Guiding Principle The guiding principle of this model is that in the case of power shortage, power is allocated to those non- essential loads which have a higher contribution per unit.
Introduction
Optimal allocation of electrical energy is a very important decision with the management of a steel plant.
This case study deals with the development and implementation of a mathematical model for optimal allocation energy in a steel plant.
Unlike in other studies, in this case study the steel plant ha been modeled with a profit maximization objective and energy as a limiting constraint.
Historical Development of the Company The steel company where the model was developed was the largest private company in India. Started in 1907 in the eastern part of India, it had grown over the years and is now the second largest steel company in India with a sales revenue of approximately 1.05 billion dollars. (1992)
Goutam Dutta 5 Basic Flow Sheet in an Integrated Steel Plant Iron Making Steel making Casting Rolling Finish Rolling RM Processing The model is now extensively used for the following: 1. Optimal allocation of the plant capacities to the various markets. 2. To indicate the economics of individual products on an overall basis. 3. The potential benefit of capacity expansion proposals. 4. Optimal route of a product. 5. Best use of limiting processes like a bogie bottom pouring, normalizing and cold drawing. 6. Break-even price of critical products like scrap, coal and coke.
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APR 86 JAN 87 JAN 88 JAN 89 JAN 90 WITH MODERNISATION, TATA STEELS DEMAND FOR POWER CONTINUALLY EXCEEDS THE AVAILABILITY OF POWER. POWER DEFICIT POWER REQUIRED BY WORKS POWER AVAILABLE TO WORKS Definitions, Assumptions and constraints (contd..) Power balance: The four major components in the power balance: 1. Power generation processors. 2. Power consuming processors. 3. External power purchased. 4. Fixed power requirement. Power Flow in the Steel Plant : POWER HOUSE NO 2 POWER HOUSE NO 3 POWER HOUSE NO 4 POWER HOUSE NO 5 D G SETS EXTERNAL SUPPLY POWER
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ESSENTIAL LOADS NON ESSENTIAL LOADS ASSOCIATED COMPANIES CITY POWER Power Distribution Diagram Problem of Power Allocation in our Steel Plant Supply fluctuation Demand fluctuation Essential loads Domestic load or city power Definitions, Assumptions and constraints Processor: A processor is a unit which produces steel, hot metal or provides service to the steel plant. Net Realization: The net realization of he product is the difference between the price and the total deduction in the form of taxes, excise duties and other dues in the government. Variable Cost: This is the sum of all the material costs and the variable portion of the conversion cost. Contribution: The difference between the net realization and the variable cost of the product.
Model Formulation The model is based on linear programming and hierarchical optimization Processor Very similar to a facility It converts input/inputs (raw materials) to outputs It will consume electricity by knowing its given by parameter (KWH/ton) It may consume oxygen (NM 3 /ton) It may consume fuel (Kcal/ton)
Materials It may be input/ WIP/output A processor convert one material to another material Every materials have net realization, variable cost. When a material is processed in a facility, it has yield and OHPT or TPOH that is required in LP formulation Model Formulation The model is based on linear programming and hierarchical optimization Model Formulation Objective : Maximize the Contribution to Profit Contribution = Net Realization-Variable Cost Constraints Material Balance Energy Balance Oxygen Balance Model 400 equations 750 variables 200 marketing bounds
MPS-TEMPO (Burroughs 6800) VAX VMS 2-3 min
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0 2 4 6 8 10 12 14 16 X-Axis: PRODUCTION (THOUSAND TONNES) Y-Axis: POWER CONSUMPTION (MILLION KWH) Y-INTECEPT = FIXED POWER (KWH/TONNE) SLOPE = VARIABLE POWER CONSUMPTION (KWH/TONNE) Scatter diagram showing the line of best fit of the total electrical energy consumed Model Implementation Marginal contribution of power Financial benefit after 1986-87 Financial benefit per unit after 1986-87 Following are the graphs representing the above three issues.
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X-axis :External MW Y-axis :Rs. 10000/MW
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At low levels of availability, the marginal contribution of power is very high; as power becomes abundant, its incremental contribution drops sharply
Prodn. Expend. 1.869 Gr. Rev. 2.04 Profit 2.79 Financial benefit after 1986-87
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2.62 Gr.Rev./ton 1.92 Expend./ton 1.75 Financial benefit per unit after 1986-87 Before Implementation After Implementation MEGAWATT PRODUCTON CONTRIBUTION AN EMPHASIS SHIFT FROM TONNES/KWH TO CONTRIBUTION/VARIABLE KWH LED TO OPTIMAL USE OF AVAILABLE POWER Aug 86 Sep Oct Nov Dec 86 Implementation problems in a developing country Social responsibility of the company Data consistency Linearity of some mills Software availability
Conclusion In addition to deciding the priority in the case of power crisis, planning the production target marketing strategy, the model is being used in critical situations. The implementation of the model has not only had a significant impact on the performance of the organization, but has also enhanced the confidence of the top management in using Operations Research and Management Science Techniques for making short- and long-term business decisions. The model has been successfully tested on a steel plant as well as on a tube manufacturing plant. Since the power shortage situation is expected to continue for at least a decade in a developing country like India, these types of models can be utilized in other steel industries and other similar industries to improve the industrial productivity and profitability in a constrained situation.