A linear Programming Model for

Distribution of Electrical Energy in a

Steel Plant

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.

102

97

92

87

82

77

72



A
V
E
R
A
G
E

P
O
W
E
R
(
M
E
G
A
W
A
T
T
)

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

SYSTEM

CONTROL

BY

CENTRAL

CONTROL

ROOM



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


500

400

300

200

100

0

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.

120

100

80

60

40

20

0

10 15 20 25 30 35 40 45


X-axis :External MW
Y-axis :Rs. 10000/MW

Marginal contribution of Power
70

60

50

40

30

20

10

0

35 40 45 50 55 60 65
VARIABLE POWER (MEGAWATT)






M
O
N
E
Y

U
N
I
T

P
E
R

M
O
N
T
H

At low levels of availability, the marginal contribution of power is very high;
as power becomes abundant, its incremental contribution drops sharply

3.0

2.5

2.0

1.5

1.0

0.5

0

1986/87 1987/88 1988/89 1989/90 1990/91 1991/92
1.06

Prodn.
Expend.
1.869
Gr. Rev. 2.04
Profit 2.79
Financial benefit after 1986-87

3.0

2.5

2.0

1.5

1.0

0.5

0

1986/87 1987/88 1988/89 1989/90 1990/91 1991/92


Profit/ton


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.