As Silicon Valley’s high-tech community suffered through rolling blackouts last month, scientists in San Diego’s biotech cluster watched anxiously, knowing they soon could be the ones left in the dark.
If the lights went out here, the industry could be faced with losing millions of dollars in the manufacture of drugs and laboratory work.
Joseph Panetta, president and CEO of Biocom, San Diego’s biotech industry association, said his 370 members depend on a clean and steady flow of electricity and natural gas.
Just a few hours of interrupted electricity flow could send individual companies into havoc.
“Idec Pharmaceuticals has told us that the impact of a blackout in the middle of manufacturing could be a $500,000 loss (or more),” Panetta said.
Idec’s South San Francisco-based partner, Genentech Inc., experienced a 90-minute blackout Jan. 18 that caused more annoyance than damage.
“Most of our critical operations were covered by two emergency generators,” said Amy Gartner, a Genentech spokeswoman.
She added the occurrence was so harmless, “it’s been business as usual.”
Biocom, however, doesn’t want to take any chances. The association recently founded an energy task force, which will investigate opportunities to share power, create one’s own supply and modify dormant generators for temporary use, Panetta said.
He cited UCSD and the creation of a municipal power district as potential power-sharing sources.
For now, the best way for biotechs to protect themselves from spiraling electricity prices is to conserve energy, he said.
Most biotechs have already shifted operations, such as computing and the production of drugs, to outside peak hours, to save costs.
Few biotechs , small or large , will be financially ruined any time soon as a result of the power crisis, industry insiders noted.
“The industry is in its best position cash-wise,” said John McCamant, contributing editor of the Berkeley-based Medical Technology Stock Letter.
Last year, biotechs nationwide raised a record-high of more than $30 billion in venture capital funding, according to a report from Ernst & Young. The cash infusion provided them with the millions of dollars needed to pursue drug development.
Panetta agreed short-term, the power crisis won’t hit biotechs too hard. He nonetheless urged California legislators to act immediately to protect biotech investment in the long run.
“I get e-mails all the time from other regions that are trying to attract companies away from California on the basis of having a cost-effective power source,” he said.
Steven Engle, CEO at La Jolla Pharmaceutical Co., also fears an unresolved energy crisis will stifle biotech growth.
For one, pharmaceutical firms looking to invest in California-based biotechs will not want to foot the bill for rising electricity costs, he said.
Skyrocketing electricity prices could deter talented scientists from coming to California, he said.
For some local biotechs, the climbing electricity rates have already stifled growth.
At Ligand Pharmaceuticals Inc., a 40 percent increase in its electricity bill over the last six months led the San Diego-based biotech to cut research projects and freeze the hiring of additional scientists, said Teresa Ghio, Ligand’s director of environmental health and safety.
“The fact we have to pay out $600,000 (in additional electricity costs over the last six months) takes us away from becoming a profitable company,” Ghio said.
Ghio said initiatives to shut down lab equipment after hours helped cut electricity costs by 5 percent.
A plan to offset high-priced electricity with cheaper natural gas backfired. Ligand recently agreed to test the efficiency of a gas-powered generator on behalf of San Diego Gas & Electric Co. to help ease the state’s power grid.
“The hope was if it works well, we could increase the size (of the generator) and generate much of the energy on-site,” Ghio said.
Since Ligand signed up for the project three months ago, gas prices have tripled, Ghio said.
As a participant of the energy task force, Ghio now hopes to find solutions with her colleagues.
Other companies, by contrast, won’t have to worry about electricity prices at all , at least not this year or next year.
That’s the case at La Jolla Pharmaceutical.
Thanks to Engle’s foresight of a potential power crisis, the company signed a long-term agreement with an unnamed independent energy provider in August.
At the time, energy providers such as Houston-based Enron, still signed 2 & #733;- to three-year contracts supplying electricity at between 5 cents and 10 cents a kilowatt hour, he said.
But even Engle needs to be concerned about the looming threat of rolling blackouts.
Panetta said California legislators need to recognize the value of the biotech industry and should exempt the industry from rolling blackouts.
He said while Silicon Valley-based software companies made themselves heard in Sacramento, “appointed officials need to understand that biotech is as important, if not more than the software industry.”
Still, on Jan. 18, even the nation’s powerful software industry learned a valuable lesson:
There is one firewall even they can’t break through , the keeper of the state’s power grid.
