and ramp down depending on what the wind or clouds are doing. This means you have to pay these generators for electricity they are not generating.
    * The preferential treatment of renewable energy results in smaller reliable energy plants becoming uneconomical to run, resulting in their closure and increased prices across the board as supply drops.
    * Rather than accept their mistakes the lefty morons double down and ask for more renewable which just make the above problems worse.

  • Ariki||

    A good example of this cluster fuck is what happening to the Drax coal power plant where they have converted some of the generators to run on biomass as its "green". However, that biomass consists mainly of wood chips from freshly felled forests in the USA, which are shipped the 7000 kms across the Atlantic. And when calculated produce more CO2 than just burning the coal form down the road.

    The energy situation in Australia is also not in a good way with South Australia suffering major outages due to its renewable energy happy state government. They claim that they are green while most of their reliable energy comes from across state lines, when that link fails so does their grid. Government policies are also making it more profitable for major energy producers to pull out of conventional energy sending the government into a panic and offering to buy the coal plants for billions because they know that shutting down these plants will collapse the NATIONAL grid.

    All of this madness has been made possible by the governments favouritism for renewable energy
    But at a certain point green delusions meets physics, and poor people die. But of course this will be the fault of greedy capitalists.

    And all of this shit is based on the false assumption that a molecule of life will result in us all dying from floods, droughts, heatwaves, coldsnaps, insects, disease, terrorism, fire, ice, insects, and all other manner of bullshit.

    A theory that predicts everything explains nothing.

  • mtrueman||

    "All of this madness has been made possible by the governments favouritism for renewable energy"

    Isn't that a 'proximate cause' at best? The ultimate cause is the concern over CO2 emissions and their heat trapping qualities.

  • mtrueman||

    "A good example of this cluster fuck is what happening to the Drax coal power plant where they have converted some of the generators to run on biomass as its "green". "

    It's a very good example. It shows the power of money and lobbying in policy making. Is that the reason why our science editor has not bothered to write about this outrage?

  • Greg F||

    The grid needs to have enough available capacity to meet the highest demand. So in addition to the items you list above there is also the capitol cost of building and maintaining traditional power plants used as backup for the unreliable green machines.

    Summer is when you get the highest demand with the time of highest demand being late afternoon - early evening.

    1.Solar is largely unavailable at this time.

    The summer days with highest demand are usually the hottest caused by a stationary high pressure system.

    2. Wind is largely unavailable at this time.

    Conclusion:
    You still need to build 98% of the traditional capacity that you would need if there were no wind and solar. You also have to pay the higher maintenance costs due to ramping up and down traditional generation to follow the sporadic output of the green machines.

  • mtrueman||

    "The grid needs...."

    The challenge then is to design an alternative to the grid which is more in concert with sources like the sun. It may well cost more than what we're paying now, and may not be as plentiful. It may even end up being more eco-unfriendly than what we're doing now, greenhouse gas wise.

  • Greg F||

    The challenge then is to design an alternative to the grid which is more in concert with sources like the sun.


    Really you have no clue.

  • mtrueman||

    "Really you have no clue."

    True enough. If you are expecting me to design you an alternative to the grid more suitable to solar energy, I'm going to disappoint you.

  • Greg F||

    If you are expecting me to design you an alternative to the grid more suitable to solar energy, I'm going to disappoint you.


    What is disappointing is your lack of understanding the fundamental difference between potential and kinetic energy. Which is why you don't understand there is no " alternative to the grid more suitable to solar".

  • mtrueman||

    China is planning on such a globe spanning grid which will cost trillions. You can read about it in the business press if you're curious. It's part of their even more gargantuan Belt and Road Initiative. You heard it hear first, comrade.

  • Greg F||

    China is planning on such a globe spanning grid which will cost trillions.


    As everybody knows ... China is a model of honesty. Are you that naive?

  • mtrueman||

    Ah, the Chinese hoax. Are you that naive?

  • mtrueman||

    "It makes the grid more unstable and therefore more expensive to manage."

