Makers of green products start to see red lights

Cheaper gas, bad economy have hybrid-car makers, energy auditors scrambling.

By , Reuters

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    Lovecraft Biofuels mechanic Mike Ackerman installs a veggie oil filter in a diesel-engine Mercedes in Los Angeles. The company's chief executive says that business suffers when gas prices fall.
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U.S. consumers’ enthusiasm for all things clean and green is being overshadowed by their urgent need for a different kind of green – the one that pays the mortgage and puts food on the table.
From hybrid cars to solar panels, products that promise to reduce consumption of polluting fossil fuels are not selling as quickly as they were before access to credit dried up and gas prices plummeted from historic highs.

“I’m the only one that’s upset when gas prices go down,” says Tacee Webb, chief executive of Lovecraft Biofuels. “Environmentalists feel the same way, but our customer base is not environmentalists.” Lovecraft, with locations in Portland, Ore., and Los Angeles, retrofits cars to run on biodiesel and vegetable oil. “It is hard on us when gas prices go down.”

For the most part, products with a green halo command higher prices than their traditional counterparts. Hybrid cars typically carry a premium of $3,000 to $5,000, an investment that takes several years to recoup.

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With gas prices now below $2 a gallon, that payback is much farther off than it was when prices soared to more than $4 a gallon last summer. Sales of hybrid cars and trucks fell 53 percent in November, according to Autodata Corp., a sharper drop than the 37 percent decline seen industrywide. Toyota Motor Corp.’s Prius made up more than half of all hybrid sales, though Prius sales were also down by nearly half.

Underscoring consumers’ hesitance on hybrids, Toyota recently leased 23 acres of space at Southern California’s Long Beach port to store thousands of cars, including Prius hybrids, that dealerships have not been able to take on.

Consumers are also balking at efforts to green their homes, even in cases where that investment will help save on their utility bills down the line.

“It’s easy to say, ‘I care about the environment, I want to do good for planet Earth,’ ” says Alan Finkel, chief executive of Green Life Guru. “But when they actually have to write a check and spend money, they need to really be shown some kind of payback.” The Santa Monica, Calif.-based company helps homeowners reduce their energy usage.

Solar panels are a particularly hard sell, Mr. Finkel said, because of the hefty upfront investment that can run into the tens of thousands of dollars.

The world’s largest maker of solar cells, Germany’s Q-Cells, stunned markets last week by abruptly cutting its outlook for this year due to “a flood” of requests from customers to postpone deliveries.

Small solar players are also feeling the pinch. Buehl Solar, a Los Angeles-area solar-panel installer, has tripled its monthly advertising budget to $1,500 to try to keep sales steady.

“If we hadn’t done that, we would definitely have a drop, maybe by two-thirds,” says Ulrich Buelhoff, the company’s owner, in an interview.

The lack of available financing for big-ticket home improvements is a major obstacle for consumers who want to install solar panels or do other kinds of green building projects, says one lender.

“There is almost no solar financing in the world today,” says Jeff Bricmont, co-founder of Modern Earth Finance, a mortgage broker that specializes in clients who are building green. “Lenders are not lending money based on the green improvement of a home.”

The lack of green building activity has hit retailers like Livingreen, which has three home furnishing and building supply stores in southern California.

“Traffic is dramatically down. Some days you just don’t see people at all,” says Ellen Strickland, co-owner of Livingreen, of her Los Angeles store. “We’ve taken a hit like everybody.”

Rebuilding efforts following a recent wildfire near Santa Barbara, Calif., have helped Livingreen’s business there, but Strickland says the company is nevertheless moving its Santa Barbara store into a smaller space next year.

Businesses are getting creative with their pricing. Strictly Business Energy, a Princeton, N.J., company that does home energy audits, is about to launch a $49.95 service in which a customer puts information about his home into the company’s website and receives a list of recommendations about reducing energy usage.

Ira Eisenstein, owner of Strictly Business, hopes the new service will drum up business with homeowners who can’t pay the $400 he charges for a home visit.

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