by chris | Dec 5, 2017 | Energy
Cost reduction in the energy market through procurement has been relatively easy in the last few years. Flat national demand, solid hydro storage, increased retailer competition and participation in the ASX market has led to competitive commercial contracts that have allowed many customers to save money without changing what they are doing.
While an immediate impact, it is not sustainable. Fixed price contracts are typically only 2-3 years in length and only relate to +/- 65% of a total bill, changes in transmission and distribution pricing is passed through at cost by the retailers and these costs are non-contestable.
In recent weeks, hydro storage has dropped for the second time this year to low levels which has driven large increases in Spot and ASX future pricing. Spot pricing through June moved well above the long term average, peak daytime periods were regularly priced at between 15-20c/kWh or more. While the South Island hydro storage lakes recovered in August from the dry winter, there has been little rain during spring which has meant that water inflows have been below 70% of average levels. It is not uncommon for Spot to bounce around at this time of year due to scheduled maintenance of thermal generators and other transmission related work, however the lack of South Island rainfall and the longer term NIWA forecasts are concerning. Over the last couple of weeks it has been like déjà vu as Spot pricing escalated to day time peaks of above 20c/kWh. 2017 is shaping up to be one of the more volatile years in recent history. Both ASX futures and Spot prices are lead indicators to over the counter retail pricing, pricing can change quickly and for customers who maybe engage with the market once every 2-3 years as contracts end, if the timing is wrong it can lead to significant price increases.
With New Zealand’s energy market so heavily reliant on environmental factors for supply of fuel, it is not enough to rely solely on pricing being the same or better every time a customer needs to sign a new commercial supply contract. Nationally we have around 6 weeks of hydro storage, tiny in comparison to Iceland who have around 6 months backup. Needless to say, it does not take much for the market here to spike, a period of unseasonably dry weather combined with a cold snap, some thermal generation outages and transmission constraint issues all lead the market in one direction.
Customers are asking us what else can be done to mitigate pricing risk in the future aside from securing competitive energy supply contracts. Utilities are a two way street, a symbiotic relationship between consumption and cost. If we take a strategic view, then time and effort needs to be directed at both sides of the coin.
We recently had a customer say, “It’s great when I can save 1-2 cents per kWh with a new contract, but for every kWh I don’t use, I save 10 cents. That’s where the real gold is hidden.”
Total Utilities has a range of energy management services that can assist customers identify sustainable energy savings. We can guide you through your energy efficiency journey from how and where to get started, device level energy monitoring and targeting to identify energy wastage, energy audits, solar viability analysis and system design, BMS optimisation and NABERNZ ratings though to implementation and post commissioning reviews.
Planning for efficiency now, can reduce cost risks in the future when commercial pricing increases. We’d welcome the opportunity to discuss with you what might be possible to ensure a commercially sustainable future.
by Mike | Nov 14, 2017 | ICT
Telecommunications services are a commodity and this has driven the price of services, especially consumer mobile and fixed broadband, to levels that were only a dream a few years ago.
Here is some context. My 13-year-old son gets more for his $10 per month prepay mobile plan today than I got for my $35 plus handset post-paid plan in the late 1990’s. At that time text messages were 20c each and only available from Vodafone.
My home fibre broadband connection, without a phone attached, costs $95 per month and gives me 103Mbs/sec throughput at quiet times and at the worst times I still see 70Mbs/sec. When I moved into my current house in late 2001 dialup, at 56kbs/sec was all we had.
All this transformation has been very good for the consumer and has driven a massive change in the way we consume telco services. Our household has ditched the fixed line because only telemarketers and political researchers were calling on it. Instead we use mobiles, Skype, Facebook and Whatsapp to communicate locally and internationally. We disconnected traditional Television a year or so ago because of the ads and our entertainment is delivered via the internet consuming Netflix, Youtube and online games on a PS4.
Commoditisation enables competition
The ever increasing commoditisation of services, along with the entry into the market of a large number of new fibre suppliers and telecommunications retailers, has created a highly competitive market place. There are now around 80 companies fighting to provide broadband services to an increasingly demanding client base.
This phenomenon is not unique to Telecommunications. It is very typical in the open market that is New Zealand to find multiple players fighting for share. In another example, the retail electricity market has 32 actively trading retailers. In comparison Texas has 38 retailers for 28 Million people.
Fierce competition has meant a constant driving down of retail pricing. As an example, a Skinny fixed broadband unlimited plan at $68 a month, delivered on 100 Mbps fibre. This price leaves Spark with only $16 out of the $68 after paying Chorus’ wholesale charges.
