The pharmacy industry like many other industries is facing the challenge of environmental concerns and regulations that are strict. As pharmaceutical companies are leaders in innovation, they are spearheading holistic perspectives on renewable energy. Moreover, instead of just compliance with regulations, the holistic corporate renewable energy portfolios are enabling excellence in operations and giving an advantage competitively. In this article, we will look more into how companies are using these different sources of renewable energy. We will also look into establishing strategic locations and integrating advanced solutions.
Foundations of Holistic Corporate Renewable Energy Portfolios
The base when it comes to a good renewable energy strategy in the pharma sector is its ability to focus on the unique operational demands while going forward with pharma sustainability goals. Let us know more ahead:
Diversifying Energy Sources
Diversifying energy sources is not just about sustainability but stands as a critical risk management move in the pharma sector. Furthermore, companies are readily taking a multi-pronged approach:
Solar Power: This energy source beyond sustainability benefits has great benefits for the industry. It can be designed in such a way that it meets the stringent cleanliness requirements of drug manufacturing environments. It can also be made to integrate with clean room technologies. Moreover, it is particularly effective when it comes to powering critical systems. These systems require consistent daytime operation, such as HVAC systems in research laboratories.
Wind Energy: This is an extremely popular energy source in the industry. It is especially used for powering energy-intensive processes like fermentation in biologics production. Furthermore, the continuous output of wind farms sits well with the pharma facilities needing 24/7 operation. Moreover, many organizations are even exploring offshore wind projects to power coastal manufacturing plants. This helps in using higher and more consistent wind speeds.
Biomass: This is particularly relevant for companies that show significant organic waste streams from production processes. For example, the facilities that make antibiotics or vitamins often have by-products that have the potential to be formed into biomass. As a result, it not only provides a renewable energy source but also addresses the challenges shown by waste management in the corporate renewable energy portfolios.
Geographical Distribution Strategies
The global nature of pharma operations makes it necessary to have a nuanced approach to the geographical distribution of renewable energy sources. Let’s see more about it ahead:
On-site Generation: Executing renewable energy projects directly at manufacturing sites and research centers is becoming common. For example – Major pharma companies in Puerto Rico installed a solar array on site. It not only reduces the costs of energy but also gives power resilience in a region that is prone to hurricanes. So, this approach helps to minimize transmission loss and enhances energy security. It stands crucial for maintaining GMP compliance.
Regional PPAs: When companies support renewable energy projects close to their main operations, they get to enjoy local benefits and keep their energy supply steady. This way, they make the most of financial incentives and ensure they always have reliable power. For instance, a pharma firm can enter into a PPA with a solar farm that is near its European manufacturing hub. This will help take advantage of the incentives of EU renewable energy. It will also help to secure a reliable power source to keep the operations going.
Cross-Border Energy Agreements: Several pharma companies are using the multinational presence to establish a cross-border agreement for energy. Furthermore, this strategy allows the benefits of renewable energy resources in one country to power the operations in another one. For example – a pharma company that has operations in countries like Germany and Spain can invest in large-scale projects in Spain and use that power to offset the use of energy in German facilities. This is through renewable energy certificates. As a result, this approach not only helps in diversifying the energy sources geographically, it also allows us to capitalize on the most cost-efficient and abundant renewable resources across their global footprint.
Integration of Energy Storage Solutions
Energy storage is starting to take center stage in corporate renewable energy portfolios. This is especially the case for pharma companies needing constant power. Let us dive deeper into it ahead:
Battery Storage: Pharma companies are using large-scale battery systems to provide power backup in case of a power outage and smooth out fluctuations in supply from intermittent renewable sources. For example – a pharma company can make use of lithium-ion batteries for uninterrupted power supply to equipment of the sensitive laboratory. It also helps to protect the experiments that hold value and maintain GMP compliance.
Thermal Energy Storage: This technology of using excessive heat is highly beneficial for pharma companies. For example, a facility for vaccine production can use molten salt thermal storage to capture excessive heat of the day and use it to energize the sterilization processes at night. As a result, it not only provides energy efficiency but maintains consistent temperatures which is particularly crucial for vaccine production.
Emerging Technologies: Several technologies are gaining attention for long-term energy storage like green hydrogen. A pharma company can invest in a pilot project utilizing electrolysis that gets power from renewable energy to produce hydrogen. This can come into use in fuel cells to give clean and reliable power for critical processes of manufacturing. This is during periods of low generation of renewable energy.