    Horses and buggys are more unstable and expensive to manage. Clinging on to 19th century tech is not the way to go. The sun isn't an intermittent source of energy. Just because you can't see it at night doesn't mean it's not still up there in outerspace radiating energy. It's the work of 21st century engineers to figure out ways to harness it. This will cost tax payers for the research, if nothing else.

    Britain has been ruled by righty morons aka the Tories for some time now.

  • Greg F||

    In typical fashion mtrueman waves his hands frantically hoping nobody will notice that he doesn't address any of the real issues raised.

  • mtrueman||

    "he doesn't address any of the real issues raised"

    You mean like 'virtue signalling at the UN?' I'm not about to start either.

  • Sevo||

    mtrueman|5.28.18 @ 7:44PM|#
    "You mean like 'virtue signalling at the UN?' I'm not about to start either."

    No, you fucking ignoramus, we mean like making some sort of believable and cogent comment regarding the issue.
    Which you have so far failed to do.
    Fuck off.

  • Sevo||

    "As I mentioned, you seem to have missed my point. According to the article, 10% of the price increases in UK energy bills can be attributed to renewable energy mandates. 90% of the increase comes from somewhere else. 10 + 90 = 100."

    As I mentioned, you are full of shit

  • mtrueman||

    Let me put it this way: 100 - 10 = 90. Does that help?

  • NotAnotherSkippy||

    Let me put it this way your head + your ass = your ground state. Does that help?

  • mtrueman||

    Not sure, but keep reading, anyway. I will comment on other matters later on.

  • Agammamon||

    There's only one method of 'passive heating' - letting the sun heat your house. Germany doesn't get a lot of sun (compared to places like where I live where you can sleep outside with nothing more than a thin blanket in the middle of January.

    In any case, trading off a small monthly bill reduction for a massive upfront payment (plus interest on the loan!) that won't break even for 25 years makes people poorer.

  • mtrueman||

    Living in such a hot climate, you may be unaware of practices like double glazing, putting two layers of slightly separated glass between the inside of the house and outside. It makes a big difference without adding to your monthly energy bill.

    "In any case, trading off a small monthly bill reduction for a massive upfront payment (plus interest on the loan!) that won't break even for 25 years makes people poorer."

    I can see a socialist arguing for subsidies making the same point.

  • Ariki||

    Yes but,
    * All of that stuff is expensive.
    * Poor people don't tend to own their own homes but rent what they can afford (not much).
    * Due to the crap nature of the rental home the landlords cant afford to invest in these things either and if they could it means the rent would increase beyond the ability of the poor to pay.

    This ultimately results in poor people living in substandard housing which requires more energy to heat that they cannot afford, leading to massive health issues and death.

    Civilisation is literally built on energy. Deliberately making it more expensive so governments can virtue signal at the UN is a colossally stupid idea.

    Renewable energy will not power modern civilisation.

  • mtrueman||

    "Civilisation is literally built on energy. Deliberately making it more expensive so governments can virtue signal at the UN is a colossally stupid idea"

    I'm not sure what this virtue signalling is but I think this whole renewable energy business comes out of a concern for CO2 emissions. Granted, it's economically stupid, but economics is not a science. There's no bargaining with mother nature.

  • Nardz||

    Which would be why bitching about CO2 emissions is stupid - science.
    CO2 is a minor greenhouse gas, feeds plants, and has been much higher in the past.
    The climate is warming... from the last little ice age.
    If anything, we should worry about global cooling - warmer climates are conducive to life, specifically human.

  • mtrueman||

    "from the last little ice age"

    We're in an ice age now. The frozen water at the north and south pole is the give away.
    By all means worry about global cooling. I won't stop you.

  • NotAnotherSkippy||

    The LIA was a specific event, but nice to see that you managed to regurgitate a tiny bit of truth for a change.

  • mtrueman||

    North and South pole can be tricky.

  • The Last American Hero||

    If CO2 was as big a deal as is often claimed, then the "Top Men" would be shouting for more nuclear, pronto.