In response Spark is refocusing towards wireless broadband rather than continuing to fight a “race to zero” price war over fibre based services. Spark are now pushing very hard the idea that connectivity should be wireless and are offering services on their 4G mobile network at the same rates to homes as the ADSL products.
Spark Digital boss Simon Moutter commented at the company annual meeting,
“Spark has reoriented its business towards a wireless future and making a strategic shift from a traditional telco with international interests to being a New Zealand-focused digital services company.“
It now looks like the relationship between Spark and Chorus, which was never an easy relationship, has moved to an all-out war.
Chorus has responded by saying they will become an active wholesaler, pushing their products in the market. This is a big change from being a passive wholesaler. For customers on ADSL there is a real challenge from the 4G fixed cellular broadband. This type of service has been very effective for rural customers who had slow or non-existent broadband available.
What does this mean for telecommunications customers?
I don’t see any downside, if you have fibre in your street, choose a provider and enjoy. If currently have a VDSL connection available, stay on that, the service is high speed and low latency.
For those who are unlucky enough to have ADSL only there are two camps. Some will get good speeds and others will not be so fortunate. If your ADSL is not up to scratch then I believe that the 4G Spark service is an excellent option. With 5G just around the corner, even more options will be available in the near future.
Once again competition has brought better services at lower prices to consumers. It’s the lumbering old Telco’s that are paying the price.
by DavidSpratt | Nov 3, 2017 | ICT
This is the third and final article on Communities of Practice (COPs), a model designed to help align business strategy with the evolving knowledge and experience of your people, while still taking advantage of the efficiencies that can be gained through more formal organisational structures and processes.
I can now safely say, after many years of practice — complete with a few painful cock-ups along the way — that the workplace model, Communities of Practice (COPs), does work. Making Communities of Practice work doesn’t happen on its own, but with the right groundwork in place and organizational support they can flourish.
COPs are made up of three essential elements: a domain (common ground or project), community (the particular group of people working on the domain), and practice (the community’s actions taken to develop and share knowledge in carrying out the job together).
There are six key components to making Communities of Practice work in the real world
1. Select the Practices that will underpin business strategy and unite your people
This process isn’t dictated by one manager. We pulled together a team of respected leaders and experts in the business and charged them with finding an initial group of three areas for “practice development”. That team determined that the business’ management of records and documents, information security, and messaging, were critical technologies with skills, activities and innovation at a premium.
Getting people to agree on exactly what “messaging” meant, for example, was difficult.
Expect the first few COP sessions to be talk fests where people debate in minute detail exactly how the particular Practice is defined, what members should be doing , how they will do it and what outputs they expect.
2. Identify the right people to participate
We asked for volunteers. Trying to name people and then advise them “congratulations we have found another way to suck the joy out of you” just doesn’t fly. We recognise many dedicated staff already work longer hours than is good for them.
3. Make time and resources available
Asking your busiest expert to take on a COP lead role without providing support and resources will see him or her head out the door faster than you can say “Mummy has moved in with Uncle Bob”.
Over time the Practice will introduce efficiencies and improvements that make work more enjoyable and effective, but it won’t happen overnight and you need to plan for that in terms of resources and people’s time.
4. Find easy-to-use technology to ensure ongoing engagement
When we first started COPs we thought a couple of face-to-face meetings a year and a monthly video or voice conference would be enough to drive results. How wrong we were! After a short time, the demands of day-to-day work took over, excitement waned and we struggled to keep people engaged.
The arrival of instant messaging tools such as SharePoint, Skype, Google docs, hangouts, classrooms and chat forums have changed everything. Communities of Practice can now be made a practical reality for an extremely low cost and with astonishing speed and availability.
5. Set realistic goals and objectives for each Practice
At first, we tried to set grand goals for Practices. As expected, everyone became confused, frustrated and rapidly lost interest. So, we changed tack and asked, “What is the biggest single problem we face and how could we solve it?” By narrowing down the discussion to a short, sharp challenge, people became more engaged.
As important as engagement is to making Communities of Practice work, it was an unexpected consequence. It turned out that many people had actually solved this specific problem in the past, either in their region or at another job. Often, they had spent hours at home building a powerful and viable answer to the problem. It was just that no one knew about it!
The Practice provided these people with a forum for sharing their solutions with colleagues who were genuinely interested and could offer further improvements.
6. Appoint executive sponsors who are accountable for results
In saying this, I don’t mean some poor middle manager who has just been assigned to COPs “special projects” while you prepare to clean out his office. Accountability for COPs is an executive role for two reasons: they will make sure it succeeds; and the people involved will actually believe it will succeed.
Confidence is essential when starting any new initiative, and Communities of Practice are no exception.
