From: "Paul Tiegs" <paultiegs(at)omni-test.com>

Subject: OMNI News Bulletin November 2008

Date: Fri, 7 Nov 2008 

updated Nov 10/08
 
Because there are some very important national and international issues in play this fall, I thought I would take a few minutes to make sure all of OMNI’s clients and friends were up to date on a couple of them I thought should get some special attention.  I think the following discussions address subjects that are really important to the hearth industry.  This is intended to be a heads up newsletter.
 
1.               I think it goes without saying, but I have to say it anyway; the greatest current threat to all of us in the hearth industry is, of course, the twists, turns, and dives (mostly dives) the economy has been taking and continues to take.  Although I could wax for hours with just a few of the details, I want you all to know that I can complain even longer about how the government is handling the problem it and the “brilliant” Wall Street gurus and mega banks created.  After all, the guys who planted the sub-prime seeds and nurtured them until they became the mega problems we now have are now the same guys being given $750,000,000,000 of government money (ie, taxpayer money) to #1. Save their sorry souls, and #2. to spend willy nilly, with all the good intensions they could muster, to spend the American economy back onto its feet.  It is really ironic that most of that money will be dispersed through the trouble-maker banks that made the problem with the government “watchdogs” watching in the first place.  The saving grace of it all I am sure, is that with that much money being injected into the economy over a very short period of time, some confidence in the markets and in the spending mood of consumers should emerge.
 
There is some good news that is more specific to the hearth industry in that $750-billion Emergency Finance Bill.  As some of you probably know, $250-billion of that $750-billion is supposed to be used to shore up the devastated housing market.  I’ve also read that there are new discussions taking place in Congress about increasing that $750-billion to around $1.25 trillion.  In any case, with these kinds of dollar numbers, I don’t personally think there is a “doomsday” economy coming.  With the ability to print money and hopefully some better managers at the helm, the government should be able to keep us from having a total economic collapse.  I do not trust the government to do much of anything very well but it does do a good job of throwing money (our money) around so this plan may work.  That is why I think it will at least have some kind of positive effect on the whole economy.
 
Now, as many of you know, the good news that most directly benefits the hearth industry is in the $750-billion government bailout of WallStreet.  There was an earmark in that legislation for those of you who manufacture wood-burning (actually any biomass-burning) heaters.  It boils down to a $300 tax credit for consumers who buy biomass-fired home heating appliances.  The bump in that good news is that those biomass-fired heaters have to have thermal efficiencies of at least 75%.  The HPBA is currently negotiating with the IRS to establish the details of what methods will be used for measuring efficiency testing and what energy basis will be used for calculating the efficiency percentages.
 
PELLET STOVES
OK now, that $300 tax credit looks good and it certainly has a great potential to help everybody but please study the details before making conclusions about how it may affect your business.  One would think that it is a slam-dunk for pellet stoves since EPA’s default efficiency is 78%.  And for EPA-certified pellet stoves this is true; I believe it is very likely that the IRS will accept all EPA-certified pellet stoves as having at least a 78% overall thermal efficiency.  For EPA-certified pellet stoves, this avoids the hassle and expense of having to test their stoves for efficiency.  However,  as I see it, the majority of pellet stove manufacturers elected to have their products declared exempt from EPA because their stoves were designed for air-to-fuel ratios of more than 35:1 and then tested to verify they had air-to-fuel ratios greater than 35:1.  Therein lies a conundrum.
 
As I’ve pointed out a couple of times already, EPA exempts any stoves that are shown to have air-to-fuel ratios greater than 35:1.  The problem that emerges now is that any stove with air-to-fuel ratios over 35:1, even if those air-to-fuel ratios only occur at the low burn rates, will have thermal efficiencies of less than 75%.  So it is very unlikely that any of the EPA-exempt pellet stoves will qualify for the $300 tax credit.  That is, it is very unlikely unless the over-35:1 air-to-fuel-ratio pellet stoves are changed into less-than-35:1 pellet stoves and go the whole gamut of testing for EPA emissions, getting EPA-certified, and then testing for efficiency.  (Actually, it is most likely that we will be able to test the emissions and efficiency simultaneously).  In summary:
               *  Most (actually it will be virtually all) EPA-exempt pellet stoves will not qualify for the $300 tax credit because their air-to-fuel ratios are greater than 35:1 and
               *  If the air-to-fuel ratio is lowered to less than 35:1 to improve efficiency and get the $300 tax credit, the stove will then be required to be EPA-emissions-certified.
 
