north america hvac news september 2010 · north america hvac news september 2010 offering green...

Canada BRG's Canadian 2010 Heating & Cooling Report Now Available!USA DOE Announces $188 Million for Small Business TechnologyUSA Builders Using Sales Incentives to Put Some Sizzle in a Cool HousingUSA Housing Fades as a Means to Build Wealth, Analysts SayUSA U.S. Home Sales at Lowest Level in More Than a DecadeUSA Heating, Cooling Equipment Shipments Continue to RiseUSA GOSOLARUSA to Acquire Exclusive Rights to New Solar FurnaceUSA With Consumers Slow To Spend, Businesses Are Slow To HireUSA Kerry Introduces Clean Energy Technology Leadership ActUSA 22 Cities In Danger Of A Double-Dip RecessionWorld Joy, Pain and Double DipsUSA Green and CluelessWorld Insurance Companies Find There Is Money to Be Made in Green

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North America HVAC NewsSeptember 2010

International Market Strategy

International strategic market research and consultancy on building product and related markets

BRG Consult NewsletterNorth America HVAC News September 2010

Canada: BRG's Canadian 2010 Heating & Cooling Report NowAvailable!BRG CONSULT has published its final reports for Canada, the USA, China and 30 Europeancountries this month, both in pdf format and in our new ENTERPRISE database system. Productsections include:

- 2010 Boiler Market Reports - Boiler types covered in the reports include:

• Wall-Hung Gas Condensing• Wall-Hung Gas Non-Condensing• Floor-Standing Gas Condensing• Floor-Standing Gas Non-Condensing• Oil Condensing• Oil Non-Condensing• Electric• Solid Fuel

- 2010 Water Heater Market Reports - Water heaters covered in the North American reports include:

• Tankless Gas Condensing• Tankless Gas Non-Condensing• Tank/Storage Residential Gas Condensing• Tank/Storage Residential Gas Non-Condensing• Tank/Storage Commercial Gas Condensing• Tank/Storage Commercial Gas Non-Condensing• Tankless Electric• Tank/Storage Residential Electric• Tank/Storage Commercial Electric• Oil• Indirect Cylinders Separate• Solar Storage Tanks• Heat Pump Water Heaters

- 2010 Solar Thermal Market Reports - Products covered in the reports include:

• Flat Plate Collectors• Vacuum Collectors• Unglazed Collectors• Solar Storage Tanks

- 2010 Heat Pump Market Reports - Products covered in the reports include:

• Ground Source• Exhaust Air-Water• Outside Air-Water• Heat Pump Water Heaters• Air-to-Air Heat Pumps

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- 2010 Furnace Market Reports - Products covered in the reports include:

• Gas Condensing• Gas Non-Condensing• Electric• Oil

- 2010 Air Conditioner Market Reports - Products covered in the reports include:

• Condensing Units• Air Handlers• Air-Air Heat Pumps• Residential Package Units• PTACs• Mini-Splits• Window/Wall Units• Portable Air Conditioners• VRFs

- 2010 Radiator Market Reports (available for 30 European countries and China) - Products coveredin the reports include:

• Steel Panel Radiators• Towel Warmers• Aluminium• Cast Iron• Decorative• Other Steel• Fixed Electric Heat Emitters

- 2010 Biomass Boiler Market Reports - Boilers covered in the reports include:• Fossil Fuel/Universal• Logwood/Bifuel• Pellet• Woochip• Other.

To obtain these full reports, a table of contents, or for more details about the contents or our newEnterprise Database, please email: [email protected]

Source: BRG CONSULT NORTH AMERICA

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USA: DOE Announces $188 Million for Small Business TechnologyCommercialization2 August 2010 -- U.S Energy Secretary Steven Chu today announced that the Department of Energywill award a total of $188 million to small businesses in 34 states to develop technologies with astrong potential for commercialization and job creation.

"Small businesses are a major engine of innovation and job creation in our economy," said SecretaryChu. "Bringing these innovative technologies to market will help spur economic growth and reducethe country's energy use."

Funded through DOE's Small Business Innovation Research program (SBIR) and Small BusinessTechnology Transfer program (STTR), today's selections are for Phase II work, which means that the201 awards will support the development of prototype or pilot operations for innovative technologiesthat have successfully passed the proof of concept stage.

The 201 awards fall in 76 targeted technology topics, in areas such as the smart grid, energy efficientbuildings, industrial energy use, advanced renewables, cleaner fossil power, carbon cyclemeasurement, and high performance computing. A sample of the Phase II SBIR/STTR topic areasand awards is highlighted below:

1. Smart Grid Controllers - The development of a smart grid will reduce energy use, mitigate theneed for new power plants, and prevent outages. However, an effective smart grid requirescommunication among a variety of devices, from utility control systems to household appliances.One project, led by INFOTILITY in Boulder, CO, will develop a "Smart Controller" that enablescommunication among distributed energy systems-such as roof-top solar panels, a plug-in electricvehicle, and demand response devices in the home. (DOE award: $999,655)

2. Advanced Solar Technologies - Solar energy is our largest energy resource and can provideclean, sustainable energy, but innovations are needed to bring down the cost. This topic seeks todevelop novel, previously untried but commercially feasible solar concepts and devices. One project,led by LUMINIT, LLC, in Torrance, CA, will develop a unique sun-tracking holographic concentratorthat separately uses both visible light for photovoltaic power and infra-red light to provide heat and hotwater for a building. (DOE award: $999,986)

3. Carbon Cycle Measurements - Eighty-five percent of our nation's energy comes from the burningof fossil fuels such as coal, oil, and natural gas. These processes add carbon to the atmosphere,principally in the form of carbon dioxide (CO2). A project led by AERODYNE RESEARCH, INC, inBillerica, MA, will develop an extremely accurate CO2 monitor, which will assist in understandingglobal climate change and will help companies measure carbon capture and sequestration projects.(DOE award: $749,787)

The small businesses being announced today will join the ranks of past SBIR and STTR recipients,many of which have successfully brought their innovations to market. For example, past SBIRrecipient A123 Systems has grown into a leading manufacturer of cutting-edge lithium ion batteriesand is now expanding its manufacturing base in Michigan, and another past SBIR winner, AMONIX, isgrowing its concentrating PV manufacturing capacity in Nevada, which is expected to employhundreds of workers.