This is part three of a series. If you missed it, catch up on parts one and two here: Forming Communities of Practice and three essential elements for successful Communities of Practice.
by DavidSpratt | Oct 31, 2017 | Case Studies, ICT
In 2013, Zespri, one of the world’s leading horticultural companies, and the recognised category leader in kiwifruit, was facing many significant challenges. The Psa virus which attacked their main gold kiwifruit crop, had the potential to devastate the company and its grower shareholders. In addition, they were facing significant capital outlays associated with their existing ICT systems and the need to upgrade their computer hardware.
Zespri had to ask questions like, “Could the new variety of crop, Sun Gold, be more robust and become another bestseller?”, or, “Would our outputs dramatically reduce?” At the same time, Zespri’s Board were concerned about identifying and mitigating the risks of a natural disaster like the tsunami in Japan or the earthquakes in Christchurch. Their data centres were located in Mount Maunganui and backup services in Tauranga. They wanted to understand the impact these types of events could have on their onsite server and storage infrastructure.
Measured Baseline Informs Strategy
Undertaking the initial analysis of Zespri’s current position, we established a baseline ICT cost. This baseline was used as a benchmark to inform financial decision-making and monitor ongoing expenditure.
With assistance from the team at Total Utilities, Zespri evaluated its ICT data centres and infrastructure services and platforms. The objective was to determine whether they could manage the range of potential outcomes that they faced. These systems would have to be flexible enough to adapt to both the best case and the worst-case scenarios.
Zespri sought Total Utilities’ independent advice to identify and assess out how they could best respond to these risks and opportunities. They ultimately saw the need to inform vital decisions around how they consumed computer services with a scalable and cost-effective model that was aligned with their overall financial and business strategy.
Undertaking the initial analysis of Zespri’s current position, we established a baseline ICT cost. This baseline was used as a benchmark to inform financial decision-making and monitor ongoing expenditure. Using this measure, we demonstrated to the CIO and CFO and subsequently their executive and board, significant savings could be made by moving to a monthly subscription model based on public cloud services.
In the future increases above the baseline, increased spending in ICT, would be indicative of Zespri’s growth. The baseline is a very useful comparative tool, both for supporting financial decisions and controlling monthly spend.
After conducting a thorough analysis of the needs and opportunities available to Zespri, we provided the quantitative data that underpinned the business case presented to their board. Total Utilities subsequently supported Zespri through our independent Request for Proposal process to choose a candidate for the migration to, supply and support of a comprehensive cloud-based infrastructure running over the Microsoft Azure Platform.
Moving ICT operations to Microsoft’s Azure cloud computing platform has many advantages including access to data from anywhere and at any time, an IT environment that is quick and easy to replicate as new offices open and new services become available, and it can effectively respond to the increased competitiveness that occurs when other global players enter the market.
In addition, moving to Azure mitigated the risk of natural disasters crippling the closely located physical data centres.
Ongoing Insights and Cloud Analytics
Our commitment to providing Zespri with a dynamic and meaningful experience meant that our relationship continued past the selection phase. With our expertise in financial analytics we continue to provide them with forever evolving insights. Steve Wichman, Zespri’s Procurement and Commercial Manager, outlines how Zespri is moving into an ICT maturity phase. With this the board is always looking for ways to optimise their systems. The regular technical and financial input from Total Utilities is very useful in this regard, Steve describes us as a sounding board and an independent voice.
Zespri utilise the Total Utilities cloud management service based on our analytics, reporting capability and the Cloudyn tool. Providing these reports and monthly insights we can help ensure that expenditure is aligned, appropriate, and adaptable to Zespri’s financial strategy. We also help them manage and mitigate the risks associated with an OPEX approach, bill shock, by providing them with real-time alerts of consumption. Steve states that these reports provide insights on how Zespri can best optimise their systems, analyse exceptions, and determine how they can improve their current and future operating state while reducing overall expenditure.
Customer-Centric and Flexible Reporting
The board is always looking for ways to optimise their systems. The regular technical and financial input from Total Utilities is very useful in this regard.
The dynamic nature of our service to Zespri means that, as well as providing clear and understandable reports, our analytics extend to creating what-if scenarios. For example, we can analyse what might happen if Zespri consolidated or expanded some of its ICT services. This approach means we can project future cost savings or increases accurately.
