Smart, New Medical Devices Coming to Market Faster

The FDA tries to keep up with medical device market shift to wearable devices that collect, analyze, transmit data

For AdvancedManufacturing.org/Published June 2016

By Karen Haywood Queen

The medical device industry is evolving to create better tools to help aging patients and their doctors manage chronic conditions outside of a hospital. Many of these devices and apps look like and/or work with smartphones. The goals are to lower costs, deliver value-based results and meet consumer demand.

 

Other trends that impact manufacturers include an aging population, improved quality inspections and the regulatory process, according to a recent report by EWI (Columbus, OH), a nonprofit engineering and applied R&D company. The Affordable Care Act also plays a role.

While the market for traditional metal parts used in implantable devices for knees and hips will be fairly stable in the year ahead, changes are coming, said Bryan Hughes, director of medical technology at P&M Corporate Finance in Chicago. Some parts used in medical devices that have historically been made of metal are being replaced by plastic components

In some cases, the volume needed has finally increased to the point it made sense to transition from metal to plastic, he said.

“Volumes have gotten to a scale, creating a situation where it makes sense financially to invest in a mold to manufacture with molded plastic,” Hughes said.

Another driver in the trend has been concern over hospital-acquired infections. “Metal instruments have historically been a reusable item,” Hughes said. “They use the instrument, send it to central sterilization in the hospital, and then use it again. But the challenges and costs associated with instrument sterilizing have moved any number of products to single-use plastic.”

Meanwhile, a whole new wave of medical devices is also coming to market.

“There’s been a recognition that many medical devices were not designed with the consumer in mind,” said Brian Williams, director, strategy, Global Healthcare at PwC.

“We buy consumer devices driven partly by price but also by form, features and the software that powers those devices. We use smartphones to do our shopping, banking, read a book, bank, take photos. We are bringing those expectations of design, ease of use and convenience to healthcare. New medical devices won’t look as much like medical devices.”

Features and technology from consumer devices are making their way into medical devices in what Dale Robinson, business development director at EWI, calls technology fusion. Manufacturing technologies, such as printed flexible electronics will enable the next generation of health monitoring devices. Electronic circuitry is already being printed onto fabrics, he said.

An aging global population will help power growth of just under 6% per year in medical device revenue.

Other technologies that will enable these trends include noninvasive sensors, onboard data analysis algorithms and wireless data transmission, Robinson said. The biggest areas for growth include patient monitoring through clothing or jewelry that seamlessly collects and transmits data to providers, family caretakers of the elderly and parents of newborns, Robinson said. The next generation of battery technology will be smaller, flexible and have a higher energy density.

The winners in the device market will design products that have a measurable value, provide a clear health outcome and integrate with devices consumers already use, Williams said. Stand-alone devices won’t likely be as common.

“Innovation has become more important in healthcare today, given changes that have occurred in the market driven by the Affordable Care Act,” Williams said. “One component of that is reimbursement models that are value based as opposed to fee based. That puts additional pressure on manufacturers of devices to show the value of their product and tie that value to an outcome achieved by the patient.”

Pressure to lower costs plays a role. “The aging global population is huge in terms of overall medical device market growth,” Hughes of P&M said. “As you get above 70, the cost of treating chronic conditions such as COPD and congestive heart failure increases dramatically. To care for a patient per day in a hospital is $3000, in a skilled nursing facility is $450, at home is $50.”

From 2010-2014, medical device revenue growth increased nearly 7 %.

With home care in mind, companies that have in the past developed devices for use in hospitals are shifting their focus to the home health market, Hughes said.

Innovations that will make home care possible include improved and miniaturized implantable devices. Interventional cardiac defibrillators are now implanted and leadless—a great improvement over older technology, Robinson said. The devices are implanted into the heart and use much smaller batteries and electronic circuitry. The data processing chips will have higher density processing capabilities to enable better performance without increasing size. To assemble such devices, manufacturing technology has improved to create hermetic seals to prevent fluids from leaking into the device and micro-joining processes to connect the battery tabs and microprocessor to the electronic circuitry, he said.

Growth in Smart Medical Devices

More devices will be worn, both on the wrist and as part of clothing using technology that prints circuitry onto fabric, said Jeffrey C. Rasmussen, market research manager at the Industrial Fabric Association International (Roseville, MN).

“In the past, sensors and circuitry embedded into fabric were too big and too clunky,” Rasmussen said. “Manufacturers have been able to make them miniaturized, more stretchable and comfortable. It’s exploded in the last year. Some of the big apparel players in the market are Adidas, Nike and Ralph Lauren.” Such clothing is improving in terms of washability, he said, although research continues in that area.

