Op Ex & Lean Six Sigma / Unit Operations / Facilty Design & Management / Energy Management

Energy Efficiency Makeover Yields Utility Incentive Rewards

GSK’s energy efficiency retrofits and enhancements return $2 million to the company’s coffers

By Nicholas Crist, GSK, Karen Braun, Johnson Controls, Russell Watters, Genesis

Changes in global climate are major concerns among scientists and the public alike. Greenhouse gas emissions (e.g., carbon dioxide) resulting from human activities are considered at least partly responsible for this effect, prompting action from responsible corporate citizens. The pharmaceutical industry has joined this effort taking action by defining targets and schedules for reducing resource consumption, emissions and ultimately their operation’s overall carbon footprint.GSK1

GlaxoSmithKline (GSK) is an industry leader in driving these reductions, establishing a corporate mandate to reduce CO2 emissions across its value chain below 2010 values — by 10 percent in 2015 and 25 percent by 2020. GSK operates two main R&D campuses and one production facility in southeastern Pennsylvania in addition to several other smaller support facilities. The total size of GSK R&D operations in Pennsylvania is just over 3 million square feet, employing about 6,000 people. In Pennsylvania, GSK’s reduction efforts dovetailed with the state’s own Act-129’s energy reduction mandates for commercial electricity providers, enabling GSK to leverage the regional energy service provider’s (ESP’s) Act-129 incentive program to accelerate the pace of these reductions. GSK is characterized as a commercial and industrial customer for the incentive program.

The Regional ESP has been implementing its energy efficiency and conservation plan (EE&C) by implementing incentive programs that reward energy efficiency improvements. The ESP’s programs offer financial incentives promoting the adaptation of energy efficient equipment including lighting, HVAC building systems, motors and drives as well as other eligible technologies and measures. Listed on the application as “prescriptive measures,” each item has a fixed incentive amount per unit allotted to their implementation. Measures not appearing on the incentive application form, if found eligible, could be applied as “custom” measures and incentivized at predetermined custom rates — 12 cents per kilowatt-hour (kWh) saved during on-peak hours and 8 cents per kWh saved during off-peak hours. On-peak hours consist of non-holiday weekday hours from noon to 8 p.m., Monday to Friday, June 1 through September 30. All other hours are classified as off-peak hours.

One of the basic elements of technical program oversight was provided by the Pennsylvania Public Utility Commission’s Technical Reference Manual (TRM), which describes the algorithms and factors used to calculate savings for energy efficiency measures. Measures not included in the TRM were considered “custom” and required extensive calculations and measurement and verification to determine savings. Similar incentive programs are offered by utilities around the nation. The main objective of these programs is to promote energy efficiency by offering incentives to the customers for undertaking energy efficiency projects.

 Through a collaboration between Johnson Controls, Genesis Engineers and the utility’s program administrator, GSK generated more than $2 million in energy conservation incentives. To get there, GSK hired Genesis, a full service A&E firm with significant experience in building energy conservation, and experience working with GSK before on a number of energy conservation projects. Because of GSK’s aggressive energy reduction mandate, there were a number of active projects eligible for incentives that were already underway at the inception of the program. As a result, it was decided that these applications should be centrally engineered and managed by Genesis.

Also invited to help meet GSK’s energy efficiency goals was Johnson Controls, who provided the project management and energy engineering services necessary to oversee the building system, lighting and HVAC control implementations and retrofits. GSK also produced applications for certain projects where the engineering effort did not overburden the project manager (such as with prescriptive lighting applications). In order to maintain a single point of contact with the program administrator for coherent communications, all applications were submitted by Genesis, even those prepared by Johnson Controls or GSK.

GSK reviews and executes hundreds of capital projects of widely varying sizes and scope each year. The first task in the process was to have the project’s participants meet with GSK’s project management staff to identify projects that include energy-conserving components likely eligible for incentives. When the effort started in May 2010, there were 37 active and pending projects identified as potentially being eligible for participation. Dozens more were added each year, but the initial backlog and retroactive implementation of Act 129 resulted in nearly half of GSK’s incentives being awarded in 2011.

Once identified as potentially qualifying, projects were screened for specific eligibility. Due to GSK’s aggressive energy conservation goals, incentives were typically pursued even for small projects with lower incentive values. Projects that lacked sufficient evidence to prove savings were dropped. As noted GSK’s team worked closely with the utility throughout the project selection process to assure the eligibility of selected projects and validate in advance the methodology for proving savings. Of the 34 incentives received:

• 17 were custom and 17 prescriptive
• Of the 17 prescriptive applications, 12 were lighting projects
• The 17 custom applications accounted for 90 percent of the value of incentives received
• Six applications of $100,000 or more accounted for 70 percent of the incentives received
• External administration and engineering cost approximately 15 percent of the incentive value, with the cost somewhat proportional to incentive value.

GSK is taking the significant return from its energy conservation efforts and reinvesting it in, among other things, its critical R&D efforts to discover new drugs in support of the company’s mission to help people “do more, feel better and live longer.” The incentives have also been used to assist in funding new energy reduction projects, which continue to control energy spending and related costs.

For GSK, the Act-129 incentive program initially provided unexpected benefits for projects that were already in progress prior to the inception of the program. Moving forward, incentive values are being incorporated into project planning and Act-129 is serving as a motivator, at times making the difference between an economically viable and non-viable project.

A number of lessons were learned, which can assist in future project selection, project execution and incentive application:

• Quality measurement and verification (M&V) is critical. Proving energy savings requires accurate readings of both baseline and final energy use. None of the applications submitted on behalf of GSK involved direct reading of kWh, so proxy measurements were required. This typically included chiller, pump and fan kW readings, fan or room airflow readings and/or outside air and supply air temperature and humidity. Some energy conservation projects were started without taking pre-readings, resulting in an inability to prove savings and, therefore, a loss of energy conservation incentives.

• Engage project managers. A corporate-wide energy conservation mandate requires the active participation of all project execution personnel to achieve the highest savings and largest incentives possible. Project managers must be engaged early to ensure all projects with energy conservation potential are identified for incentive application, that baseline energy measurements are taken and that maximum performance is achieved from the energy conservation measures.

• Commissioning is critical for ensuring functionality. A detailed commissioning is required to ensure energy conservation measures function properly and trend data is accurately captured. This requires point-by-point verification and calibration of all sensors needed for measuring energy consumption, including verification of calculations performed by building automation systems. Often, building automation systems include simplified calculations that may not be accurate enough to prove energy savings, such as assumed voltage and power factor measurement.

• Include incentive value in payback calculations. Now that Act-129 has been extended for a second phase and the types of project and methods of proving savings have been validated, decision-makers can use the value of the incentives in payback calculations with confidence. Incentive value should not be used to reduce the project budget, as incentive payment is received after the project is finished and operational for long enough for savings to be proven.

The collaboration between GSK, Johnson Controls and Genesis has resulted in over $2 million worth of incentives to GSK between its southeastern Pennsylvania facilities, with 24 GWh of annual electric energy use reduction and 13.7 kTons of annual CO2 reduction (not including associated gas heating savings) for 34 energy-efficiency projects implemented during the Phase-1 of Act-129. GSK was one of the major participants in the Act-129 program and was placed on the ESP’s Top 5 list of participating customers in terms of kWh energy savings claimed and incentives received.


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