Total Utilities insights, financial analysis and recommendations have become more meaningful as more data is gathered and more avenues explored. We can now calculate ICT costs on a “per service” basis. This allows Zespri to identify the true cost of financial, operations, marketing or any other system that requires ICT resources. Our benchmarking and cash projection approach extends to three-yearly reviews of the business case. These reviews are vital to ensure that the case remains relevant to Zespri’s situation and consistent with the parameters set by the board. Regular reviews, along with ongoing monthly, quarterly and annual reporting, are at the heart of Zespri’s ongoing drive to extract the maximum, identified and projected value available from the Microsoft Azure platform of services.
Understanding Key Business Drivers to Leverage Competitiveness
Other ICT consulting companies might focus on the technology or hardware, we take a financial analytics approach that sees ICT as a consumable and adjustable utility. This means consumption and costs are transparent, flexible and optimised. We believe ICT should be financially appropriate for a company, aligned with their goals, and be able to adapt to real-world factors. We do all this by establishing a baseline of costs, creating a detailed business value analysis in support of a business case and then deliver regular monitoring. This approach informs understanding of the company’s consumption, costs and benefit realisation from their Azure based ICT systems. This is the multi-faceted and valuable service that we continue to provide to Zespri.
Finally, would Steve at Zespri recommend us to other companies? A resounding yes. Our strong and dependable relationship, the way we deliver on a job both in quality and in timeliness, and our independent and trusted advice, is hard to find elsewhere.
by DavidSpratt | Oct 26, 2017 | ICT
Last month I introduced Communities of Practice, a model designed to help align business strategy with the evolving knowledge and experience of its people, while still taking advantage of the efficiencies that can be gained through more formal organisations and processes.
There are three elements that make up a Community of Practice. These are Domain, Community and Practice.
Domain
The common ground that inspires members to join, drives their learning activities and gives purpose and meaning to their activities.
Let’s take a simple example. Yours is a plumbing and gas fitting firm with offices across the country. The building boom has meant that Christchurch, Nelson, Auckland and Tauranga are seeing increased demand for the design and installation of sophisticated gas heating systems and appliances in new, architecturally-designed homes, shopping centres and offices.
In each of these main centres you have a mixture of apprentices, newly-qualified and experienced tradespeople working under a standard organisational structure with supervisors and a branch manager.
The domain in this instance is the design, selection and installation of new gas systems. The reason people join (purpose) is to share ideas and come up with best practice by taking advantage of the work that community members have done, whether in training at apprentice school, at their previous job or on the job last week.
The motivation (meaning) is twofold. To be recognised by your peers and to learn from the experience of others, in an environment where the company rewards these activities.
Community
Creates the social fabric for learning.
Our plumbers and gas fitters are in a mixture of locations and have a wide variety of experience and insights and formal learning. In reality though, they do not have a great deal in common other than their learning domains.
In our imaginary firm, Jim and Rod have a common cause when it comes to the knowledge they are sharing from Jim’s last project. Jim is sharing his ideas and experience from a job where he specified and installed the latest gas appliances from a new European supplier. Rod is about to install the same equipment on his next job and is worried about getting the specification wrong. He has never seen or installed the equipment before and the job has contracted delivery milestones and quality demands.
What I haven’t mentioned is that Jim only just qualified as a gasfitter last year. He finished his apprenticeship with another company in Dunedin and only just joined the Christchurch team in January. Rod, on the other hand, has worked for the Auckland branch as a supervisor for twenty years and is regarded as the top dog in the Auckland office.
Jim wears tight jeans and sports an indie-style beard, while Rod has a beer gut and listens to Led Zeppelin. In normal circumstances, these two vastly different people with seemingly nothing in common would never have come together for the betterment of themselves or their firm. The Community of Practice that the company has established means that knowledge and skills are now becoming a part of the fabric of how things are done at work regardless of location or status.
Practice
The Practice component of a Community of Practice is the point of action around which a community develops, shares and maintains its knowledge.
A Practice is built on establishing, recording and sharing formal methods (explicit knowledge) and practical experience (tacit knowledge). It delivers reusable and constantly evolving best practice while making room for innovation. It allows the firm to continue to constantly improve its standards regardless of changes to the organisational structure or the movement of staff.
Jim’s willingness to share his drawings and installation instructions and, importantly, to take the occasional phone call from Rod has created genuine, measurable customer value on his latest job. These drawings and connections also endure for all community members and the firm. This motivates staff, creates a sense of belonging and maintains competitive advantage for the company as a whole as it evolves in a tough, competitive market. This is the basis of Communities of Practice.
Part Three of this series covers the most important question of all. How do we break down the structural, cultural and political barriers that exist to Communities of Practice while maintaining the day-to-day organisational framework that ensures the business operates in the day to day?
by chris | Sep 26, 2017 | Energy
What is Power Factor and why is it Important?
