Although the pharmaceutical industry’s energy bills comprise less than 5% of overall costs, one company has embraced energy management and efficiency.
The cost of health care encompasses many unseen factors. Case in point: energy costs. Each year, the pharmaceutical sector spends more than $800 million on energy, according to the US EPA. Even so, those costs comprise a small percentage—about 5% of the cost of goods sold and 1% of sales—of overall costs, according to Tom Pagliuco, energy director for the global supply chain for the pharmaceutical company Schering-Plough.
Thus, the small cost component can be a challenge in convincing pharmaceutical industry leaders to view energy management with concern as a competitive advantage as would be the case in other industries where energy costs can run up to 20% of goods sold and higher as a percentage of revenue—such as the automobile industry, Pagliuco points out.
Nonetheless, energy costs saved is money returned to companies for other operating costs and profit.
Pharmaceutical companies such as Schering-Plough are engaged in ongoing efforts to reduce energy costs. Headquartered in Kenilworth, NJ, Schering-Plough manufactures prescription medicines, consumer health care products, and animal health care products. The company employs 51,000 people and has net sales of $18.5 billion. The EPA recently named the company an Energy Star Partner of the Year. Its multifaceted approach to energy management includes:
- A 20-MW cogeneration unit at its Kenilworth headquarters, which is third-party owned, operated, and maintained
- An 8-MW trigeneration unit for electricity, steam, and chilled water at its Union, NJ, site, which includes steam-driven centrifugal chillers
- A 9-MW trigeneration unit at its Singapore facility that features absorption chillers and has reduced the site’s carbon footprint by 17,000 metric tons
- A 1.7-MW solar photovoltaic system at its Summit, New Jersey facility—one of the largest rooftop installations in the US—intended to reduce carbon dioxide (CO2) emissions by approximately 1,000 tons per year
The EPA accorded Schering-Plough Energy Star recognition for its strategic energy management. That vision entails reducing energy consumption by 10% at each site by 2011 and attaining a 10% absolute reduction of CO2 emissions by 2013 from 2008 levels. To that end—in addition to the solar, cogen, and trigen installations—the company improved energy use intensity by 3.7% in 2008 under a strategic energy management initiative that involves:
- Building a Web-based global energy data management system to monitor and control energy use in its 16 million square feet of facility space worldwide
- Raising the awareness of energy issues throughout the company’s workforce
- Leading the pharmaceutical industry’s support for the completion of EPA’s new energy performance indicator (EPI) for pharmaceutical manufacturing plants in the US
- Participating in the Energy Star Pharmaceutical Manufacturing Focus and laboratory benchmarking initiative
Additionally, the company’s Cleveland, TN, site gained honors from the EPA for its overall site-based energy efficiency efforts that places it in the top quartile for pharmaceutical manufacturing facilities. Schering-Plough’s initiatives began in 1986 with the cogeneration system in Kenilworth, which serves as a manufacturing, R&D, and headquarters site. The system is a combined cycle system.
The company’s second major effort was the trigen system installed at its Union operation in 1997. The system is comprised of two Solar Turbines-Taurus 60 gas turbine units of 4 MW each for a total of 8 MW. The system had proven to be a learning experience for Schering-Plough.
“There used to be an absorption chiller on that system,” says Pagliuco. “Now they use the steam to drive a steam turbine on a centrifugal chiller, so it’s still a trigen. In my opinion, it’s actually a nice trigen, because you’ve got the advantage of the efficiency of a centrifugal chiller, yet you’re using steam. It helps balance out the steam load.”
Schering-Plough’s most recent trigen installation—fueled by natural gas—went online in July 2008 in the company’s Tuas, Singapore manufacturing operation. The plant was the second constructed in Singapore (the first being installed by the pharmaceutical company Pfizer) and is the largest in Singapore.