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Small businesses play a major role in spurring innovation and creating jobs in the U.S. economy.Between 1993 and 2008, small business created 64% of all net new jobs, totaling 14.5 million newjobs. Small businesses employ nearly 40% of the U.S. science and engineering workforce. The goalof DOE's SBIR program is to help innovative small businesses succeed. In keeping with the goals ofthe Recovery Act, the Department's SBIR efforts have incorporated a fast-track process forapplications, increased emphasis on job creation and commercialization potential in the review andselection process, and provided business incubator funding.

Source: The Department of Energy

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USA: Builders Using Sales Incentives to Put Some Sizzle in a CoolHousing Market9 August 2010 -- A majority of the nation’s home builders have been offering incentives this summerto boost their sales in a generally cool marketplace, according to a recent NAHB survey.

The polling — which was conducted in June in conjunction with the monthly Builders’ EconomicCouncil survey for the NAHB/Wells Fargo Housing Market Index — also found that some builders areusing incentives to fill the void now that the May 1 deadline for signing a sales contract to qualify forthe home buyer tax credit has come and gone.

“Some builders have, in fact, introduced new incentives in response to the expiring tax credit, but onlya relatively small number compared to the number that historically advertise some type of specialsales incentive,” said Paul Emrath, author of the special NAHB Housing Economics study, “Builders’Use of Incentives After the Tax Credit.” “Moreover, a relatively small share of the builders whocurrently advertise one of these incentives is explicitly marketing the incentive as a replacement forthe tax credit,” he said. Emrath noted that the uptick in single-family activity over the past year or sohas been largely attributable to the enactment and extension of the credit, so it would be only naturalfor builders to devise new strategies in its absence.

Historically low mortgage interest rates and affordable housing prices remain major positives forhousing, but economic growth and improvements on the employment scene have been slower thanexpected, according to economists at NAHB, putting housing this year on a decidedly more gradualupward path than usually occurs following a recession.

Nearly three-fourths of the builders surveyed by NAHB in June — 73% — reported that they werecurrently using and planned to continue to use at least one incentive unchanged.

Many builders, but far from a majority, said that they were adjusting their incentives programs — bychanging existing incentives or initiating new ones — to compensate for not having the tax credit.Fifteen percent of the builders indicated that they were altering at least one of the incentives they hadbeen using and 12% said they were adopting at least one new incentive, with some overlap betweenthe two responses. In addition, 15% of builders told NAHB researchers that they were initiating atleast one new sales incentive, but for reasons unrelated to the fading tax credit.

Seventy-six percent of builders said they were currently using some sales incentive in June, which isdown some from last year’s peak rates. In February 2009, 85% of builders were using incentives tobolster their sales; by June of last year that share had dropped to 79%.

Among the common types of incentives that builders have been using and will continue to provide,reducing the price of the home is the most popular, cited by 54% of the survey respondents. Thatwas followed by offering options or upgrades at no reduced cost (50%) and paying closing costs(44%).

Reducing home prices became increasingly prevalent as the housing downturn deepened, rising from18% of builders in January 2006 to 45% one year later, 52% in February 2008 and 72% in February2009.

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Offering green features at no cost or a reduced cost is the fourth commonest sales incentive, reportedby 32% of the builders, followed by helping buyers sell existing homes, 25%, and absorbing financingpoints for buyers, 23%.

The NAHB study found that one-fifth of all builders are adopting a new incentive and/or modifying onethey have already been offering to compensate for losing the tax credit as a marketing tool. Of all thebuilders surveyed, the most common incentives for filling the gap include:

¦ Options or upgrades at no or reduced cost, 10%¦ Discount home prices/reducing margins, 9%¦ Paying closing costs or fees, 6%¦ Green features at no or reduced cost, 6%¦ Absorbing financing points for buyers, 5%¦ Mortgage rate buy-downs, 4%

Among incentives being adopted for reasons unrelated to the tax credit, offering green features at nocost or a reduced cost was the most common, cited by 8% of all the builders surveyed.

“Given recent experience with volatile energy prices and the public attention focused on possibleclimate change, it is probably not surprising that a significant share of builders are now adopting low-cost green features as a marketing device, nor that they are doing so for reasons unrelated to theexpired home buyer tax credit,” Emrath said.

When the builders who reported using special sales incentives were asked if they were advertising ormarketing those incentives as a replacement for the home buyer tax credit, 19% said yes and 81%said no. Among the builders who have chosen not to offer sales incentives, the reasons for thatdecision include:

¦ Cannot afford incentives due to rising construction costs, 50%¦ Have tried incentives, but they were ineffective, 41%¦ Don’t think incentives work in market area, 18%¦ Market now strong enough, incentives not needed, 6%

Nineteen percent of the builders gave other reasons for not relying on incentives. Most commonly,these were builders who only build custom homes to contract or otherwise operate in an environmentwhere they don’t typically advertise, making incentives irrelevant.

