Energy Case Study
 

Practice - Strategic Sourcing
Sector - Utilities
Category - Electricity
Geography - UK
Baseline - GBP 3.1m
Savings - GBP 0.2m (6%) in the short-term; up to 25% from demand management and co-generation initiatives in the medium term

Our client was a large European minerals extraction company. It has major operations in many world regions (Europe, North America, South America, and Asia Pacific). The client had recently made an acquisition in the UK and was seeking further cost efficiencies out of this organisation. One of the areas tackled in this broad project was the cost of electricity which, owing to the energy-intensive extraction methodology, was a relatively significant cost item.

The UK electricity market is deregulated for both half-hourly metering (HHM) and non-half-hourly metering (NHHM), which were the two metering configurations that existed on the Client site. An e-auction event was organized using proprietary, industry-specific software developed by Triton Associates’ energy practice.

Key savings levers were:

• Disaggregating the electricity requirement into individual “bundles”, which varied by time of day, day in week, and annual seasonality
• For HHM sites, bidding the “raw” electricity cost separate from the transmission cost; for NHHM sites the two were bid as a bundle
• Using a real-time auction format to enable all market suppliers to dynamically bid for the “package” of electricity that was put out to tender. In this instance, several competing providers signed up for the tender.

The results were that we obtained total project cash savings of GBP 0.2m (6%). 
 

In parallel, two further initiatives were launched to gain additional electricity-related savings:

• Exploring the possibilities for on-site power generation, either via a co-generation project in partnership with a local utility, or investing in wind turbine capacity on-site. This yielded the potential for a further 8% savings in total electricity cost, as well as a valuable hedge against future price increases
• Optimising electricity consumption. This was in three modules: 
  • Ascertaining whether internal electricity demand could be time-shifted to times at which demand was lower
  • Investigating the adequacy of the current metering tools and processes to provide a clear, real-time view of electricity consumption and cost at a granular level
  • Sensitising and incentivating operational staff (at the most granular level) to managing their electricity usage in an optimum fashion

Combined, these three initiatives offered the potential for a further 17% save in electricity cost, over a two-year phase-in period.