Ignatov & Company Group - Engineering & Technology Consulting - Best Practices consultingWe provide Best Practices consulting services to our international clients since 1998. We work in both directions – international Best Practices for local players, and local Best Practices for global companies working in a particular market. 

Case Study

Challenge

The US manufacturer with a facility in Russia decided to decrease costs; shrinking of the energy cost was the key strategy – as the manufacturing process assumes energy high consumption. The Russian facility was supplied with electricity from the national grid and thus the launch of own energy plant seemed to be the most obvious solution for cost decrease.

The company decided to see how the self-supply with electricity worked with other manufacturing facilities in Russia; our team was hired for Best Practices consulting projects – with the following key goals: to research how the corporate power plants work in Russia, to find the best practices in the area and to share the knowledge with the client.

Approach

In Stage 1 We identified corporate power plants in Russia and selected those with capacity equal to the required with the client.

In Stage 2 We made in-depth profiling for the selected power plants. Information about generating facilities, their capacity and utilization, transmission lines, energy production and supply in kW and TEF (tons of equivalent fuel), environmental issues, safety, fuel supply, etc.was collected; another part of the deal was gathering cost data – like cost of fuel procurement, labor costs, amortization, etc. Qualitative analysis was done for each of the selected power plants – organization, management, etc.

In Stage 3 the client had a selection of two options for the power plant’s future capacity – either to launch a plant that will supply only manufacturing site or to build a power plant that may sell the surplus of electricity to external customers (thus more decreasing the per-kilowatt price for the production site). We did a research, comparing the business models and performance indicators for corporate power plants of those two types (i.e. self-supply-only vs. self-supply-plus-surplus-sales); the benefits of selling electricity to external customers (like partial financing of the energy cost for the main plant) were compared with the challenges (like licensing and certification requirements, state-regulated pricing for energy external supply, necessity to hold a staff for work with the customers, etc.). The results of the analysis were summarized and provided to the client.

In Stage 4 We did a profile for “perfect corporate power plant” – based on the experience of the existing plants; their achievements and mistakes, challenges and strategies were “squeezed” in the vision for how the corporate power plant must work to be the beneficial endeavor.

Value

The client’s management got deep understanding of how the energy self-supply works in Russian manufacturing sector, which threats and challenges they will meet at their move to self-supply and cost reduction.       

As the result of internal discussion the client decided to launch a power plant with surplus of electricity (to sell it to few neighbor industrial sites) and developed requirements to the power facility based on the “perfect corporate power plant” profile.