“Other builders feel that advertising incentives is not an effective way to negotiate with customers,”Emrath said. “Some believe, for example, that so many customers will ask for incentives orconcessions irrespective of any builder’s marketing campaign that it is more efficient to let thecustomer make the first offer.”

Source: National Association of Home Builders

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USA: Housing Fades as a Means to Build Wealth, Analysts Say22 August 2010 -- Housing will eventually recover from its great swoon. But many real estate expertsnow believe that home ownership will never again yield rewards like those enjoyed in the second halfof the 20th century, when houses not only provided shelter but also a plump nest egg.

The wealth generated by housing in those decades, particularly on the coasts, did more than assurethe owners a comfortable retirement. It powered the economy, paying for the education of childrenand grandchildren, keeping the cruise ships and golf courses full and the restaurants humming.

More than likely, that era is gone for good.

“There is no iron law that real estate must appreciate,” said Stan Humphries, chief economist for thereal estate site ZILLOW. “All those theories advanced during the boom about why housing is special— that more people are choosing to spend more on housing, that more people are moving to thecoasts, that we were running out of usable land — didn’t hold up.”

Instead, Mr. Humphries and other economists say, housing values will only keep up with inflation. Ahome will return the money an owner puts in each month, but will not multiply the investment.

Dean Baker, co-director of the Center for Economic and Policy Research, estimates that it will take 20years to recoup the $6 trillion of housing wealth that has been lost since 2005. After adjusting forinflation, values will never catch up.

“People shouldn’t look at a home as a way to make money because it won’t,” Mr. Baker said.

If the long term is grim, the short term is grimmer. Housing experts are bracing themselves forTuesday, when the sales figures for July will be released. The data is expected to show a drop of asmuch as 20 percent from last year.

The supply of homes sitting on the market might rise to as much as 12 months, about twice the levelof a healthy market. That would push down prices as all those sellers compete to secure a buyer,adding to a slide that has already chopped off as much as 30 percent in home values.

Set against this dismal present and a bleak future, buying a home is a willful act of optimism. Thatexplains why Adam and Allison Lyons are waiting to close on a $417,500 house in Deerfield, Ill.

“We’re trying not to think too far ahead,” said Ms. Lyons, 35, an information technology manager.

The couple’s first venture into real estate came in 2003 when they bought a condo in a 17-unitbuilding under construction in Chicago. By the time they moved in two years later, it was alreadyworth $50,000 more than they had paid. “We were thinking, great!” said Mr. Lyons, 34.

That quick appreciation started them on the same track as their parents, who watched the value oftheir houses ascend for decades. The real estate crash interrupted that pleasant dream. The couplecannot sell their condo. Unwillingly, they are becoming landlords.

“I don’t think we’re ever going to see the prosperity our parents did, but I don’t think it’s all doom andgloom either,” said Mr. Lyons, a manager at I.B.M. “At some point, you just have to say what the heck

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and go for it.”

Other buyers have grand and even grander expectations.

In an annual survey conducted by the economists Robert J. Shiller and Karl E. Case, hundreds ofnew owners in four communities — Alameda County near San Francisco, Boston, Orange Countysouth of Los Angeles, and Milwaukee — once again said they believed prices would rise about 10percent a year for the next decade.

With minor swings in sentiment, the latest results reflect what new buyers always seem to feel. At theboom’s peak in 2005, they said prices would go up. When the market was sliding in 2008, they stillsaid prices would go up.

“People think it’s a law of nature,” said Mr. Shiller, who teaches at Yale.

For the first half of the 20th century, he said, expectations followed the opposite path. Houses wereseen the way cars are now: as a consumer durable that the buyer eventually used up.

The notion of housing as an investment first began to blossom after World War II, when the nestingurges of returning soldiers created a construction boom. Demand was stoked as their bumper crop ofchildren grew up and bought places of their own. The inflation of the 1970s, which increased thevalue of hard assets, and liberal tax policies both helped make housing a good bet. So did the longdecline in mortgage rates from the early 1980s.

Despite all these tailwinds, prices rose modestly for much of the period. Real home prices increased1.1 percent a year after inflation, according to Mr. Shiller’s research.

By the late 1990s, however, the rate was 4 percent a year. Happy homeowners were taking about$100 billion a year out of their houses, which paid for a lot of good times.

“The experience we had from the late 1970s to the late 1990s was an aberration,” said Barry Ritholtzof the equity research firm FUSION IQ. “People shouldn’t be holding their breath waiting for it tohappen again.”

Not everyone views the notion of real appreciation in real estate as a lost cause.

Bob Walters, chief economist of the online mortgage firm QUICKEN, acknowledges that the recentcollapse will create a “mind scar” just as the Great Depression did. But he argues that housingremains unique.

“You have to live somewhere,” he said. “In three or four years, people will resume a normal course,and home values will continue to increase.”

All homes are different, and some neighborhoods and regions will rebound more quickly. On theother hand, areas where there was intense overbuilding, like Arizona, will be extremely slow to showany sign of renewal.

“It’s entirely likely that markets like Arizona will not recover even in the 15- to 20-year time frame,”

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said Mr. Humphries of ZILLOW. “The demand doesn’t exist.”

Owners in those foreclosure-plagued areas consider themselves lucky if they are still solvent. Butthat does not prevent the occasional regret that a life-changing sum of money was so briefly withintheir grasp.

Robert Austin, a Phoenix lawyer, paid $200,000 for his home in 2000. Five years later, his neighborslisted a similar home for $500,000.

Freedom beckoned. “I thought, when my daughter gets out of school, I can sell the house and buy aboat and sail around the world,” said Mr. Austin, 56.

His home is now worth about what he paid for it. As for that cruise, “it may be a while,” Mr. Austinsaid. Showing the hopefulness that is apparently innate to homeowners, he added: “But I won’t rule itout forever.”