The system is comprised of two Solar Turbines TBM-Taurus 60 gas turbine (GT) units of 4.5 MW per GT. The system—which functions at 70% efficiency—is expected to result in a 24% reduction of total CO2 emissions from the pharmaceutical operation. The trigeneration system produces three types of utilities—electricity, steam, and chilled water—through harnessing residual heat that is otherwise waste heat.
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Photo: Schering-Plough
Pharmaceutical companies such as Schering-Plough are engaged in ongoing efforts to reduce energy costs. |
Total power generated from the system includes 9.2 MW, with 24 tons of steam generated per hour and 4,000 Rtons of total chilled water generated. The system was made possible through a grant from Singapore’s National Environmental Agency’s Innovation for Environmental Sustainability Fund. It was constructed and is being managed by TPGS, a joint venture of Tuas Power and Gas Supply. The grant symbolizes Singapore’s push toward that technology. The deal allows Schering-Plough to expand the plant by another 5 MW to address increased electricity and steam demands.
Also, in May 2008, Schering-Plough partnered with PPL Renewable Energy to design, construct, and operate its solar photovoltaic system at its Summit, NJ, office and R&D site. The system—owned, operated, and maintained by PPL—was built on seven buildings throughout the campus. The power generated by the facility will be purchased by Schering-Plough and renewable energy credits will be purchased by PPL EnergyPlus to increase development of renewable energy projects. The rooftop solar panels significantly reduce energy bills by generating electricity during daytime or “peak” hours when power prices are highest and facilities consume the most energy.
The system’s peak output is 1,400 kW (ac) and its annual output is 1.8 million kWh or 3% of the site’s total energy consumption. Energy supplied by the solar panels will provide about 12% of the peak energy needs. The system is expected to reduce CO2 emissions by about 1.3 million pounds each year. Schering-Plough owns the CO2 emission reductions generated and applies them against its greenhouse gas emissions reduction target of a 10% absolute reduction of (2008) CO2 emission levels by 2013.
Schering-Plough is promoting its solar energy management efforts at its Summit facility through the “Green Room.” The room features displays on how solar technology works, with sample panels powering a light bulb and a small fan. There are displays showing visitors what the solar panels output on a daily basis.
“The city of Summit is really supportive of the project,” notes Pagliuco. “As a community outreach, we think the project can be used for school and Scouting projects. It fits nicely with who we are—a science-based company. I personally feel the US needs to get back in the ballgame as far as math and science. This is a great way to use something we’re doing to increase that awareness with school children.
“We’ve been getting a lot of positive press about the solar project,” adds Pagliuco. “It’s a soapbox issue for me. Solar gets a lot of interest; it’s sexy. But it’s hard to get people excited about a chiller project.”
Pagliuco says he’s a “huge fan” of cogeneration and trigeneration. “Dollar for dollar, it’s much bigger bang for the buck than some of the renewable technology—certainly more than solar,” he says. “Even though you’re burning a fossil fuel, you get a lot more carbon reduction than you do with solar.”
Economics drove Schering-Plough to explore distributed energy, says Pagliuco, who came onboard with the company in 2006.
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Photo: Schering-Plough
The rooftop solar panels significantly reduce energy bills by generating electricity during daytime or “peak” hours. |
“It was the savings potential, because back in 1986, and even 1997, the drum wasn’t beating as strongly for the concept of greenhouse gases and climate change,” he says. “Kenilworth is such a big energy user, which also is a driver for Union and Singapore.”
His favorite energy efficiency approach is human-based energy efficiency measures. “I’m fond of saying the cheapest and greenest kilowatt hours are the ones you don’t use,” he says. “That’s our focus. Laying out our strategy for investment, we first look at energy efficiency, secondly at cogeneration and trigeneration, demand response for sites that have the capability of a tiered rate structure and then renewables. But even within renewables, we’re looking for power purchase agreements because then there is no capital outlay on our part. Even with incentives, paybacks can be rather long.”
Cogeneration can go “either way” in terms of quick paybacks, Pagliuco says. “We’ve got a couple that are power purchase agreements. We’ve got a couple where we own them—the paybacks aren’t so long on those comparable to a renewable.