NON-CAT WOODSTOVES
The problem with non-cat woodstoves, even if they are EPA-certified, is that their EPA-default efficiency is 63%; certainly a respectable value by itself but not enough to qualify for the $300 tax credit.  So at minimum, each and every non-cat stove, unless it has been efficiency-tested at 75% before with the IRS-approved method, will have to be tested for efficiency.  This is OK (especially from lab business perspective) but there is still a bigger problem in that getting a non-cat woodstove to have a thermal efficiency of at least 75% is difficult at best.  I am sure that whoever came up with the 75% requirement did not realize that it is critical that some heat remains in the flue gases making them buoyant and able to draft the flue gases to the outdoors.  Like pellet stoves, the non-catalytic stoves generate a lot of warm excess combustion air (ie, more than the actual combustion needs) at low burn rates, and again like pellet stoves, this pushes the thermal efficiency percentages down.
 
One factor that may be of some help for non-cats is if the HPBA is successful in convincing the IRS, for a variety of technical and international trade reasons, to adopt the European low heating value energy basis for calculating efficiency.  This could add up to about 7 percentage points above the efficiency that would be calculated using the North American energy basis.  If typical non-cat efficiencies run at about 63%, like the EPA has specified for default purposes (and it is our experience that they do), using the European energy basis will still leave most non-cats below the qualifying 75%.
 
CATALYTIC STOVES
It is worth noting here that EPA's default efficiency for EPA-certified
catalytic woodstoves is 72%.  Therefore, if the HPBA is successful in convincing
the IRS to use the lower heating value basis for wood fuel, they will not need
to be re-tested and certified in order to qualify at or above the 75% efficiency
minimum.  However, if the HPBA is not successful, already EPA-certified
catalytic woodstoves might have to be retested.  If they were tested using EPA's
Method 5H they will probably not have to be tested but if they were tested using
EPA's Method 5G and no combustion gas analyzers were used, they will have to be
retested.  Even if they have to retest, I am expecting that the catalytics will
get easy approval for the $300 tax credit.
 
POSSIBLE CHANGES/SHIFTS THAT MAY OCCUR IN THE WOODSTOVE MARKET
Putting the additional efficiency/emissions hurdle in front of non-cats like I’ve describe above could mean there will be a whole new slew of catalytic stoves coming out in our future.
 
 These are my observations and my opinions about the recent national financial calamity and the biomass earmark funding and how they will likely affect the hearth industry.  I realize I strayed from my usually strict technical analysis and engineering perspective to make it look like I have financial and economic expertise.  I do not have that kind of expertise but I was drawn in by the obvious high level of ignorance that I am now seeing in the governmental, in the financial/banking sector, and in the economic systems we’ve come to trust. They said they knew best about how to run things and that we should trust them, and we did; shame on them.  Now, they want us to trust them again; and if we do, shame on us.
 
2.               If you had not heard before or have not had a chance to visit OMNI in Portland, Oregon lately, I am proud to announce that we have moved to some brand new facilities.  We are now located very near the Portland airport in some fantastic facilities.  We have 23,500 square feet new laboratory and office space built to our specifications including 30-foot ceilings.  Some of the specialized facility systems we have include a centralized high-volume master venting system for all 10 wood-fired and gas/oil-fired appliance test booths, a sealed test room for pellet stoves, a fuel preparation room, a steel fabrication shop, and two private offices specifically designed for use by visiting clients.  Pictures are attached.
3.               And finally, after about 15 years of resting on a shelf in the back room, we have resurrected registered OMNI trademark that we call “Emiciency.”  Of course it is appropriate for the times because it is a contraction of the emissions and efficiency testing that we have pioneered over the last 20 years.  I intend for you to see it around the industry a lot more in the next 20 years.
 
If you have questions or comments please let me know at your convenience,
 
Paul Tiegs
President
 
OMNI-Test Laboratories, Inc.
 www.omni-test.com
 
Street Address:
13327 NE Airport Way
Portland, Oregon 97230
USA
 
Mailing Address:
PO Box 301367
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Phone:  503-643-3788
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