Source: The New York Times

USA: U.S. Home Sales at Lowest Level in More Than a Decade24 August 2010 -- Housing sales in July plunged to their lowest level in more than a decade,exceeding even the grimmest forecasts.

The National Association of Realtors said Tuesday that the seasonally adjusted annual sales rate of3.83 million was 25.5 percent below the level of July a year ago.

July was the first month that buyers could not qualify for a tax credit of up to $8,000, so analysts wereexpecting weak results. But their consensus called for a decline of about 13 percent.

Jennifer H. Lee, senior economist for BMO CAPITAL MARKETS, called the numbers “truly gut-wrenching.”

Those on the front lines of real estate describe an absolute standoff between buyers and sellers.

“What few buyers are out there circle a listing like a vulture, waiting from the day of its debut until it’sleft for dead, contacting us only after it has left the market to ask what it sold for and whether it’staking backup offers,” said Glenn Kelman, chief executive of the online brokerage REDFIN.

Mr. Kelman noted that what made the sales drop “even more breathtaking” was that it was happeningin July, a month when demand typically peaks.

“Prices will have to drop again in most markets before buyers come back in force,” Mr. Kelman said,“and so sales volume will probably be in the tank at least until next spring.”


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USA: Heating, Cooling Equipment Shipments Continue to Rise11 August 2010 -- U.S. factory shipments of both residential and commercial heating and coolingequipment increased in June, with the largest growth coming from warm air furnaces, according to theAir-Conditioning, Heating, and Refrigeration Institute (AHRI).

Residential Water Heaters

U.S. shipments of residential gas water heaters have increased 11 percent, to 2,119,820 units,compared to 1,914,465 units shipped during the same period in 2009. Residential electric waterheater shipments increased 3 percent year-to-date, to 1,990,401 units, compared to 1,925,878 unitsshipped at the same time last year.

Commercial Water Heaters

Year-to-date U.S. shipments of commercial gas water heaters also increased 4 percent, to 42,102units, compared with 40,331 units shipped during the same period in 2009. Year-to-date commercialelectric water heater shipments increased a small 1 percent to 29,620 units from the same time in2009.

Warm Air Furnaces

Again, the biggest increase was seen on the warm air side. U.S. shipments of gas warm air furnacesincreased 18 percent, which grew from 895,614 units shipped during the same period in 2009 to1,059,502 units in 2010. Year-to-date U.S. shipments of oil warm air furnaces increased 16 percentto 21,491 units, compared with 18,469 units shipped during the previous year.

Central Air Conditioners and Air-Source Heat Pumps

Year-to-date combined shipments of residential central air conditioners and air-source heat pumpsincreased 6 percent, to 2,949,141 units, up from 2,785,134 units shipped in June 2009. Year-to-dateshipments of central air conditioners also increased 5 percent, to 1,959,845 units, up from 1,867,674units shipped during the same period in 2009. The year-to-date total for heat pump shipmentsincreased 8 percent, to 989,296 units, up from 917,460 units shipped during the same period in 2009.

Source: Supply House Times

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USA: GOSOLARUSA to Acquire Exclusive Rights to New SolarFurnace Technology4 August 2010 -- GOSOLARUSA INC. announced that it has entered into an agreement to acquirethe exclusive worldwide rights to a new, patent pending, solar heating technology. The companybelieves this new technology could revolutionize the solar industry by providing a practical method ofdelivering forced air heat to homes in cold climates using solar energy.

Forced air heating systems are used in 35 million homes in the United Sates. It is the most commontype of heating system in US homes. Forced air furnaces generally run on fossil fuels such as naturalgas, fuel oil and propane. They distribute warm air by blowing it through ducts.

GSLO’s new “Solar Forced Air Furnace” will be designed to easily adapt to existing systems in these35 Million homes to reduce heating costs and to provide a low-cost, “green” energy source to replaceoil and gas.

“We are excited to have acquired this new, revolutionary US technology that has the potential toreduce energy costs and replace oil & gas in millions of homes across America,” noted GSLOPresident Thomas Massey. “This is a huge, untapped market that spends thousands of dollars everyyear on heating costs. We believe millions of Americans will welcome a technology that will reducetheir energy costs and give them a green energy alternative to oil & gas heating,” he concluded.

GOSOLARUSA aggressively acquires, develops and markets the most promising and potentiallyprofitable American technology possible. The GOSOLARUSA mission is to manifest cutting edgeAmerican solar technology and manufacturing advances to successfully compete in a globalmarketplace, which includes TRINA SOLAR, JA SOLAR and CANADIAN SOLAR INC.

Source: www.GoSolarUSA.com

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USA: With Consumers Slow To Spend, Businesses Are Slow ToHire21 August 2010 -- Corporate profits are soaring. Companies are sitting on billions of dollars of cash.And still, they've yet to amp up hiring or make major investments -- the missing ingredients for astrong economic recovery.

Many Democrats say the economy needs more stimulus. Business lobbyists and their Republicanallies say it needs less regulation and lower taxes.

But here in the heartland of America, senior executives say neither side's assessment fits.

They blame their profound caution on their view that U.S. consumers are destined to disappoint formany years. As a result, they say, the economy is unlikely to see the kind of almost unbrokenprosperity of the quarter-century that preceded the financial crisis.

Across the industrial parks and office towers of the Chicago region, in a more than a dozeninterviews, senior executives said they see Americans for years ahead paying down debts incurredduring the now-ended credit boom and adjusting spending to match their often-reduced incomes.

"It's a different era," said Daryl Dulaney, chief executive of SIEMENS INDUSTRY, which has 30,000U.S. employees who make lighting systems for buildings and a wide range of other products. "Ourhiring and investment decisions have to be prudent and reflect that."

