kiplinger connection
Energy • The Economy • Housing

Energy: New technology will make coal hot again—and clean.
The Economy: U.S. manufacturing is picking up and ahead of China.
Housing: Will people trade in houses as they do cars?

Energy
Coal: The plentiful but polluting fuel.
It'll hog the energy debate this summer as U.S. policymakers chase two difficult goals: Substantial cuts in greenhouse gas emissions and less dependence on imported fossil fuels.
Electricity demand will grow about 40% in the U.S. by 2030. That’ll be true even with widespread conservation measures.
Green energy sources won't help enough. At best, solar, wind, biomass, and other sources will account for 5% of total energy production.
Nuclear power also has limitations, though its use will expand up to 20% by 2030. Problems include high investment costs, a need for huge plants, and waste disposal issues.

So coal is key to bridging supply gaps both here in the U.S. and throughout the world, where it is the top energy generating source. That’ll be the case for several more decades. It’ll take that long for solar, nuclear fusion, and other clean sources to take up the baton.
But is there a practical way to burn coal with less pollution? Because if not, attempts to curb global warming will likely be in vain.

Cleaner-coal power plants ARE feasible with a technology,
integrated gasification combined cycle (IGCC), that turns coal into a gas and separates the harmful carbon dioxide, enabling underground storage. Utilities plan to build as many as 30 IGCC units, starting in 2010.
By 2012, plants will be up and running with an advanced form of IGCC that promises to be more efficient while reducing CO2 emissions.
Congress will OK funding and other support to speed them along.
These facilities will be economical under a cap-and-trade system for greenhouse gas emissions, which we expect in the next five years. With emission limits integrated into the cost of producing all power, clean coal electricity will be cheaper than conventional coal power.

More coal use will be a boon to states that could use a boost: Indiana, Illinois, Michigan, and Ohio are prime sites for new coal plants, for example, because of their proximity to supplies and transportation. Plus renewed interest in high-sulfur coal will help Appalachian states.
The downside: A premium of about 20% on average electricity costs during the next 25 years, before economies of scale start to kick in.
Adding to price woes will be tougher environmental protection regulations on coal mining firms, making it more costly for them to extract the fuel.

The Economy
Manufacturing is finally starting to rebound. More companies are restocking their shelves, with new orders for computers,
electronic goods, fabricated metals, chemicals, and transportation.
Still, factory production will rise only about 2% for the year,
down from 3.6% last year. And employment continues to shrink...20,000 more jobs will be lost between now and the end of the year.

The pickup will keep the U.S. ahead of China in manufacturing. The U.S. lead is substantial and likely to last for more than a decade.
The U.S. has a solid advantage in capital goods, from equipment to make agricultural machinery to aircraft.
Moreover, demand for such items is soaring in emerging markets, which are growing faster than markets in the industrialized world.

U.S. manufacturers will reap the benefits, with stronger sales likely to South America...especially Brazil, Argentina, and Chile...Southeast Asia, India, the Middle East, eastern Europe, and even China itself. The best guess: China won’t pass the U.S. in manufacturing until around 2020. Even then, the U.S. will keep an edge in some sectors.

Housing
People trade in cars. Why not houses? More home builders, desperate to clear inventory from tracts of newly built houses, are encouraging trade-ins. They'll buy customers’ existing homes, saving them the hassle of finding buyers in a slow housing market. Builders can then use their construction resources for quick makeovers to increase the market value of the old houses and sell them quickly.
About 10% of U.S. home builders are already offering trade-ins, a clear sign of how difficult it is for them to unload new houses. A similar trend occurred in the previous slump in the early 1990s.
Buyers skirt the commission cost normally paid to agents, and home builders typically arrange the sale and closing within a month.