Solution: Power plant economics

Client: Power generation

We were tasked to develop a cost model solution for a power generating unit of an oil and gas major for its integrated petrochemical complex.

The existing cost allocation for the producing utilities such as pwer and steam was performed using Lotus spread sheets. This posed a few problems to the company, as the spread sheets are subject to human errors, i.e. improper insertion of data, macros executed incorrectly, accidental deletion of data and many more. Futhermore, there is lack of vendor support as Lotus SmartSuite has been discontinued.

Another challenge that we encountered was on developing the algorithms for allocation of resources, whereby a portion of the final by-product is fed back again into the production process as a resource, thereby creating a perceived infinite looping condition.

We developed an automated cost model solution for the organisation, using IBM Cognos TM1. This enabled our client to perform driver -based product cost allocations, which allowed tracing a product's cost from all direct and indirect costs incurred. The solution was extended further to enable users to analyse the profitability of products.

The solution also allows the users to perform multi-dimensional analysis, without tedious rebuilding of reports. Another key achievement was the reduction in the allocation processiong time in deriving the allocated costs.