Sensors are becoming better and more sophisticated. Devices now entering the market have sensors that measure more physiological parameters such as 2-lead EKG and pulse oximetry, Robinson said. Circuitry and biosensors imprinted into fabric and worn close to the heart and lungs for monitoring a person’s pulse and/or respiration rate tend to be more reliable than those worn on the wrist.

Other technology in this sector includes smart socks that send an alert if a baby stops breathing, a vest defibrillator, and smart blankets that can send alerts if a patient is developing bedsores.

Smart fabrics manufacturer Eeonyx has developed a patented formulation that allows it to apply conductive polymer coatings to textiles, fibers, and yarns—making them piezo-resistive, which means they are sensitive to and react to touch, Rasmussen said. This creates a custom pressure touch sensor in the fabric. In 2014, Eeonyx partnered with BeBop Sensors, which now uses co-designed proprietary Eeonyx smart fabric to create flexible electronics/circuits that can be incorporated into a single piece of fabric. Using DuPont designed conductive inks, BeBop Sensors’ stretchable circuits can be printed onto fabric, such as a shirt or jacket for a variety purposes including wearable controllers.

“Instead of wearing sensors in the shirt, the shirt is the sensor,” Rasmussen said.

Self-Monitoring

With these devices in hand, consumers will monitor their own health, perhaps consulting with a medical provider by video or a smart device. “I can use my smartphone to gain access to a clinician in real time through video consulting,” Williams said. “In that distributed-care environment, innovation needs to advance to support convenient care.”

These new devices will be easier to use at home and easier on the eyes. For example, ResMed and other companies focused on oxygen treatment are developing better devices to effectively provide patients with oxygen at home—instead of in a hospital on a ventilator, Hughes said. “People don’t want a huge oxygen concentrator that takes up a lot of room and is loud,” he said. “We’re working with a company that has a pretty big, ugly device. They want us to make it look cooler.”

Some aren’t technically medical devices as defined by the Food and Drug Administration because they simply collect data. These wearable devices to monitor health information include products such as the Fitbit or Apple Watch, Robinson said.

Technology fusion will come into play again as tech companies such as Google, Fitbit and Verizon are moving into medical device territory, said Chris Schorre, vice president of global marketing at medical device consultancy Emergo in Austin, TX. “You are also going to see more companies that are making traditional medical devices looking for ways to add a wireless monitoring component to their products so they can connect to a smartphone or tablet. Consumers want their devices to do more than simply count steps or measure their heart rate, and doctors increasingly appreciate the benefits of remote patient monitoring.”

For example, Verily, formerly Google Life Sciences, has gone aggressively into life sciences, he said, citing the company’s research and development with Swiss manufacturer Novartis of a contact lens with a chip embedded in it to measure blood glucose (BG) levels.

“There are definitely going to be winners and losers,” Schorre said. “A lot of this technology will connect via a smartphone, tablet or other system. If Verily succeeds in getting its contact lens with an embedded glucose sensor cleared by the FDA, and users can constantly monitor their glucose levels with alerts on their smartphones, it’s going to have an impact on companies making traditional meters … at least among the 10—15% of people wearing contacts.”

As companies such as Google move into medical device territory, medical device companies will have to return the favor, Schorre said. “You are going to see more companies that are traditional medical device companies developing wireless technology to connect their products to a smartphone.”

When devices are designed to collect and transmit data to healthcare providers for diagnostic analysis and therapeutic advice from a physician, they turn a corner to become FDA-regulated medical devices, Robinson said.

One leader in that space is Glooko Inc. (Palo Alto, CA). Glooko was founded in 2011 by a mobile app developer, a technologist, and a then-Facebook senior executive. Its diabetes management platform, Glooko MeterSync, downloads readings from more than 40 of the most popular blood glucose meters, insulin pumps and continuous glucose monitoring systems to Android and iOS mobile devices.

Other companies are moving into that sector. Late last year, the FDA granted 510(k) clearance for LabStyle Innovations Corp.’s Dario Blood Glucose Monitoring System. The system includes a device housing that includes a blood glucose meter, lancing device, test strips, lancets, control solutions and a mobile application. The mobile app allows the user to look at glucose test results using Apple’s iOS 6.1 or above smart mobile device technology. It helps manage the disease by recording the BG results and other user-entered information such as carbohydrates, activity, and insulin use.

Medical Device Market Speeds Up

“There have been big changes in the speed of innovation,” Williams said. “We are seeing more new products, new apps, new solutions that meet consumers where they are than we saw even a few years ago. It’s driven by an innovation cycle associated with technology. It doesn’t take long to develop a new piece of software that does something novel.”

That innovation cycle is moving much faster than the regulatory environment for traditional healthcare infrastructure is accustomed to, Williams said. The FDA has continued to tweak the process in an effort to keep up with changes while maintaining safety.