“You’ve got to look at the economics around the electricity and the thermal load,” adds Pagliuco. “Even with that, cogen can have something in the three- to five-year payback. They’re relatively good paybacks, and they provide good CO2 reduction, especially considering the amount invested, $1,000 to $1,500 invested per ton of CO2 reduced, so it’s way better than solar from a dollar invested per ton of CO2 reduction.”
As Schering-Plough first considered its options in energy management, one of the primary drivers was economics, says Pagliuco.
“In Singapore, we ran the economics, and the economics looked good,” he says. “There was a movement on the island to go more towards a cogen option. There was a lot of discussion. Several other pharmaceutical manufacturers were looking at it. The Singapore equivalent of the EPA was looking at this very favorably. While the economics looked good, the CO2 reductions looked even better. Pros—rather than the cons—started building up.”
Pagliuco acknowledges that while Schering-Plough has become an industry role model for onsite energy management, “there is no silver bullet,” he says.
“Cogens and trigens are on my radar screen,” he says. “You’ve got to do a lot of things in order to come up with the overall plan. We are just looking for where it fits the best.”
Federal and state initiatives help to ease transitions in energy management, says Pagliuco. He points out that New Jersey has passed several pieces of legislation that make cogens quite attractive, such as a $450 rebate per kilowatt powered by a cogeneration facility.
“There also is some discussion on eliminating the sales tax on the cost of natural gas,” he adds. “That’s a 7% reduction, and it’s my job to watch to see where the economics are starting to look good. The minute the economics make sense, we pounce on it.”
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Photo: Schering-Plough
The EPA accorded Schering-Plough Energy Star recognition for its strategic energy management. |
That’s what underscored what Pagliuco terms as the “perfect storm” that led to Summit’s solar project.
“We had recently done a lot of work at the site,” he says. “We have 13 buildings with flat roofs that were all changed out in the last couple of years. We didn’t have to worry about putting a solar system on an older roof and then taking it off to redo the roof.
“We found the right partners in a solid company with a good reputation. Everything came together. Then the state came up with a solar renewable energy certificates program that provided some incentive for third-party owners to want to make the investment. Incentives, grants, and the right economic conditions make it a viable option.”
Pagliuco takes his message throughout the pharmaceutical industry, as well as to other groups, such as energy conferences. Energy has become an important part of the pharmaceutical agenda now, he says, and the industry is beginning to track its energy use, especially through methodologies offered up by the EPA.
“Part of being an Energy Star Partner is being able to spread the news,” says Pagliuco. “I certainly have an opinion I’m very willing to share. When I speak, I preach that people really should be looking more at cogeneration. Even though it burns a fossil fuel and it’s not technically a renewable, it’s got tremendous capability of reducing CO2 just because of the efficiency gains in the electricity.”
Pagliuco says one of the issues the pharmaceutical industry has with cogens and trigens, which makes it “a little trickier,” is the thermal load. While a pharmaceutical company might have a “decent” steam or heat load in the wintertime, it typically does not in the summer; thus, there are more trigens in the pharmaceutical environment, he says.
“It’s a way of trying to level out that thermal balance on an annual basis as opposed to a refinery that has a tremendous process steam load,” he says. “They actually have a bigger steam load than they have an electric load, so they typically size for the steam load, and then they’re looking to export electricity.
“For us, we’re still going to be importing some electricity, because our thermal load isn’t large enough to keep things in balance, although our Singapore unit is pretty well-balanced. The thermal-to-electric load is pretty close.”
Schering-Plough’s Union and Kenilworth facilities continue to buy electricity off of the grid in the summer, and the Summit facility—equipped with the solar system—is buying it. Pagliuco says the advantages offered by cogen are that a pharmaceutical company can size it for the thermal load and effectively get the electricity for “free.”
The efforts instituted thus far at Schering-Plough have formed a solid foundation for future measures, says Pagliuco. “When I got here three years ago, one of the things I set out to do was to put into place the energy management program. The two key pillars are management commitment and recognition.
