Abbott Records a 35% Reduction in Oil and Gas Usage

By Michael Kanellos

Waste heat works, Abbott (ABT) would like you to know.

The medical equipment and pharmaceutical giant has managed to reduce its demand for fossil fuel by 35 percent, compared to a 2006 baseline. The original goal was to reduce oil and coal consumption by approximately 11 percent to 12 percent by 2011.

Just as important, the substantial reduction wasn't accomplished through buying green energy certificates, one of corporate America's favorite if now always helpful avenues for going green. In 2008, Abbott bought 1.3 million megawatt hours of electricity, 32 percent down from 2006. In all, it used 4.2 million BTUs in 2008, a 35 percent reduction when normalized to sales and 15 percent reduction in absolute terms. (Sales went up during the period.)

A significant portion of the gains came from employing co-generation systems that capture waste heat and exploit it to boil water or run double-effect chillers that can make ice or cold water with heat.

"Co-gen has probably had the biggest payoff," said Paul Finnegan, division vice president of Abbot who oversaw the project. The units have around a 20 percent return on investment and thus will likely pay for themselves in about five years.

Waste heat remains one of the world's vast untapped energy sources. Simply put, industrial machinery and computers aren't optimally efficient so they dissipate a lot of the oil and/or electric power fed to them into ambient heat.

A study conducted by Lawrence Berkeley National Labs estimated in 2005 that the U.S. alone has 100 gigawatts of untapped electrical capacity in the form of waste heat that annually could produce 742 terawatt hours of power. UC Berkeley estimates that the U.S. consumes 100 quads (100 quadrillion BTUs) of energy a year and 55 to 60 percent of it gets dissipated as waste heat (see Tapping America's Secret Power Source).

Worse, waste heat increases the need for air conditioning, further leading to more power consumption. Companies trying to exploit waste heat include Recycled Energy Development and Cypress Semiconductor.

Other gains came from solar panels at select facilities and energy efficient building design. Natural sunlight and cooling are key features of a recently constructed Singapore facility.

The company looked at LED lighting but the retrofit, at the moment, comes with high capital costs.

Comments

[Grumann:]

Okay that was an excellent observation about waste heat. Make a lot of sense and seems to be cost effective. Now, are there any investment opportunities in the area. Which public companies develop, consult or sell waste heat recovery systems?

Oct 02 09:16 AM

[jerrydd:]

Ormat, Razer/UTC and Cyclone Tech, cyclonepower.com are 3 good ones to make money off this.

A/C companies could do this as waste heat engines are just A/C units in reverse. These same units can be used for Solar CSP, CHP.

They should be between every coal, NG, nuke steam powerplant and their condensers. There is more waste heat than useful heat in the UsS, much of which could produce power.

Oct 02 10:42 AM

[tc1:]

The author has mentioned, but not highlighted, two companies, one of which is publicly listed: Cypress Semiconductor (CY), which has a $1.52B market cap, a forward P/E of 22.2, a 2.8 mean buy rating at finance.yahoo.com, a current price this morning of around $9.80, but a whoppingly negative current EPS of -3.90 and terrible operating margins (-29%) and ROE (-52%), along with an uncomfortably high 18% amount of short-selling. CY carries manageable debt of $27.7M on revenues of $682.8M and cash holdings at $245.6M.

I daresay there are many more promising looking companies out there though i might look at this one again if a real trend in exploiting waste heat were to take off en masse.

Oct 02 10:45 AM

[THofler:]

Jerry,
Yes, classic reversible heat engines can do A/C in one direction or generate mech./elec. power from waste heat in the reverse direction. But typical A/C units are non-reversible vapor compression systems.

Oct 02 08:52 PM

[Erich J Knight:]

This story just shows ABT's common sense, as Walmart labels a product 's carbon foot print, process heat (really no such thing as "Waste Heat") is the low hanging fruit.
I hope Walmart's efforts will drive a movement for Carbon ratings on energy sources.
Also, I think that origin labels, (even in % if blended) could inform consumer's choice.


If your looking for an ABT related stock,
The Message boards pundits, say that NNLX is in ABT's sights.

Oct 02 08:53 PM