Power Factor is an electrical term that is the measurement of how efficient energy consuming equipment translate that energy into a useful output. It is measured by the ratio (>0 and <1) between apparent power (kVA) and real power (kW), where apparent power is the amount of energy required to deliver a required output. Power Factor should be as close to 1 as possible (above 0.95) so that apparent power and real power are nearly the same. This means that nearly all the energy consumed is translated into a useful output.
An analogy of this is a boat travelling in a straight line from Beachlands Marina to Waiheke, with no wind and water currents it can easily make the trip without difficulty (real power), however in the real world, environmental factors exist which, if not allowed for, will make the boat travel off course or get to its destination much slower. The boat requires more energy (apparent power) to counteract the wind and ocean currents to arrive safely at its destination in its desired timescale. With stronger wind and currents, more energy is required to make the same trip and perform the same action.
In an ideal world, the boat would only travel on calm sunny days as this would maximize the energy output in travelling to Waiheke Island.
This Overlooked Charge on Your Energy Bill Could be Costing You Dearly
Returning to buildings, manufacturing plants and industrial sites, power factor is caused by inductive energy loads, these are the wind and ocean currents that can potentially mean that we use more energy than is necessary to run our equipment. Inductive loads include:
- Transformers
- Induction motors
- Induction generators (wind mill generators)
- High intensity discharge (HID) lighting
Sites with poor power factor (a low ratio of below 0.95) create disturbance in the local electricity distribution network which can require the network operators to build more infrastructure than is required to deliver power to customers.
Power Factor Charges
We regularly come across customers who are not aware they are being billed for poor power factor, in most cases the energy retailers are not concerned about these charges as they are pass-through network costs. Most North Island and some South Island energy distribution networks charge customers with poor power factor. Pricing is mostly standardised through the country at around $8.90 per reactive kVA unit per month, however penalty times and the way the billable Power Factor is calculated varies between networks.
An example of this is below, covering a customer located in the Vector Network in Auckland.
This is an extreme case, however shows what customers should look out for on their energy bills. If poor power factor is charged, along with a peak kVA demand charge, then customers are paying a higher cost for peak demand as poor power factor inflates this. Like the analogy above, a greater amount of kVA energy is needed to get to Waiheke due to strong winds and ocean currents.
What can be done to correct Power Factor?
Power Factor can be corrected through the installation of capacitor banks, traditionally these consisted of a control unit and a series of capacitors that would filter the power used on site as required. Modern units are evolving quickly as technology advances where sophisticated software can deliver granular correction with less capacitors to ensure that power factor remains above 0.95. Fully active systems delivering electronic real time correction are also becoming more accessible but remain very expensive and only suitable for specific situations. Hybrid systems are also available, but again, these are suited to specific situations.
There are numerous businesses out there offering power factor correction, many companies only offer off the shelf type products. The danger here is that they are not specifically designed to a customers requirements and can be either under sized (i.e. they wont correct all of the power factor issue) or their over sized (i.e. a customer will pay for more than what they need). Standard step sizing of the capacitor banks may be too large which means correction only works at large loading as the unit lacks the granularity to correct smaller loadings.
What if I have a unit already installed?
Depending on the age and design, most units can be repaired or upgraded. However older units may need to be replaced as it would be a case of just throwing good money after bad.
Unfortunately Power Factor Correction Units are not a set and forget product, just like a car they need a regular annual inspection. Having your unit checked on an annual basis is a good way to make sure that they continue to run efficiently and you get 100% value out of an expensive asset. All too often we hear of customers say, “but I installed a unit 3 years ago, why am I still being charged for power factor?”
If the unit was designed correctly in the first instance and the customer has not outgrown it, the most likely issue is heat. Capacitors have a life cycle of around 10 years if kept cool. However if they are regularly exposed to temperatures above 30 degrees they can begin to fail. This is why unit design is important and relates to the location of where the unit is installed. Off the shelf products will not consider this.
Who do I call?
Total Utilities can assist customers in building the business case to install or repair correction equipment, illustrating potential savings and relative return on investment based on measured half hour interval data.
We can design and install Power Factor Correction Units through kAVrCorrect (Formerly Metelect in Rotorua) so that customers receive and full end to end service.
With New Zealand’s energy market so heavily reliant on environmental factors for supply of fuel, it is not enough to rely solely on pricing being the same or better every time a customer needs to sign a new commercial supply contract. Nationally we have around 6 weeks of hydro storage, tiny in comparison to Iceland who have around 6 months backup. Needless to say, it does not take much for the market here to spike, a period of unseasonably dry weather combined with a cold snap, some thermal generation outages and transmission constraint issues all lead the market in one direction.