Executives see little evidence that the economy is slipping back into recession. But they describe abusiness environment in which sales come in fits and starts and their customers can't predict whatthey will want to buy in the future.

"In the past, our customers had more long-term vision on what they're going to need," said BillLarsen, president of LARSEN PACKAGING PRODUCTS in Glendale Heights, Ill. Now, he said, "theydon't know what they're going to need and when they're going to need it."

Larsen's company sells boxes and other packaging materials to all types of companies, so its salesclosely reflect overall economic activity. Those sales have been swinging widely from month tomonth.

When companies decide whether to hire workers or invest, say, in a new factory, this kind of volatilityand uncertainty about future conditions makes for a strong disincentive.

During the first half of this year, capital expenditures by business have been a bright spot in theeconomy, growing at more than a 20 percent annual rate. But executives say little of this reflectsexpanded capacity. They say firms are spending primarily to replace equipment they had held ontolonger than usual last year to conserve cash.

David Casper, who heads commercial banking at HARRIS BANK, which has more than 300 branchesin the Chicago area, estimated that the firm receives three loan applications from businesses lookingto replace outdated equipment for every customer seeking to expand productive capacity.

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"These decisions are not being made lightly," he said. "We're not in normal times yet."

Small-scale investments

From his office in a leafy office park in suburban Lake Forest, Ill., Robert W. Crawford Jr. is one of theexecutives making such tough decisions. He founded BROOK FURNITURE RENTAL in 1979 to rentsofas, dining room tables and such, mostly to executives on a temporary assignment. The firm nowhas 500 employees in seven markets.

At first glance, Crawford, 71, appears to be on an expansion binge; his company has roughly doubledits purchases of furniture this year. But that's not because of any grand expectations for the future.Instead, he's making up for last year, when the company cut furniture purchases 40 percent and randown its inventory. The large spending bump this year is meant mainly to get inventory back up tonormal levels.

And like the corporate sector as a whole, when Crawford gives the green light to an investment, it'susually designed to lower the need for labor. Instead of expanding capacity, such as building a biggerdistribution center and having to hire more workers to fill it, he is looking to serve existing customersmore efficiently.

That means, for example, small-scale investments in software and new packing procedures so thatfurniture-delivery crews spend less time in traffic and can get seven or eight stops done in a day,compared with five or six before. He has thus reduced staffing this year despite an increase inbusiness.

"Every investment decision we make is more careful and methodical than it was just a few years ago,"said the gravelly-voiced Crawford. "Now we go in smaller, and take time to build out capacity. We'rebeing much more precise and conservative about growth."

By contrast, for most of the 31 years he has been in business, it has paid to be bold. As acrosscorporate America, risk-taking was rewarded. Those who bet on growth to justify hiring more workersand buying more machinery often profited at the expense of more timid competitors.

But executives now project more gradual economic growth and are making less ambitious investmentdecisions. At BROOK FURNITURE, that means entering new markets with a 20,000-square-footdistribution center, rather than one three times that size as before.

"We're not taking it for granted that growth will be there," said Crawford.

Unhappy with Obama

What role is government policy playing in fostering corporate caution?

The executive class in the Chicago region is none too pleased with many of the policies of PresidentObama, their former hometown senator. They criticize his willingness to let Bush-era tax cuts expireat year's end for households that make over $250,000 and allow the capital gains tax rate to increase.They dislike aspects of his landmark health-care law, and some fear that the financial overhaullegislation enacted this summer will make it harder for them to get loans.

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"Congress has been very tough on businesses," said Jason Speer, chief executive of QUALITYFLOAT WORKS of Schaumburg, Ill., which makes the industrial equivalent of toilet ball floats, itemsthat sell for up to $1,200 and are used to measure water levels in farm and industrial equipment. Thecompany also makes the metal balls that go on the top of flagpoles.

Fundamentally, executives objected to Obama's policies on the grounds they would make the UnitedStates a less competitive place to operate in the long run.

But when Speer and other executives were pressed on the role that tax and regulatory policies play inhiring, they drew only vague connections. Speer said his decision whether to hire is driven primarilyby demand for his products. Orders are coming in strong enough that he is running about 20 hours aweek of overtime. So he is weighing whether to hire two or three additional manufacturing workers.

None of the executives interviewed linked a specific new government initiative with a specific decisionto refrain from hiring.

Sustainable growth?

Democratic leaders, however, have been arguing that additional government spending could furtherstimulate the economy, protecting jobs and perhaps even prompting new hiring. Some economists,meantime, have urged the Federal Reserve to goose the recovery by embarking on an aggressivenew effort to pump money into the economy.

But ILLINOIS TOOL WORKS in Glenview shows why more government action might offer limitedhelp.

David Speer (no relation to Jason) is chief executive of the company, which has 60,000 employeesworldwide in more than 800 business units and $14 billion in sales. He said an additional burst offiscal stimulus from Washington might help boost economic growth for a period of months. But that isunlikely to affect his decisions about hiring and expansion, which Speer said are based onexpectations for sales over years to come, not just the immediate future. As long as U.S. consumersremain deeply strained, he is unlikely to undertake aggressive expansion.

More fiscal stimulus "might help make things a little better for a couple of quarters, but I'm not sure itwould get at the underlying economic issue," Speer said. "The core question is: How do you getconsumers back on their feet. We need growth in a sustainable way, not another Band-Aid."

Nor is it clear that new Fed action, such as steps to try to lower long-term interest rates andencourage investment, would prompt him to expand.

