Green hits red light with cash-strapped consumers

LOS ANGELES/SAN FRANCISCO Fri Dec 12, 2008 2:21pm EST

1 of 4. A home under construction uses new solar technology that allows thinner solar wafers to be designed into the shingles in Temecula, California in this July 19, 2008 file photo. 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 their historic highs.

Credit: Reuters/Mike Blake /Files

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LOS ANGELES/SAN FRANCISCO (Reuters) - 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. Environmentalists feel the same way, but our customer base is not environmentalists," said Tacee Webb, chief executive of Lovecraft Biofuels, a company with locations in Portland and Los Angeles that 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.

With gas prices now below $2 a gallon, that payback looks much farther off than 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 total 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.' But when they actually have to write a check and spend money, they need to really be shown some kind of payback," said Alan Finkel, chief executive of Green Life Guru, a Santa Monica, California-based company that helps homeowners reduce their energy usage.

Solar panels are a particularly hard sell, 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 this 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 pain. Buehl Solar, a Los Angeles-area solar panel installer, has tripled its monthly advertising budget to $1,500 to keep sales steady.

"If we hadn't done that we would definitely have a drop, maybe by two-thirds," Ulrich Buelhoff, the company's owner, said 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, said one lender.

"There is almost no solar financing in the world today," said 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," Ellen Strickland, co-owner of Livingreen, said of her Los Angeles store. "We've taken a hit like everybody."

Rebuilding efforts following a recent wildfire near Santa Barbara, California, have helped Livingreen's business there, but Strickland said the company is nevertheless moving its Santa Barbara store to a smaller space next year.

Businesses are also getting creative with their pricing. Strictly Business Energy, a Princeton, New Jersey, company that performs home energy audits, is about to launch a $49.95 service through which a customer can input information about his home on the company's website and receive a list of recommendations about reducing energy usage.

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

"If I say to somebody I'm going to spend three hours in your house and it's going to cost you $400, people are like 'Let me check with my husband,' and then you never hear from them again," Eisenstein said.

(Editing by John Wallace)

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