Producing or launching an innovative product in the US has been challenging compared to releasing the same product in Europe because the FDA’s system of approval and clearance depends on predictive devices—comparing a new device to one that has already been cleared or approved by the agency, Schorre said.

The FDA classifies medical devices as Class I, II and III. Class I devices, such as dental floss, are deemed to be low risk. Class II devices, such as condoms, are higher risk than Class I and are subject to more controls to reasonably assure the device is safe and effective. Class III devices are the highest risk—“anything where failure of the device would injure or kill a patient or user,” Schorre said—and require the greatest regulatory controls. Active implantable devices, such as pacemakers, are Class III.

Some Class I devices, nearly all Class II devices and a few Class III devices must be cleared by the FDA via a 510(k) process, also known as Pre-Market Notification. Most Class III devices are subject to the far more stringent PreMarket Approval (PMA) requirements, which involve clinical trials.

Launching an innovative product in the US market is sometimes challenging compared to releasing the same product in the European market. That’s because the FDA has a predicate-based regulatory system, which relies on comparing a new device to one that has already been cleared for sale by the agency. “The problem with that system is, if your device is new, innovative and quite a bit different from one already cleared by the FDA, then the FDA is going to treat it as a new device,” Schorre said. “They will initially default to classifying it as ‘high risk.’ You may have to [clear] significant hurdles so it can be a Class II product—to convince the FDA that it’s not high risk and doesn’t require clinical trials. But obviously, just because a device is innovative and new doesn’t mean it’s high risk.”

US Regulators Try to Catch Up

Because of the different European approval system, “We sometimes advise clients to seek approval for their innovative products in Europe first,” he said. “The regulatory system in Europe is rules-based and is therefore more flexible …. [G]oing to Europe first can be faster and cheaper because the manufacturer might avoid having to jump through unexpected hoops that would be required for FDA clearance of an innovative but lower risk device,” Schorre said. “Getting approval in Europe first will not necessarily make getting approval in the United States easier. The primary benefit is that companies making new technology can generate sales more quickly and be generating post market clinical use data that might eventually support a FDA submission.”

In the future, clearance for mobile medical apps might be more well-defined in the United States. “The FDA is leading the charge in developing standards for mobile medical apps, but some want the FDA to take the next step in being more specific about what is allowed and what is not,” Schorre said. “That has not been happening in the rest of the world. Other countries will look at how the United States is regulating apps and issuing guidance and most likely will emulate what the FDA has been doing. To their credit, the FDA understands they will always be a step behind in regulating mobile medical technology and do not want to be the ones to hinder its development.”

To see original publication, go to http://advancedmanufacturing.org/smart-new-medical-devices-coming-market-faster/

 

To Recapitalize or Not to Recapitalize: How To Hedge Against Rising Interest Rates

By Karen Haywood Queen/Published April 7, 2015 for ForbesBrandVoice

With the Fed signaling that it may raise interest rates for the first time in nine years, now is the time for middle market companies to explore the pros and cons of recapitalizing, releveraging, and refinancing. Businesses can take advantage of the current low rates while hedging against rising rates.

“Interest rates typically aren’t near zero the way they are now,” says John Merrick, professor of economics and finance at the Raymond A. Mason School of Business at William & Mary. “One would expect that rates would normalize over time. The possibility of the Fed raising rates in the coming year is quite appropriate.”

On March 18, the Fed indicated that a rate increase is possible in June or later this year. Likely, any rate increase will not be steep. “The Fed raises rates in a slow and methodical way,” Merrick says.

Companies that have not already moved to take advantage of lower rates should consider taking action now. Businesses with financing tied to short-term interest rates stand to pay more when interest rates rise.

“The opportunity to refinance at reasonable interest rates is there,” Merrick says. “There’s still time to act but you shouldn’t be waiting for a better opportunity. You shouldn’t be hanging with a big exposure in your funding.”

That logic can also apply to recapitalizing, which reorganizes a company’s capital structure to replace debt with equity, and releveraging, which adds more borrowed capital to existing debt. “I really don’t view adding leverage and recapitalizing as different. They’re just different points along the same continuum,” says Neil Wessan, managing director and head of CIT Capital Markets.

The main advantage of recapitalization or adding leverage is reducing the cost of capital relative to what a company is currently paying, he adds. Since interest rates are low for now, it’s possible for companies to significantly reduce the cost of borrowing.

Hedge Against Rising Interest Rates

Companies looking for flexibility now may consider hedging against rising interest rates. According to Wessan, businesses aren’t focusing enough on the importance of hedging. “Companies should take advantage of relatively cheap mechanisms available to protect themselves today, rather than waiting for interest rates to move,” he says.

Interest rate swaps are one way to hedge against rising interest rates. A company making such a deal enters into derivatives where it “pays a fixed rate and receives a floating rate,” Merrick says. “If interest rates go up, they win on that contract.” That would hedge the company against rising interest rates on the loan.