“I feel a strong commitment from my management and senior leadership to support the program,” he says. “As far the recognition of Energy Star Partner of the Year, part of my focus this year is to promote the program internally and externally.
“A huge part of any energy management program is awareness—to make people aware that they really do impact energy consumption. Everybody uses energy—some more than others,” adds Pagliuco. “The other important thing is that no contribution is too little. People think by turning off the lights, what kind of impact is that going to have? If you can save $100 and multiply that by 50,000 people, you’re looking at $5 million for a relatively little cost. You have to get people aware this is an all-in effort and nothing’s too small.”
Pagliuco says he often makes the analogy of energy management to safety. “Safety is 24/7,” he points out. “You don’t become safe when you show up at work and turn your ‘safety’ in at the end of the day. You should be safe 24/7, even at home and work.
“As for energy, you can save energy at home and at work, putting money in your pocket and the company’s pocket. Even more, you’re saving CO2. We’re trying to build that conservation mindset. If you’re doing right things from a safety standpoint and an energy standpoint, you’re going to make your business more efficient and productive, and it’s going to help in some areas where there are bigger dollars in savings.”
Pagliuco points out that instituting distributed energy and other site-based energy efficiency efforts certainly can be done without sacrificing product quality and employee productivity.
“The manufacturing process and product does not care where the electricity comes from,” he says. “Traditionally, distributed generation comes from cogens and trigens, but I think solar and wind is becoming more popular. Those are distributed of sorts, because they are usually located at the site—at least in the way we’ve done it.
“Typically, the distributed generation sources are providing some kind of thermal output,” he adds. “Typically in a trigen case, some of that steam is getting turned into chilled water and then electricity. Those are all necessary ingredients for our products.”
Even the installation process has little or no impact on productivity, says Pagliuco.
“There might be something as you make the cut-overs, tie-ins, and the start-ups, but that’s usually pretty minimal,” he says. “At our Singapore site—which is our latest site to put in the trigen—one day they were coming off the grid, and the next day they hooked in the trigen system.
“Those electrons were coming out of the unit, so it really didn’t affect productivity, the process, or cause any changes on the product side,” he adds. “It helps from a cost standpoint, because it’s producing electricity more efficiently and a little cheaper. It helps from an environmental standpoint, because it produces less CO2.”
Going forward in energy management, the pharmaceutical industry is essentially not different from any other, notes Pagliuco.
“Energy efficiency should be first and foremost,” he says. “On dollars per kilowatt, there are a lot of things that can be done—the ‘low cost–no cost’ opportunities, such as turning off lights that don’t have motion detectors when you leave the office, and turning off your computer and monitor. These are the behavioral issues that present infinite possibilities for reducing CO2, as well as costs.
“But a typical energy efficiency project will have a three-, maybe four-, year payback, and the cost per ton of CO2 can go from $0 to $900, so it’s got the best return. That’s first and foremost,” he states.
In essence, the pharmaceutical industry needs to consider supply-side matters such as cogeneration, perhaps wind and some other renewables, and structuring them as power purchase agreements, Pagliuco says. Pagliuco says Schering-Plough has instituted a big push for increasing its efficiency and reducing energy consumption.
“We reduced our consumption globally by 3.7% last year,” he says. “Some of the other Energy Star partners can range as high as 8% on an annual basis. Our goal is to get 10% over the next three years at about 3.5% a year.”
The pharmaceutical industry will be a growth industry for some time to come as Baby Boomers age and human life spans increase.
“The game changer is greenhouse gas emissions reductions and carbon footprinting,” notes Pagliuco. “That spreads across all industries if you’re trying to do the right thing. One of the beauties of energy management, and the thing that makes my job so much easier, is that we can do the right thing and save money at the same time. It’s a real win-win. If you can reduce a kilowatt, you’re going to save money and reduce carbon. You don’t get to have too many opportunities to be playing in that ballpark.”