For large companies such as ILLINOIS TOOL WORKS, the price of borrowed money isn't theproblem. The company had $1.3 billion in cash on its balance sheet at the end of June, up from $743million at the end of 2008. Lower interest rates wouldn't make much of a difference, either.

"I could borrow $2 billion tomorrow for 3 1/2 percent," said Speer. "But what am I going to do with it?"

Speer is coming to terms with a new economic reality. After an extended economic boom, the nationis less than three years into the process of working out the excesses of that period.

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"It took us a decade to get in the ditch we are in," Speer said. "There isn't going to be instantgratification to get us out of it. We're going to have to get used to a lower growth economy, and thatis going to be a big adjustment for all of us."

Source: The Washington Post

USA: Kerry Introduces Clean Energy Technology Leadership Act17 August 2010 -- Sen. John Kerry, D-Mass., has introduced the Clean Energy TechnologyLeadership Act of 2010. The legislation will provide tax incentives for clean energy manufacturing,and renewable energy and conservation, Kerry's office says.

Specifically, the Clean Energy Technology Leadership Act will provide additional funding for theadvanced energy manufacturing credit, as well as uncap the credit for solar energy property, fuel-cellpower plants and advanced energy storage systems, including batteries for advanced vehicles.

In addition, the legislation will provide a further $3.5 billion for Clean Renewable Energy Bonds,extend and modify tax incentives for new energy-efficient homes, non-business energy propertyimprovements and energy-efficient commercial buildings, among other measures. It will also extendthe research and development tax credit retroactively for 2010 and through 2012, while providing anadditional 10% credit for qualified advanced energy research expenditures.

Source: Office Of Sen. John Kerry

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USA: 22 Cities In Danger Of A Double-Dip Recession17 August 2010 -- The chance of a national double-dip recession is hotly debated amid an increasingnumber of signs that the economic recovery is losing pace, but the risk is particularly troublesome ona local level.

A new report from Moody's Economy.com singled out 22 cities that are at risk of slipping back into arecession in as early as three months. To come to this conclusion, the economists considereddwindling progress in employment, housing starts, home prices and industrial production.

The at-risk cities are spread across the country, though more than half of the cities are in the South,and five are concentrated in the Midwest.

"With chances of a national double-dip recession now estimated at about one in four, several metroareas will probably experience their own downturns in the first half of 2011," said economist AndrewGledhill, author of the report.

Private sector hiring has been tapering off in recent months compared to the start of the year,triggering Moody's to boost its forecast for a national double-dip from a 20% chance to 25% chance.

What's a double dip? No one really knows.In the 22 identified metro areas, Gledhill said private sector hiring is particularly sluggish, increasingthe chances of a slowdown.

Without a substantial pick-up in hiring, Gledhill said the number of cities in danger of a double-diprecession could grow, possibly reaching the triple-digits.

"There was a time when all 384 metro areas were in a recession. We probably won't get to that pointagain, but given the growing risk of another national recession, we're on the lookout for more metroareas that will be weakening substantially on several levels over the next six months to a year,"Gledhill said.

He added that a handful of metro areas, particularly those that are industrial economies, are alsosuffering from a recent falloff in manufacturing.

Source: CNNMoney.com

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World: Joy, Pain and Double Dips12 August 2010 -- Seldom does the United States look at Europe with economic envy. The past fewweeks, however, have been one of those rare phases. Concern about America’s stumbling recoveryhas been rising, just as anxieties about the euro area’s economy have faded. The dollar is theweakling among rich-world currencies. But Americans should take a little heart: it is too soon todespair about their economy. And Europeans should show a little caution: it is too soon to be surethat theirs is firmly back on its feet.

Some forecasters believe that America’s disappointing GDP growth in the second quarter, 2.4% at anannualised rate, could be the start of a slide towards a second recession. One worry is jobs, or thelack of them. American business created only 71,000 in July, too few to match the growth in thepopulation of those of working age and far too few to shorten the queue of unemployed noticeably.Unemployment is stuck at 9.5%, even though corporate America is flush with cash. Companies arestill unhelpfully shy of hiring, preferring to squeeze yet more output from fewer people.

Contrast America’s woe with Europe’s renewed hope. Figures published after The Economist went topress were expected to show that the euro area’s economy grew faster than America’s in the secondquarter, thanks largely to supercharged Germany. Booming sales to fast-growing emerging markets—notably Brazil, China and India—have brought German industry its strongest quarter in decades.The newly affluent in those countries are rushing to buy Audis and Mercedes, as well as luxury goodsfrom other European countries. German firms that had mothballed factories when global demand fordurable goods plummeted have returned to capacity far sooner than they had dared hope.Germany’s unemployment rate, 7.6%, is a bit lower than at the start of the financial crisis.

Beware of short memories

Yet it is only a matter of months ago that fortunes were reversed. Then America seemed to be pullingstrongly and Europe was the laggard. The dollar was riding high as investors fled from the euroarea’s debt crisis. This underlines the most crucial point for policymakers: America’s and Europe’seconomic fortunes are as tightly bound as ever. For all the talk of competition, politicians in Brusselsand Frankfurt should be praying for growth in America—just as their peers in Washington, DC, shouldbe pleased to hear about China’s nouveaux riches ordering German cars and French claret.

That said, both Europe and America seem to be suffering from delusions—of strength and weaknessrespectively. In Europe it is far too early to celebrate recovery on at least two counts. First, Germanyapart, the euro area remains weak. Spain, whose economy is barely growing and where the joblessrate is 20%, would love to have America’s problems. Second, Germany relies on exports, notspending at home: the home market is one of the few places where sales of Mercedes cars havefallen this year. So its economic fortunes remain closely tied to the rest of the world—including one ofits biggest markets, America.