Even as rates have remained low, terms and conditions of borrowing have loosened in recent years, which means companies that already have good rates may still be able to refinance to obtain better terms and conditions that provide more flexibility.

Whether it’s to make an acquisition, build a new plant, or pay a dividend to shareholders, “The primary consideration should be matching the requirements and plans of the company against what’s available in the capital markets to make it more efficient,” Wessan says.

Knowing When to Wait

Recapitalization, refinancing and adding leverage have many benefits for middle market businesses. But despite pending interest rate increases, there are times when it may be better to hold off.

For example, a company’s current credit situation may mean it does not qualify for today’s low rates. But if the company expects to release a new product soon or anticipates other developments that will improve cash flow, waiting—even with a pending interest rate hike—could be prudent, Merrick believes. Qualifying, even at a higher rate, is better than being turned down. “If they’re having trouble selling themselves to a bank as a good bet, then it may be good to wait until something changes in the company to tell a better story and make them seem much more credit worthy,” he says.

Another reason to wait: if a company is considering a sale in the near future, Wessan says. A company needs to have enough time to spread out the costs associated with refinancing for it to be economical.

Ultimately, the decision to recapitalize or add leverage is an economic one. Wessan notes: “If you can recognize the cost savings in excess of the upfront charges you pay for the refinancing, I think it’s worth considering.”

Credit union social media done right with personality and purpose

For Raoust+Partners for CU Insight. Published April 3, 2015.

By Karen Haywood Queen

‘Credit Unions need to get on social media, especially YouTube, because that’s where the action is.’ Great advice as far as it goes. But without a purpose, social media presence doesn’t expand a brand.

Some argue that the Facebook ship has sailed—younger people certainly have moved on to other channels. If a credit union is on Facebook, the page should reflect the credit union’s unique personality not serve as a dump for generic copy that could be about any business.

Found on Facebook: “Keep your face towards the sunshine and shadows will fall behind you.” Thank you Walt Whitman, but how does that promote a brand or attract new credit union members?

Raoust+Partners helps credit unions determine if their culture is a good fit for social media. If so, Raoust+Partners helps create content specifically for those channels aimed at getting results. Credit unions use social media channels effectively and smartly not by pushing product but by creating content that’s an extension of their brand story.

YouTube, which has replaced television for many younger people, can be an ideal medium for telling a credit union’s story. At least until the next big thing comes along.

Just being on YouTube isn’t enough. What works? Copy developed specifically for YouTube – not rebroadcasts of TV commercials. YouTube gives a credit union time to expand its message beyond a 10-, 15- or 30-second TV spot. Take advantage of it.

Keep in mind, though, that people tune in to YouTube to be entertained.

No one wants to watch a credit union’s annual meeting on YouTube. Correction: a spot check of three credit union annual meetings showed 14 views, 84 views and 177 views.

Not many people really want to watch Blizzard the Penguin visit a credit union either—102 views.

Sadly, not many people even want to hear how a credit union helped a college student with her overwhelming debt. In 10 months, 15 views.

If the message isn’t entertaining, they’ll tune out. They certainly won’t share it with their friends.

True to its name, Innovations Federal Credit Union in Panama City, Fla., a Raoust+Partners client, has mastered the art of telling its story on YouTube in a way that engages viewers and clearly communicates the credit union’s offbeat brand. The well-produced videos give viewers insight into Innovations’ culture.

Innovations’ videos are produced solely for YouTube—not TV commercials rebroadcast. CEO David Southall sketched out the credit union’s first YouTube video, Jingle Bells Lip Dub, on a napkin in 2009. He still has the napkin.

The video stars not actors, but rather employees who are clearly engaged and having fun. The mimosas may have helped.

“Around here, for local Christmas commercials all the employees get together, wave at the camera and say ‘Merry Christmas,’” Southall says. “It’s kind of boring and overdone. We decided we didn’t want to do that.”

Raoust+Partners helped take the concept from a napkin to a professional production.

“They have some creative minds at Raoust,” Southall says “They made it look professional—rather than something we did homemade. If something is interesting and eye-catching, you want to share it with your friends and family.”

So far, 17,383 people have enjoyed the catchy beat and fun vibe of that first video. That engagement, that culture can’t be faked. If that unique exuberance isn’t in a credit union’s DNA, best to avoid the attempt. For Innovations, it worked because the video showcased the credit union’s personality.

“That first video said to our community ‘Hey we’re different,’” says Southall, who appears in the videos. “We don’t want to be traditional in anything. Our lobby design is different. The way we hire employees is different. The way we train employees is different.”

The Financial Brand ranked Innovations 21 out of the top 100 credit unions on YouTube. More important, as Innovations continued to make more videos, friends and family of employees, credit union members and then others in the community asked to participate. You can’t put a price on that kind of engagement and awareness.