Structuring Power Purchase Agreements for Pharmaceutical Needs
A holistic renewable energy strategy requires power purchase agreements. It offers a method of secure and long-term energy supplies. Moreover, it also manages financial and operational risks perfectly. Let us go deeper into the subject ahead:
Types of PPAs in Pharmaceutical Renewable Energy Portfolios
The unique energy needs of the industry require a tailored approach to the structures of PPA for holistic corporate renewable energy portfolios:
Physical PPAs: These agreements include a direct delivery of renewable power to the facilities. Furthermore, they are perfectly suited for large pharma manufacturing plants that have significant needs for energy. For example, a facility of biologics products can enter into a physical PPA with a wind farm nearby to power its energy-intensive fermentation and process of purification directly.
Virtual PPAs: These PPAs are also known as financial PPAs that allow organizations to support renewable energy projects without physical delivery of power. Furthermore, they are extremely useful for companies that have their operations geographically dispersed. For example – a global pharma pharma company can use these PPAs to offset the energy use of its smaller facilities spread across multiple areas or countries where direct physical PPAs might not be suitable.
Green Tariffs: There are many regions where the PPA market is not fully developed. Here some utilities give special tariffs for renewable energy. Moreover, these are an attractive option for companies that are seeking to make their energy supply sustainable without the complexity that physical PPAs bring to their corporate renewable energy portfolios. For example – a mid-sized pharma manufacturer in a developing market can go for green tariffs to support the development of local renewable energy. This is while making the procurement process simple.
Long-term vs. Short-term Agreements
The duration of PPA is an important consideration for any company. Furthermore, the pharma companies need to consider it specifically. This is owing to the long-term nature of the development of drugs and processes of manufacturing. Let’s look deeper into these structures for corporate renewable energy portfolios ahead:
Long-term agreements: These agreements typically are for 10-20 years. Furthermore, they provide stability in prices and long-term pharma sustainability commitments. Moreover, they fit well for companies having long-term, stable needs for energy. It includes a large-scale manufacturing facility for established drugs. For example – a company that produces a blockbuster medication can enter into a 15-20-year PPA. This is to secure the power for its dedicated plant for production. So, they can align the energy contract with the expected market lifetime of the drug produced.
Short-term agreements: These agreements last for 3-5 years and offer a certain flexibility that comes at a premium. These are great for pharma companies that have evolving needs for energy. It can include those organizations that are in the early stages of drug development. It can also include those that see a change in the manufacturing process soon. For example – a biotech startup can opt for a shorter term of PPA agreements while scaling production for a newly approved therapy. As a result, it allows for adjustments as the needs evolve.
Hybrid Structures: There are many organizations that go for a hybrid structure to balance stability and flexibility. Such a structure can be great for companies having a diverse portfolio. For instance, a company can choose long-term PPAs for its established lines of product. Then, they can opt for a short-term agreement where the product is still in its clinical trials.
Risk Mitigation Strategies in PPAs
Risk mitigation becomes crucial seeing the nature of PPAs and the dynamic nature that the industry holds for building sustainable energy portfolios for pharmaceutical companies. Let us see some risk mitigation strategies ahead:
Volume Flexibility: Include clauses that give way to adjustments in the volume purchased. This can help in managing the changes in energy demands. Moreover, it is crucial for the industry as the demands frequently fluctuate. For instance, a PPA should include provisions for adjusting the volumes of energy if a major product loses its protection of the patent as this can lead to a reduction in manufacturing activities.
Price Collars: Establish some upper and lower limits on the PPA prices. This can help in saving the buyer and seller from extreme fluctuations in the market. Furthermore, it is especially relevant for pharma companies that operate in a highly volatile market. A price collar in corporate renewable energy portfolios is something that can protect an organization from sudden spikes in the cost of energy. It also makes sure that a minimum price is given to the renewable energy provider ensuring viability.
Regulatory Change Provisions: Make sure to include clauses that address the potential changes in the regulations for energy. As a result, it helps to protect companies from unforeseen shifts in policies. As the pharma industry is already heavily regulated, this can be significant. For example – a PPA can include provisions for renegotiations if a new regulation is impacting the economics of the production or consumption of renewable energy. This is one of the most powerful corporate renewable energy strategies in the pharmaceutical industry.
To Sum Up
The development of holistic corporate renewable energy portfolios reflects a great evolution of the pharma industry’s approach to managing energy and sustainability. Furthermore, these strategies tailored to the unique needs of the sector allow companies to meet their goals while making sure that a reliable and high-quality supply of power is there for drug development and manufacturing.
If you want to explore more areas of sustainability for pharma sectors and more, consider joining us for the 2nd Net Zero Energy Sourcing & Power Purchase Agreements Summit. It takes place on 12-13 September 2024 in Berlin, Germany. Moreover, the event offers unmatched opportunities when it comes to diving into rare insights on every important aspect of energy sourcing/ PPA. It includes sessions, case studies, panel discussions, and more. Additionally, the networking opportunities of the event can help you get that competitive advantage that can help you flourish your business with sustainability goals.