How real are the risks of a double dip in the United States? The recovery has lost momentum in partbecause shops and warehouses are fuller, so that the initial boost to demand from restocking isfading. The housing bust still casts a shadow. Households must save to work off excess debts.Firms fearful of weak consumer spending are cautious about investing. Bank credit is scarce. All thisstands in the way of a full-blooded recovery. But a slide into a second recession would require firmsto cut back again on stocks, capital spending and jobs. The cash buffer corporate America has builtup in case of harder times makes a fresh shock of that kind unlikely.

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Yet even without a double dip, America could plainly be doing better. Its firms might be more willing tospend their cash if they had a clearer sign from Mr. Obama how he intends eventually to close theircountry’s fiscal deficit (and the extra taxes that might entail). But in the short term eyes are fixed onthe Federal Reserve. On August 10th the central bank acknowledged that the recovery hadslackened and said it would reinvest the proceeds from the maturing mortgage securities it owns ingovernment bonds. This was a small shift back towards “quantitative easing”—but less than thebears wanted.

Anxiety about deflation remains justified: any sign of it would require much bolder measures from thecentral bank. However, for the moment the Fed has sent the right signal: concern but not panic.Apart from anything else, it is not clear that yet more monetary stimulus would have created manynew jobs. The relatively high level of job vacancies in America seems consistent with far lowerunemployment. Some firms have complained that the available workers do not have the skills thatthey want. Unemployment, sadly, may thus have deep roots, with more people this time remainingout of work for longer. It will be a hard slog. But on the current evidence don’t expect America’srecovery to grind to a halt.

Source: The Economist

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USA: Green and Clueless19 August 2010 -- You could practically hear a collective groan from enviros across the worldyesterday, when THE NEW YORK TIMES reported on city apartment dwellers who leave their airconditioning running for days and days when they are not even home: with “utilities included” in theirrent, these model citizens don’t pay for it, and they want to walk into a nice cool room when they getback from vacation or just a tough, hot slog from the subway. So much for all those 50 Things YouCan Do books, magazine articles, and Web sites, all of which patiently explain that it would be really,really helpful if we didn’t run appliances when we’re not using them. Apparently, that message—which green groups have been disseminating for at least 20 years—can’t hold a candle to people’sapathy, ignorance, and selfishness.

But the problem goes beyond the fact that people don’t care about, or perhaps understand, the factthat wasting energy and using it inefficiently accounts for a good chunk of the greenhouse-gasemissions that cause global warming. (In one 2009 analysis, scientists led by Thomas Dietz ofMichigan State University estimated that household-based steps—as opposed to national policies likecap-and-trade—such as weatherizing homes, upgrading furnaces, switching to higher-mpg cars,changing air filters in a furnace, and not wasting power would cut U.S. carbon emissions by 123million metric tons per year, which is 20 percent of household direct emissions and 7.4 percent of U.S.emissions.) Despite the millions of words that have been written on how to save energy and use itmore efficiently, people basically have no idea what to do.

Scientists led by Shahzeen Attari of the Earth Institute at Columbia University surveyed 505Americans (recruited through Craigslist), asking them to name the best ways to conserve energy.The most common answers had to do with curtailing use (by turning off lights or driving less, forinstance) rather than improving efficiency (installing more efficient lightbulbs and appliances, say).But it is energy efficiency that offers the only possibility for dialing back our voracious consumption ofenergy and the fossil fuels that generate it. The reason is basic psychology: we are just not going tobecome a nation of pedestrians, let alone do without all our electronic toys. The only hope istherefore to continue satisfying those materialistic needs but with less electricity and gasoline. Yet asAttari and her colleagues report in a study in the current issue of the Proceedings of the NationalAcademy of Sciences, only 12 percent of participants mentioned efficiency improvements as “themost effective way” to conserve energy, while 55 percent mentioned curtailing use. Specifically: 20percent said turn off lights, but only 3.6 percent said use more efficient bulbs; 15 percent said driveless or use public transit, but only 3 percent said use a more efficient car. No wonder Americans areso resistant to taking personal steps to mitigate climate change: they think it means doing without.

And the ignorance continued. The scientists next asked people to estimate how much energydifferent appliances used and how much different behaviors saved. More said line-drying clothessaves more than changing the washing-machine settings (the reverse is true). Most people also thinktrucks and trains that transport goods use about the same energy; in fact, trucks use 10 times more tomove one ton of goods one mile. Most people also said that making a glass bottle takes less energythan making an aluminum can (the reverse is true: a glass bottle requires 1.4 times as much energyas the can when virgin materials are used, and 20 times as much when recycled materials are used;making a recycled glass bottle actually takes more energy than making a virgin aluminum can).

The higher the energy used by an appliance, the more wrong people were in their estimates. “Inother words,” the scientists write, “people’s understanding may be worse where the potential for CO2reductions is large.”

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Here’s my favorite: participants who said they did lots of environmentally responsible things on theenergy front actually had less accurate perceptions of all this—suggesting that while people may thinkthey’re doing the planet good, they are not. The notion of making “informed choices” is great, but itkind of requires being, well, informed. What we have instead, it seems, is rampant ignorance. Thereal problem, Attari told me, is that when people pick the easy things, the low-hanging fruit, they figurethey’ve done their bit for the environment and then don’t take steps that could actually make adifference.

Why the ignorance? As usual, the press and green groups bear some of the blame, for promulgatingsimple feel-good but ultimately almost-useless steps such as turning off your cell-phone chargers.(Yes, it does add up, but a typical cell-phone charger draws one watt of power, so over a day that’s 24watt-hours, or about one 40th of a kilowatt-hour, for a grand total of about 10 cents per day insavings.) The press and enviros have also spread the comforting myth that we can shop our way tosaving the planet, a notion I have pilloried before. Whoever’s to blame, the consequences are clear:even people who want to conserve energy have barely a clue how to do it, and lots of people don’teven want to. No wonder those apartment ACs are running full tilt while nobody’s home.