A flash mob to open a new branch generated more than 5,000 views. A video entitled Bad Bank Romance has captured 4,219 views.

YouTube isn’t the best place to constantly push products but those who know what they’re doing—read Innovations–can bend the rule. Innovations’ 30-second video about an Obstacle-Free Auto Loans collected 53,151 views.

The goal of these videos is to reach younger members and potential members. While the average age of credit union members nationwide is about 48, Innovations’ average age is 40 or 41.

“Those are the members we want to attract—the kind of members who like the social media piece,” Southall says. “Our older board members—they probably haven’t seen them. Maybe their children or grandchildren saw them.”

Saw them and decided Granddad’s credit union wasn’t so fuddy duddy after all.

The (off) beat goes on.

Branding is about DNA, not smiles and dogs

For Raoust+Partners and CU Insight Published March 18, 2015 By Karen Haywood Queen.

Dogs. Smiles. Fun. That’s the theme of too many credit union brands.

A brand is not a logo. A brand is not a color palette.  A brand is not a dog.

Yet, an online search for credit unions with dogs or credit unions with smiles yields plenty of promotions based on smiles and/or canine friends.

Don’t blame the credit unions. Blame the ad agencies that confuse a promotion for a brand, agencies that talk instead of listen. These agencies trot out the same dog and pony show and then tweak that show slightly for each credit union. But dogs and smiles won’t separate your credit union from the pack.

Raoust+Partners knows that each credit union has a unique DNA. That DNA has nothing to do with dogs and everything to do with each credit union’s history, culture, community, employees and members. To create an authentic brand, Raoust+Partners doesn’t field test a dozen ideas to see what sticks. What it does is plenty of research–the kind that traditional focus groups and boring surveys don’t reveal. What it does is listen… No dogs either—unless the credit union is in an area with a strong canine heritage.

Instead, Raoust+Partners uncovers the credit union’s unique DNA and then builds on the core values of the past to move to a successful future. At Jeanne D’Arc Credit Union in Lowell, Mass., that DNA included a long history of reaching out to immigrants and the unbanked.

In 2009 when Raoust+Partners began working with Jeanne D’Arc, the nearly 100-year-old credit union was losing both members and market share. The listening approach yielded key intelligence.

Members and even former members felt a strong loyalty. But they thought of the credit union as they might a beloved former kindergarten teacher — a teacher you reluctantly leave behind after mastering the basics.

“The depth of their passion for the credit union was refreshing,” president and CEO Mark Cochran says. “But they thought they should grow up and go somewhere else later. They didn’t understand that there was more.”

Cochran, who had started at the credit union in 2007, knew he didn’t want to approach branding as a popularity contest.

“We didn’t want the coolest thing or even ‘This is who we want to be,’” he says. “With Raoust+Partners, our approach was ‘What are we? Who are we?’ We didn’t want to project ourselves as anything different from who we are. We didn’t go about trying to invent something new. We wanted to use our members’ words and perceptions as a launching point for where we want to go in the future.”

As Cochran listened to members, former members and employees, he heard stories of how the credit union had made a difference and how strongly the community and the credit union were intertwined.

“So many of these stories had a common theme: ‘I was new to this country,’” Cochran says. “The credit union was the first place that I had an account. It was the first place I got a car loan.’ But they viewed us like a hometown savings and loan — offering only checking, savings and mortgages.”

Jeanne D’Arc was already offering the products members wanted—credit cards, small business loans, automated banking –members just didn’t know. But getting the word out about those products was a minor part of the Raoust+Partners strategy. Emphasizing connections was the major focus.

At Jeanne D’Arc employees are part of the community and many know the members personally or at least at the level of  ‘I know your cousin who dated my sister.’ That shared history, knowledge and understanding make up the edge the competition doesn’t have. With that in mind, most of the marketing and advertising Raoust+Partners developed was based not on products but on the connection. With an authentic brand, employees don’t have to put on fake smiles and read from a phony script—they live the brand.

To reflect that shared history and values, Raoust+Partners created “We share a common thread.”

The resulting brand is a big mirror that accurately reflects members, employees, the community and the credit union’s personality. When members or perspective members look in that mirror, they recognize something that makes them feel comfortable and at home. They feel the connection.

That connection can happen only with a brand that is true to the credit union. An authentic brand reflects a credit union so closely that it would fail anywhere else. Raoust+Partners knows what works in Lowell, Mass., won’t work in Panama City, Fla.  At Innovations Credit Union in Panama City the resulting brand position was “Spark Change” based on the young credit union’s modern, progressive outlook.

Meantime since 2009, Jeanne D’Arc’s assets have nearly doubled, from $600 million to $1.1 billion—all organic growth, no mergers. The average age of members has dropped from 46 to 41. Average age of new members is 34

“It was the natural outcome of doing things that are right for our members,” Cochran says. “It goes back to that common thread.”