    They aren't, so it's a dead giveaway that they are using fearmongering to keep the sweet sweet grant money coming in.

  • mtrueman||

    "They aren't, so it's a dead giveaway "

    But they are. China and North Korea are just two places where the push towards nuclear is evident. American top men are constrained by democracy and a public which is a lot more skeptical about nuclear than communist bureaucrats.

  • Diane Reynolds (Paul.)||

    California is on track to greenwash 90% of its energy use by 2020.

  • Canman||

    Governor Shellenberger will put a stop to that.

  • C. S. P. Schofield||

    In other words, they are completely consistent with the general thrust of all environmental movement policies, most of which are promulgated by elitist vermin.

  • mtrueman||

    It's even worse. These elitist vermin hail from Hollywood.

  • Johnimo||

    Where's Tony? Doesn't he want to join this conversation? Is it too painful for him?

  • Plow Horse||

    Not to worry. Here in the People's Republic of Mexifornia, the poor have their electricity subsidized by the rest of us who pay through the nose. The poor can buy all the electricity they want for ~0.11/KWh, while the rest of us serfs get to pay about 3x that amount.

  • Richard Stallman||

    Encouraging renewable energy today could save millions of lives in a
    few decades. The reason I say "could" rather than "will" is that we
    are probably not doing enough of it.

    The cost will turn out to have been a small price to pay. However,
    there is no reason we should put the burden on the half of America
    that is now poor. If we took the proper steps to increase wages and
    social benefits, that could more than make up for the cost that poor people
    suffer for this crucial need.

    Marksts are very useful but we must not worship them; don't forget
    that they also fail. Counting the immediate cost of building
    renewable generation, while ignoring the enormous future costs of
    global disaster due to today's fossil fuel use, is an example of
    short-term thinking, which is one of the ways markets predictably
    fail.

  • 1980-f||

    I suspect that your words will fall on deaf ears here. Despite the much-vaunted "reason" title, there are plenty of contributors who are blindly wedded to neoliberalism's false promises.

  • NotAnotherSkippy||

    As opposed to the global warming death cult. If you're truly worried about global warming, then you support nuclear power.

  • NotAnotherSkippy||

    So you're massively disappointed that the west walked away from nuclear power, right?

    Christ, what an asshole (and idiot).

  • The Last American Hero||

    Are you a former Solyndra employee?

  • albo||

    the proportion of households in Germany spending more than 10 percent of their incomes on energy tripled from 7.5 percent in 1998 to 22 percent in 2013

    10 percent of their income? That's insane.

  • 1980-f||

    In the UK, "energy and climate change policies accounting for about 10 percent" of energy prices do not seem like a massive amount, really. Not enough to account for the level of energy poverty here which is related far more to low incomes and the increasing economic inequality due to the government's pursuit of a neoliberal economic policy. As I am seeing elsewhere on this site supposedly devoted to clear-sighted "reason", there is a fairly obvious anti-renewables agenda behind this article.

    "It is important to state that a greater dependence on renewable energy will protect the UK somewhat from these increases, the UK expects to have 30% of electricity from renewables by 2020 [2]...

    Work by the Committee on Climate Change has shown that if renewable energy systems continue to be invested in, this will increase energy bills by £100 by the year 2020. However, not investing in renewable energy could lead to far higher bills. For example, if fossil fuel gas is the main component of the energy system in the UK in the future, then bills could increase by £600 by the year 2050 [3]... renewable energy is not the major cause of energy price increases, and not supporting renewable energy will cause bills to be increased even more."
    http://www.narecde.co.uk/does-.....w1ip0gvy00

  • NotAnotherSkippy||

    Now tell me the one about how Drax is saving money. The UK has already wasted billions on "green" energy and the marxist central planning that you favor is an endless money pit. Stop interfering in the market and your "renewables" will die the death they so richly deserve.

  • mtrueman||

    "Now tell me the one about how Drax is saving money. "

    It's not about saving money. It's about putting the coal burning industry to use burning wood instead of coal.

  • online trainings||

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