Enhancing Energy Security in the Pharmaceutical Sector: Strategies and Challenges

Energy security, referring to the uninterrupted availability of affordable energy sources, has become a paramount concern in recent years. Russia’s invasion of Ukraine and weaponization of its energy highlighted the inherent vulnerabilities of energy supply chains. In the immediate aftermath of the war’s outbreak, Europe took measures to avoid supply disruptions, ease market pressures, and save energy.

Countries and regions around the world are now accelerating their clean energy transition through structural reforms of the energy system. This involves diversifying import routes and sources, filling gas storage tanks, and investing in infrastructure to reduce dependency on single suppliers. Additionally, they are promoting the import of renewable and low-carbon energy carriers as part of the broader goal to decarbonize the energy system while enhancing energy efficiency to reduce overall demand.

Energy supply security is not only a national issue but is also a critical concern for industries that depend on gas as their main energy source, such as the pharmaceutical sector. Given its specialized nature, stringent regulatory requirements, and reliance on continuous operation for the manufacture of critical products, this industry faces heightened risks. For pharmaceutical companies, maintaining a stable and secure energy supply is essential to ensure the quality and safety of life-saving medications.

Strategies for Enhancing Energy Security

To enhance the energy security of an organization, efforts should be directed towards minimizing reliance on external energy sources like gas while maximizing the utilization of local, renewable energy, and electrifying operations. The main strategies include:

• Reducing energy consumption: Introducing energy efficiency measures is the first step to lowering dependence on fossil fuels. From behavioral changes to technologies that minimize energy use, such as LED lighting or heat pumps that recover and reuse waste heat, reducing demand is a ‘no-regret’ option. Energy management systems that take an end-to-end approach can substantially impact demand, integrating advanced monitoring, control, and optimization technologies to manage and reduce energy consumption across the entire production process, from energy and material sourcing to product delivery.

• Electrification: When paired with a reliable renewable or low-carbon energy supply, electrification is synonymous with decarbonization, as it significantly reduces the need for fossil fuels to power equipment and transport vehicles. As technologies advance, an increasing number of industrial processes can be powered by electricity.

• On-site renewable energy solutions: This may involve installing solar panels on facility rooftops, utilizing biomass boilers, and exploring geothermal energy options. Solutions must consider the geographic (availability of underground heat sources) and operational conditions of the relevant sites. On-site biogas and biomass are less common in the pharma sector as companies don’t have sufficient waste products to valorize.

These measures have the dual impact of promoting energy security, enhancing energy efficiency, and reducing carbon emissions. An additional driver of security is replacing aging assets, such as gas boilers, with efficient electrical boilers that can be powered by green energy.

Challenges and Financial Considerations

While the urgency and benefits of undertaking measures to improve energy security are clear, the journey is not without its challenges.

• The cost of implementing decarbonization solutions is one of the main reasons companies delay their efforts, as it typically involves substantial upfront capital.

• Physical space constraints could make it impractical to implement on-site solutions like solar panels or biomass boilers. An on-site biomass solution, for instance, needs space to store the biomass.

• Integrating new technologies into existing production processes is another big hurdle. Suppose the decision has been made to use a heat exchanger for heat recovery. This means interfering with the existing production system and potentially modifying it. Some clients view this as a risk to ongoing operations.

• Cultural resistance from on-site engineering teams is another common obstacle. These teams are accustomed to operating their existing reliable systems. They might resist the introduction of innovative technologies, or even resent external teams interfering with methods that have been successful for many years.

The question is how to overcome these obstacles. Looking at the financial aspect, there are two approaches to consider when analyzing how to make energy security projects feasible: internal carbon pricing (ICP) and as-a-service models.

Companies that prioritize reducing their carbon footprint and are willing to accept the cost can usher carbon projects through their internal commitment process by setting up an ICP mechanism, paving the way to implement reduction projects. They can assign a cost to carbon, such as $100 per ton, which is then factored into their long-term financial analysis. This approach often improves the business case for investing in low-carbon technologies by quantifying the economic benefits of reducing emissions.

Companies more concerned about reducing cost can use an as-a-service model, which eases the financial burden by shifting the upfront cost to the service provider. In this case, the energy solutions provider finances the initial capital investment for new technologies and then charges the client a service fee. This approach not only reduces the upfront cost for clients but also aligns the incentives of both parties towards achieving energy savings, carbon reductions, and energy security.

Key Success Factors

The financial side of implementation is only one aspect of a broader strategy to achieve the means to energy security. We can identify three additional factors that are instrumental to the successful implementation of energy security and decarbonization projects:

• Stakeholder engagement: This may be the linchpin to rolling out energy security measures. On-site engineering teams, for instance, often hold the budget of the local site. So, even if the corporate team is onboard with the solutions, the local teams must pay for them. Ensuring all stakeholders, from leadership to on-site engineering teams, are engaged and aligned with the project’s goals and understand its benefits, is paramount. Otherwise, the project could become difficult, if it’s not derailed altogether.

• Centralized project management: A strategic approach with central control and governance helps standardize processes and technologies across different sites. Centralization that industrializes the procurement, installation, and commissioning of technology accelerates the overall program.

• Comprehensive agreements: Establishing master service agreements at the corporate level facilitates smoother implementation across multiple locations. These agreements provide a strategic framework that supports consistent and cohesive project execution, avoiding the complexities of negotiating individual contracts in different countries.

Building Resilience to Energy Risks

The pharmaceutical supply chain is complex and global. A breakdown of energy security at any point of this chain can have cascading effects, potentially disrupting the production and availability of essential products. The dependence on energy imports due to limited domestic energy resources, viewed in the light of potential disruptions to energy supply routes due to ongoing geopolitical complexities, has thus raised concerns about energy security in Europe, Asia, and beyond.

An appropriate response to this potential threat is within our grasp, as it dovetails with measures to accelerate the energy transition. Building energy resilience entails diversifying energy sources to reduce dependency on any single supplier or source, improving energy efficiency to reduce overall energy needs, and enhancing local energy production to bolster self-sufficiency. Pharma companies can achieve these measures by forging strategic partnerships with service providers that merge consulting expertise with the capability to implement the required solutions, thereby facilitating their transition to a more secure and sustainable future.