And an uncommon approach.

Woof.

Australia Suffers Net Metering, PV Challenges

By Karen Haywood Queen Smart Grid Today January 12, 2015

EXCLUSIVE INTERVIEWS

Energy pricing creates ‘death spiral’ as AC grows

The energy pricing structure in Australia is creating a world of energy “haves” and “have-nots” where homes with large air conditioning systems and/or solar panels are subsidized by those with neither, leaders of two industry groups told us recently.

“Many higher income families are putting more than their fair share of pressure on the grid by using large AC systems and creating extreme peaks,” Mark Paterson told us. He is grids and renewable energy integration leader at CSIRO’s (Australia’s National Science Agency) Energy Flagship.

“Meantime, many of these people also have installed a lot more PVs. So their electricity bills have been significantly reduced as they sell power back to the utilities. The rates do not actually reflect a home’s peak demand impact on the grid.”

GROWING PAINS
3rd in a series on the challenges of renewables

Both tariff reform and, in time, something like the transactive energy approach under development in the US (SGT,2013-Nov-7) and the Netherlands (SGT, Dec-18) are needed to resolve this issue, the pair said.

For customers with large air conditioners, the cost of their network service exceeds what they pay by AU$683/year (US$585/year), Energy Networks Assn (ENA) CEO John Bradley told us. His organization represents Australia’s gas and power distribution firms.

For solar customers, the reduction in network charges exceeds the reduction in network costs by AU$29-117/year (US$24-95/year) depending on which direction the panels face, Bradley said, citing a report ENA published last month on a national approach to power network tariff reform.

Paterson was in the US last month to speak at the GridWise Architecture Council conference on transactive energy in Portland, Ore, and he called the growing problem “a social justice issue” in his country where, according to Oxfam, the richest 1% own the same amount of wealth as the bottom 60%.

In the last 15 years, Australia experienced a sharp rise in residential AC adoption. In 1999, about 35% of homes in the country had AC, according to figures ENA released in April. By 2010, that doubled to 70%.

When many residential customers install AC, this can drive the need for expanded distribution grid capacity that is under-used for most of the year, Paterson said. This drives up rates for all customers, he added.

About AU$11 billion (US$9 billion) in peak generating and other infrastructure has been built to meet this peak demand for AC and is used only 1% of the time – the equivalent of only four or five days a year. Meeting this demand at peak times costs AU$2,500/appliance (US$2,000/appliance), the ENA estimated.

“It’s a major factor in over 50% of every electric bill,” Paterson said. Network charges range from 25-58% of the bill, ENA said.

Paying for this infrastructure has sent power bills soaring – 8-20%/year – and created what Paterson called “a death spiral” as more PVs are added in response to higher power bills. Consumers now pay over AU33¢/KWH (US27¢/KWH), he added.

“There’s a lot of bill shock every year,” Patterson said. The Energy Users Assn of Australia in 2012 said energy prices in Australia were among the highest in the world. Those rising energy prices – combined with high buyback rates of over AU40¢/KWH (US33¢/KWH) for early adopters of PV-generated power – spurred fast growth in PV installation for those who could, Paterson said.

As all those AC units came online, peak demand grew dramatically, creating a low network capacity use – the ratio between peak demand and average demand. From 2001 to 2012, peak demand grew 20-37%, twice the rate of average energy demand during the same period, ENA said. In newer subdivisions, average energy use is just 21% of peak demand.

Meanwhile, solar panels in that time grew to over 1.3 million for about 9 million homes from almost none in 2007, according to 2014 figures from ENA and the Australian Institute of Family Studies. That growth was compared with 500,000 panels in the US for 120 million homes.

Initial Australian government incentives offering payments of over AU40¢/KWH (US33¢/KWH) for PV generation – an amount higher than customers were billed for energy use – helped drive that PV growth, Paterson said.

Participation in the PV programs typically exceeded what the original policymakers may have anticipated. In some states, that became a runaway train. Not everyone could catch the train,” he added.

“There are a lot of families living in apartments where it’s not simple or perhaps even possible to take advantage of PVs,” Paterson said. “Meantime, if you happen to be able to install solar, you can either be paying nothing for your electricity bill or you may actually be paid.

Wrong pricing hurts

QUOTABLE: This is increasingly presenting a social inequity challenge. Australian households with large AC and PVs are placing an inordinate burden on that common shared infrastructure that they’re not paying for due to Australia’s volumetric rate structures. This is understandable, however, because our rates do not signal how customer choices impact the grid or the community as a whole. – Mark Paterson, grids and renewable energy integration leader at CSIRO’s (Australia’s National Science Agency) Energy Flagship

For example, a typical PV customer in New South Wales provides a benefit to the grid of about AU$10/month (US$8/month) but receives benefits estimated at AU$69/month ($56/month), Bradley said.

