As energy prices rise by the day, Mike Sewell, director of energy services at Dalkia, explains why outsourcing its procurement and management should be considered like any other service
Taken at its face value the management of energy is not a core function of many organisations, and yet for the pharmaceuticals manufacturer, without its plentiful and reliable supply, productivity in such a competitive environment would be severely compromised.
The continual and unwavering hike in energy prices in the UK has raised the issue of energy, its procurement, management and savings linked to environmental, CSR and financial considerations, to the boardroom agenda. For example, the cost of gas has risen from between 25 and 28 pence per therm to 35-40 pence, in just one year. The reality of this is that an industrial site with a gas bill of £1million typically may have to pay an extra £500,000 this year. A knock-on effect of this is the rise in electricity prices, as gas is used to fuel many power stations. Similarly, the Carbon Trust has recently found that UK companies waste £1bn a year on energy largely due to energy plant optimisation issues, energy wastage and inefficient energy usage across the manufacturing site.
In a recent survey among companies with a turn-over in excess of £50million within the chemicals industry at large, Dalkia found that 33% of respondents are considering looking to an outsourced partner to help with the management of energy within an organisation, from its purchase to the way it is supplied, processed and excess carbon is dealt with. In the report outsourcing energy management was seen by most as a route to improving efficiency, exercising tighter budgetary control and reducing costly materials waste.
Alongside this it was found that 97% of the industry has plans to reduce operating costs mainly related to cost control with the emphasis placed on cost at the expense of alternate growth strategies. So with cost, and in particular energy cost, being the main concern for the UK's chemical industries, there is plenty of opportunity for decision makers within pharmaceutical organisations to alleviate the financial and operational burden that energy currently levers.
Currently commonly outsourced areas are soft services with 73% of chemicals companies already employing outsourced companies to handle contract services such as catering, cleaning, helpdesk and reception or porterage duties. In addition Dalkia has found that where considered a critical element to the productive and smooth operation of core functions of a business, the likelihood for the service to be outsourced is greater. Energy has the highest rating of criticality within the chemicals sector, with 57% of people asked considering it to be vital to the importance of the business's productivity and profitability.
Linking this to the financial impact of energy in terms of the bottom line and importance of its expert management becomes clear. Various levies and charges that have developed from the Kyoto Protocol have left a seriously treacherous terrain for the uninitiated. The agreement to reduce the UK's carbon emissions from the combustion of fossil fuels, which creates greenhouse gases (GHGs) that are commonly known to be harmful to the Earth's atmosphere by causing climate change, is legally binding. The result is a series of processes for stringently governing the way all industry sectors manage their energy consumption and therefore the GHGs they produce.
While energy and its management is a complicated legislative area with many pitfalls and inherent risks, an outsourced energy services company (ESCo) can help to ensure that this section of a company's operations are run with one eye firmly on the bottom line.
One example of a successful energy management outsourcing contract is at Eli Lilly's Speke facility where Dalkia manages the Combined Heat and Power (CHP) plant of the Lilly Speke production plant.
For any application where there is a constant demand for heat and hot water and a need to generate a site's electricity requirement, CHP is an important way of harnessing waste heat and yields efficiencies in excess of 70%. This compares to around 34% for traditional power stations and 46% for the new generation of gas-fired power stations. As approximately 7.5% of the total electricity supplied in the UK is wasted every year due to its transportation over the grid, on-site generation provides even greater energy efficiency.
From an energy perspective where a number of utilities are required, the logical step is to expand the role beyond the CHP plant to become a multi-utility source delivering, in addition to electricity, steam, and hot water, additional services including compressed air, treated process water, chilled water, refrigeration, and industrial gases.
Eli Lilly's Speke site is the sole Lilly worldwide supplier of a biosynthetic human growth hormone and is the largest bulk biotechnology manufacturing facility in the UK. Lilly Speke is currently the only source in the world of the vital drug Capreomycin used in the treatment of Multi-Drug Resistant Tuberculosis.
The CHP scheme at Lilly Speke supplies electricity and energy to the site and comprises two gas turbines and four gas fired boilers with a combined electrical capacity of 9MW. The CHP energy centre is twice as efficient as a standard power station, and through its use Lilly also benefits from exemption from the Climate Change Levy (CCL) tax. Bob Major of Lilly Speke said: 'In all aspects of business, environmental benefits are at the forefront of our operations. The CHP plant at Speke enables us to stay one step ahead in this respect.'
Eli Lilly is not the only pharmaceuticals manufacturer to have already moved to an outsourcing strategy for the management of its energy supply. At Astra-Zeneca, energy management including multi-site energy and utilities design, build, operation and maintenance is outsourced alongside other contract hard FM services.
Manufacturing innovative medicines for the treatment of cancer, cardiovascular, gastrointestinal, infection, neuroscience and respiratory, AstraZeneca's site at Macclesfield requires stable and reliable supplies of electricity and steam.
Following the customer's policy to economise on the use of natural resources, a CHP plan was recommended as the most efficient method of generating electricity using fossil fuels. For this reason Astra-Zeneca sought a partner to develop a suitable scheme.
Working in partnership with the customer, Dalkia designed, installed and commissioned a new 23MW CHP plant to meet AstraZeneca's Macclesfield site needs. Dalkia is responsible for the daily operation and ongoing maintenance of the plant as well as all other utility plant and distribution systems including compressed air, refrigeration, process water and nitrogen gas.
The AstraZeneca plant operates on natural gas in normal operation with standby distillate fuel oil for emergencies. A major benefit to the customer is the remarkable savings resulting from the plant: the CHP plant provides a reduction in CO2 of approximately 39,000 tonnes per year.
As a result of the significant carbon savings Astra-Zeneca benefits from exemption from the Climate Change Levy. In addition to the environmental benefits the new plant provides a cost and logistic saving compared to the previous steam plant at the site. A replacement guarantee scheme planned in by Dalkia ensures that there are no unbudgeted steam plant replacement costs during the duration of the contract.
David Gartside, UK manufacturing sites manager for AstraZeneca explains the significance of the CHP plant: 'This CHP plant is a good facility for the Macclesfield site and provides a modern solution to our energy requirements for the foreseeable future. The investment represents a significant step forward in the development of the site at Macclesfield whilst at the same time improving its environmental performance.'
At Wyeth Pharmaceutical in Dublin energy management and FM services are outsourced to supply a total solution to one of the largest biopharmaceutical facilities in the world. Fifty six staff working at any one time, on 24 hour per day seven days per week shifts, provide the operation and maintenance of all utilities including steam, clean steam, hot water, chilled water, softened water, WFI, reverse osmosis water, HVAC, compressed air and waste systems. The benefits to the customer means that there is just one point of contact for all services at the facility, risk is transferred to Dalkia, and Wyeth has peace of mind in the knowledge that critical services are in the hands of a specialist with GMP accreditation while in the meantime staff can focus resource attention on the core manufacturing and business activities.
With such tangible benefits to the customer, an energy management company can design and deliver an effective energy and utilities management programme, including CHP, and manage it to the customer's best advantage. This can lead ultimately to effective Demand Side Management where the energy used is directly related and managed to the commercial outputs from the client's site.
About Dalkia
In the EU Emissions Trading Scheme (EUETS) Dalkia has the largest number of individual energy plant installations falling under the control of one operator with 238 installations with a Greenhouse Gas Emissions Permit in the name of Dalkia. These account for an annual allocation of ~19.25million tonnes of CO2.