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World: Insurance Companies Find There Is Money to Be Made inGreen Technology8 August 2010 -- Every day, national and local officials, municipal utilities, corporations, homeownersand consumers are weighing the risks and rewards of adopting renewable energy. The up-front costscan be daunting.

Sure, putting solar panels on my house might be good for Mother Earth and could save me money inthe long term, but what if they break in two years and I’m out $5,000 before I have recouped myinvestment?

Unfortunately, good karma points are not going to pay the power bill. But insurance might.

Increasingly, insurers are stepping in to bridge the gap between green intentions and actual capitaloutlays on green technology.

They are backstopping warranties on solar panels, helping start-up companies with short trackrecords offer multidecade guarantees on their products and win over skeptical customers and projectfinanciers. They are studying weather patterns to offer protection in the event of, say, unusually weakwinds that fail to spin turbines, or a volcanic ash cloud from Iceland that diminishes the output of asolar energy facility in Spain.

They are advising companies on how best to incorporate renewable energy systems into their factoryoperations and offering property insurance that will pay not just to rebuild a structure in the event of aloss like fire but reconstruct it in a more environmentally friendly and energy-efficient way.

They are even offering coverage to carbon traders. So, if you are a European utility engaged in anemissions offset program in China and a devastating earthquake damages your partner power plantin Sichuan, you have some peace of mind.

Cynics might say that insurers are just the latest industry to see green — i.e., money — in the greenmovement. But Dr. Nikolaus von Bomhard, chief executive of MUNICH RE, says climate changeshould not just be an opportunity for insurance companies to sell more policies for loss prevention.

Insurance, he argues, can play an important “pace-making” function, helping accelerate the adoptionof green energy by assessing, quantifying and spreading risk.

“Insurance can support the modernization of economies and societies by encouraging thedevelopment of new technology and enhancing innovation,” he said at a recent panel discussion onclimate change at the Shanghai Expo.

The task of crunching the numbers and pricing new green insurance products falls to teams ofmathematicians, engineers, physicists, lawyers and other analysts in groups like MUNICH RE’sspecial enterprise risk unit. In 2007, they were asked by a solar panel manufacturer to come up withsome insurance that would backstop the 20- or 25-year warranties that prospective customers weredemanding.

“A performance warranty creates a liability on a company’s balance sheet,” explained Christian

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Scharrer, a risk analyst with the unit. “Most companies don’t have the capital structure to keep it ontheir own balance sheet,” he said, let alone pay out a hefty claim.

MUNICH RE spent months investigating the engineering and manufacturing methods. While solarphotovoltaic panels might all look the same on the outside, Mr. Scharrer said, “if you dive into thedetails of the manufacturing process, they’re different in terms of quality.”

After more than a year and a half of analysis, MUNICH RE sold its first such policy in 2009 to SIGNETSOLAR and now counts eight other panel manufacturers as clients.

Jim Tynion, a partner at the law firm FOLEY & LARDNER of the United States and chairman of itsenergy practice, predicts that this segment of the business will “explode” in the next five years,particularly as the United States increasingly introduces mandates for green energy.

“Manufacturers are going to have to produce more,” Mr. Tynion said. “The Chinese and othermanufacturers from around the world want to come to the U.S. market, but many don’t have a historyor a credit standing. They are not financeable in the U.S. They don’t have a warranty claims processin the U.S. — if something breaks, who do you call?”

But if these manufacturers “can go out to the insurance company, and the insurance company doesthe research, that’s going to help the market.”

Todd Roberts, chairman of SOLARTECH RENEWABLES, a company in Kingston, New York, thatrecently started making solar panels in an old I.B.M. facility, said the number of insurers offeringwarranty insurance policies had expanded in the past 6 to 12 months from a few players to about adozen. A 25-year policy, he said, adds about 1 percent to the cost of panels but provides acompetitive edge.

Insurers like FM GLOBAL, meanwhile, are advising clients like JOHNSON & JOHNSON on issueslike how to install solar panels on their factories without causing drainage problems, increasing therisks of fire or compromising the structure of the building.

“Alternative energy is becoming a huge part of our business,” said Jonathan W. Hall, an executivevice president with FM GLOBAL. “We have plan services and plan review. Clients send in plans tous to help engineer the projects right from the get-go. Have you developed the building adequately tohold the weight? Checked the fire hazards? You don’t want to create a problem that would shutdown your business.”

Once in a while, he said, he has to tell clients that their well-intentioned plans to make theirbusinesses more sustainable might not be the best idea. “Green roofs are not appropriate in atyphoon zone,” he noted, because strong winds could turn loose plant matter, rocks or landscapinginto projectiles.

As more companies adopt large solar, wind and other renewable energy systems, many are lookingto generate power for themselves and sell energy back into public grids. Other companies thatembrace energy-saving technologies want not only to cut their power bills but also to take advantageof tax credits — credits that might be sold or traded to other investors.

“That’s one of the big reasons companies are spending all this money on green energy systems,” said

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Michael Meehan, founder of ENXSUITE, a San Francisco firm that helps companies manage andimprove their energy use.

Some of his clients are pouring hundreds of millions of dollars a year into green energy initiatives, andthe deal-making is getting increasingly complex, Mr. Meehan said. With so many dollars at stake,more and more players are looking for hedges and safety nets.

“At that level,” he said, “the whole notion of insurance becomes so much more important.”


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