Those payment rates for new PV connections are much lower now, around AU8¢/KWH (US7¢/KWH) in most states, Paterson said, but solar customers who installed solar early on have been grandfathered in under old rates until they expire as late as 2028 in some states, according to ENA.

How Investors Can Make The Most of Low Oil Prices

Published April 14, 2015 Forbes.com E*Trade

By Karen Haywood Queen

As the price of oil hovers around $50 a barrel, its lowest point in six years, some experts argue that now is a good time to invest in oil-related stocks and funds. But Mike Loewengart, director of investment strategy at E*TRADE Capital Management, LLC, says investors shouldn’t see the relatively low price as a green light to rush into oil investments.

That’s not to say that oil can’t generate a healthy return. In fact, if you had invested $1,000 in an investment tracking the S&P 500 Equal Weight Energy Index on Jan. 1, 2009, when oil was about $35 per barrel, your money would have more than doubled by now — even with the recent drop in prices, Loewengart says.

But the potential for growth comes with the potential for loss, says Loewengart, who has additional advice for those interested in testing the market, perhaps for the first time.

Expect Price Swings

If you invest in oil, expect wide swings in price. For example, in recent months, different experts have predicted that oil may hit $20 a barrel and $200 a barrel.

“Expect volatility,” Loewengart says. “See past what might happen in the short term and focus on the longer term.”

Seek Diversity

Consider your background, skill sets and how much time and effort you’re willing to put into following your investments, Loewengart says. If you’re not willing to put the time into researching individual stocks or other investments, then broad-based energy related investments are better choices, he says.

For a more conservative move into oil-related investments — and remember “conservative” is relative in this sector — consider investing in the largest players, Loewengart says.

“These relatively stable, diversified production companies didn’t rise as much as the riskier players,” he says. “But they also have fallen only about 10 percent from the peak. They’re more diversified so their price movements are less correlated to the price of oil than the smaller players.”

Options for Dividends

These bigger, diversified companies also are a good option for investors looking for dividends. No matter where the price of oil goes, these companies are likely to maintain regular payouts, Loewengart says.

Another option for those seeking dividends is investing in master limited partnerships (MLP) — in firms that transport and store oil and natural gas. An MLP is a type of limited partnership that is publicly traded. MLPs offer the tax benefits of a limited partnership combined with the liquidity of publicly traded securities.

“MLPs are required to pay out most of their earnings to shareholders,” he says. “Because of that, they produce a very healthy yield. Last year, they were very popular as people searched for yield investments.”

But MLPs are not low risk, he cautions. Prices have dropped about 15 percent from the mid-2014 high, he says. If oil prices continue to drop, producers may demand lower rates for transport, which could impact these energy sector MLPs, he says.
Riskier Investments

Slightly less conservative are investments in smaller companies that that are either directly or indirectly involved with exploration and production, he says. Because these businesses are more narrowly focused, their securities are more closely correlated with the price of oil, offering larger risk-reward opportunities, he says.

“Small cap players rose almost 400 percent from 20091,” Loewengart says. “Conversely, they have fallen the most. Because they are so closely tied to the price of the commodity, there would be a fair amount of speculation with investing in those companies.”

Moving up the risk ladder, oil-related bonds offer income — along with risk, he says.

“If the price of oil continues to fall, these companies will go out of business,” he says. “In these cases, a bond holder will get nothing or very little.”

When to Hire a Manager

Bond investments in the oil sector are more challenging for individual investors, he says. “These fixed-income markets are pretty opaque,” Loewengart says. “They’re not as transparent as equity markets. They trade differently. A lot of individual investors are not comfortable buying these securities.”

An active manager, however, can “shorten your portfolio, move investments to other sectors and help navigate a changing interest-rate environment. An active manager can add considerable value,” he says.

A Risky Bet

The riskiest oil-related investment of all is betting on the price of oil itself, Loewengart says.

“We would be very hesitant to suggest to a smaller retail investor to make a dedicated bet on oil futures,” he says. “There have been many professionals who have been simply caught off guard by the relatively swift decline of oil in the past few years.”

Investing in the oil sector can generate a good return for your portfolio. A variety of investment products offer many options for investors, Loewengart says, with different levels of yield, diversity, risk and reward. But you should take a long-term view and consider engaging an active manager.

Climb a life insurance ladder and save

By Karen Haywood Queen • Bankrate.com

Published Oct. 15, 2014

Cartoon characters Lou & Stan standing between an 'insurance' ladder © Ziven/Shutterstock.com

People who invest in certificates of deposit are used to the concept of “laddering.” They buy CDs that mature on different dates to avoid being locked out of their cash or locked into a low interest rate for too long.

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You can build a similar ladder with life insurance, planning extra coverage for when you’ll need it the most and tapering off coverage when your needs won’t be as great. This approach can save you money.

You can ladder life insurance two ways:

Life insurance needs can go up and down

Laddering is great because most people probably don’t need much life insurance at the start of their careers, says Mike Piper, a certified public accountant in Manitou Springs, Colorado.

“After they get married, have kids and/or get a mortgage, suddenly there is somebody who would be in financial trouble if they died. So they need life insurance,” adds Piper, the author of several personal finance books and blogger at ObliviousInvestor.com.

Later, that need for life insurance should decrease as your savings grow, your debt balances shrink and children leave the nest. By reducing the amount of life insurance during that stage of life, a policyholder could save hundreds of dollars a year in premiums, Piper says.

Potential sources of savings

Laddering shorter-term policies not only is a good way to bulk up coverage during key times of your life, but it also saves on premiums, says Greg Sanders, founder of Peachtree Insurance Advisors in Marietta, Georgia.

The annual premiums on 20-year and 10-year policies would be lower than for a 30-year policy in the same dollar amount because coverage on the 10- and 20-year policies ends while the policyholder is younger and presumably in better health, he explains.

At the same time, big policies don’t necessarily bring big savings. Buying one $5 million, 20-year policy instead of two $2.5 million, 20-year policies saves only $85 a year, Sanders says.

Laddering example No. 1: Lou, 30

Here’s how laddering would work for a 30-year-old man we’ll call “Lou.” He is a nonsmoker in average health and lives in St. Louis.

Cartoon character 'Lou' © Ziven/Shutterstock.com

If Lou were to buy a 30-year, $1.5 million term-life insurance policy, he might pay $2,050 a year in premiums, Piper says.

But with laddering, Lou might buy:

  • One 30-year, $500,000 policy with an annual premium of $730.
  • One 20-year, $500,000 policy with an annual premium of $475.
  • One 10-year, $500,000 policy with an annual premium of $310.

Those premiums add up to $1,515, saving Lou $535 a year during the first 10 years for the same $1.5 million in coverage, Piper says. That’s $5,350 for Lou, in addition to potential interest or investment returns.

As the two shorter policies expire, after 10 and 20 years, Lou would save even more because he would no longer be paying those premiums. But he would have less coverage.

Too young to ladder?

An argument might be made against life insurance laddering for people in Lou’s younger age bracket.

“If you’re 27 years old and need $1 million worth of insurance, just buy a 30-year term policy,” says Sanders. “Don’t try to split it up. You might save a little bit of money, but the savings won’t be worth it.”

He adds: “If you get into your 30s and 40s and don’t need that much coverage, you can always call and reduce your death benefit, and the insurance company will reduce the premium.”

But the laddering strategy can work well for those in their mid-30s and older who are buying life insurance for the first time, Sanders says.

Laddering example No. 2: Stan, 43

Consider the example of another consumer we’ll call “Stan.” He also lives in St. Louis, is 43, doesn’t smoke but is overweight and takes medication for blood pressure and cholesterol. He also would be considered in “average” health, Sanders says.

Cartoon character 'Stan' © Ziven/Shutterstock.com

Buying a 30-year, $1 million life insurance policy could cost Stan $3,221 a year, he says.

Instead, Stan could use laddering to purchase:

  • One 30-year, $250,000 policy with an annual premium of $912.
  • One 20-year, $750,000 policy with an annual premium of $1,522.

Those add up to annual premiums of $2,434, which would save Stan $787 a year for the same $1 million in coverage during the first 20 years. That’s a total savings of $15,740, which Stan would enjoy on top of any interest or investment gains, Sanders says. But, like Lou, Stan would have less coverage in the later years.

But needs may not change

A laddering plan presumes that life insurance needs will shrink, but unexpected issues often arise — such as boomerang children returning to the nest, a mortgage refinance that increases housing debt or the purchase of a second home, says Craig DeSanto, senior vice president in charge of life insurance for New York Life.

“What they initially thought they would need ends up changing over time,” he says. “If you’re going to execute a strategy like this, it’s really important that you buy term insurance from a carrier that allows conversions to permanent insurance to give you the option to keep the policy in place if your needs have changed.”

If you find yourself wanting to replace laddered policies with longer-term coverage that’s potentially more expensive, you might reduce your benefit to save on premiums, DeSanto says.

Don’t forget your policies

Let your heirs know about your life insurance ladder: how many policies you have and with what companies. “It’s important that they know all of the policies you have in place,” Piper says.

Finally, don’t forget you have more than one policy when it comes time to pay the bills on them. “You wouldn’t want to let one policy accidentally lapse by missing a premium payment thinking, for instance, that you already paid the life insurance bill last month,” he says.