Ukrenergo decided to be guided by the principle “if you want to do well, do it yourself” and created a subsidiary of Ukrenergo Digital Solutions. This is an IT company whose task is to develop the necessary software products for the Ukrainian operator of the transmission system (and therefore for the entire electricity market of Ukraine).
What exactly is being developed in the first place, what benefit these projects will bring to the energy system and consumers, and even how they will save money - Andrii Nemirovskyi, director of Ukrenergo Digital Solutions, member of the board of NEC Ukrenergo, told Kosatka.Media.
- Why does a system operator need their own IT company?
- For the first time, the idea of creating a subsidiary Ukrenergo appeared in 2018. Then we bought a huge amount of new computer equipment, and in the process, we saw that our colleagues in the public sector, including in the energy sector, are not doing it very effectively. In parallel, we were looking for ways to reduce the burden on Ukrenergo's tariffs. The creation of a subsidiary company, which will, on the one hand, help state-owned enterprises in optimizing purchases, and on the other, earn money on consulting and receive profit from this, which, of course, will go to Ukrenergo's income, solved both of these problems. But then on the agenda was the launch of the European model of the electricity market, and I objectively understood that I, as the ideologist of this process, would not have enough time to raise another direction.
We returned to the idea of creating a subsidiary company after we encountered very interesting moments in the process of launching market processes. For example, the program to ensure the functioning of the market - the Market management system (MMS) platform - had to change along with the changes in the Market Rules. And then we saw how dearly the developer-copyright holder of the software evaluates every, even small, revision associated with changes in the regulatory framework. And they were enough for MMS.
Finally, we were convinced of the need to create our own company after the Regulator changed the rules for distributing the capacity of interstate power transmission lines. As a result, our contractor requested UAH 22 million for the completion of the corresponding software package - the Auction Platform - under these rules. For comparison, the purchase of the software itself cost us about UAH 15 million.
Andrii Nemirovskyi told Kosatka.Media how Ukrenergo's projects will benefit the energy system and consumers. Photo: press service of Ukrenergo
- Can you name the company?
- Yes, this is the Czech company Unicorn Systems. According to our preliminary calculations, if we “write from scratch”, such a software package would cost 18 million hryvnias excluding VAT.
We discussed this situation with the Regulator and achieved the postponement of the entry into force of the rules for the allocation of capacity at the interstate intersection. A tender was announced for the creation of software for Prozorro, and we entered it with a price of 18 million hryvnias. Two companies came to participate in the competition. They did not go down in price, although the contractor only needed to finalize the program.
We then considered that both the time and the budget to create the program "from scratch" was more than enough, and decided to do it on our own. This was the first order of NEC Ukrenergo with Ukrenergo Digital Solutions.
The second was the development of the DataHub complex. Ukrenergo, according to the current legislation, is responsible for its implementation in Ukraine. We agreed with the World Bank that the implementation of such a project could cost about $ 13-14 million. The tender was announced twice, the proposals of the contractors varied in different ranges. Those who undertook to fulfil the order at a lower price did not have the necessary experience in designing such systems. As a result, we decided to create a complex ourselves.
- Usually, people who already have some experience act according to the principle “it's easier to do it yourself”. Have you encountered the IT sector somewhere?
- Don't think that software development is some kind of incomprehensible process. The performer must understand, firstly, the logic of the business processes of the customer company: what figure comes from where, what to multiply it by to reach the desired result, and what to do with it later. Software, on the one hand, facilitates and activates these processes, and on the other hand, it neutralizes the influence of the human factor on them, excluding corruption issues. The second point is the technical implementation. This requires highly qualified IT specialists.
The software required for the creation of DataHub, the Auction platform (for the distribution of the available bandwidth of interstate sections - Ed.) In Ukraine, is only needed by Ukrenergo. This is a very narrow specialization. Third-party companies go to such projects with the expectation that, in addition to paying for the creation of the program, then for many years they will receive payment for its support and other additional services. A so-called vendor lock is formed when the customer for a long time becomes dependent on the contractor company.
Although the same Auction Platform is actually a properly configured calculator, whose task is to collect participants' bids in time (received before the “closing gate” of the auction), rank them, like in Excel, depending on the bid amount, and compare them with the availability of network bandwidth. There is a possibility - we skip everyone, no - we cut off the "tail of the queue"
Yes, one could take the path of least resistance and order from a contractor. In 9 months we would have received a system that would have to be further refined, but we believe that this is an ineffective waste of the Company's time and funds.
Let me cite one more fact that confirms the correctness of our decision: for several years the support of a developer of one software that we use cost us, say, several tens of thousands of euros per year. As soon as our contractor realized that we would no longer need him very soon, in 2021 they billed for the same services in an amount that was more than three times the original cost of technical support.
- You mentioned that two orders from Ukrenergo are already in operation, as IT specialists say. And at what stage is everyone?
- We have signed contracts for three projects. This is the creation of project documentation for the Auction Platform, which I spoke about, it has already passed the stage of examination, NPC has accepted it.
There is an order for the development of software for the Auction Platform for this project documentation. Soon, there should be a test acceptance of several modules. In particular, this is the acceptance of applications from market participants, the Oschadbank interface for checking the money in accounts, integration with the client base, and more. According to our schedule in September, the platform should perform its functions.
According to DataHub, the story is both simpler and more complex at the same time. There is a different architecture and there will be about 45 different stages. We expect that the first test operations will begin on January 1, 2022.
- Are there any outside customers?
- For the next two years, we do not plan to take orders from other companies. We must ensure the replacement of all software systems at Ukrenergo.
For this year, we will take two more improvements. NEURC at the end of February approved amendments to the Market Rules. It will be necessary to revise certain old modules for controlling blocks of thermal power plants, and this will also be ordered by Ukrenergo. Perhaps a Technical Portal will appear. Therefore, I think that for 2-3 years we will be overloaded with orders from Ukrenergo.
- How big is the staff needed for such a volume of orders?
- Today we have a little more than 30 people, of which 25 are directly IT specialists. If the projects coincide in time, we plan to increase the number of staff several times.
Andrii Nemirovskyi about what made Ukrenergo develop DataHub on its own. Photo: press service of Ukrenergo
- But what about the eternal problems of state-owned companies - experienced specialists do not go to low salaries, while young people gain experience and go to the private sector?
- Yes, this is an important point. We use a project-based approach: we estimate how many man-hours need to be spent on a project, how much it will cost on the market, and for this amount, we conclude a contract with Ukrenergo. Accordingly, there is an opportunity to pay salaries competitive in the market to employees and, thus, keep them in the orbit of Ukrenergo.
- You have orders for three years. Are there any plans for a more distant future, because, as you say, Ukrenergo is your only customer in our country. Will narrow specialization play against the company?
- There are several vectors for development here. After 5 years, the contract for MMS support ends. Let's see how the contractors behave. I do not exclude that we will have to write our own version. Plus export potential. Especially in those countries where the introduction of the norms of the EU Third Energy Package at the initial stage - Georgia, for example. Here we can easily compete with the same Unicorn Systems.
- Will Ukrenergo Digital Solutions develop software for power grid infrastructure, for example, new substations?
- Substations are purchased with a certain software package from the manufacturer. It makes no sense to write something of their own for them - no one knows them better than the manufacturer. The same applies to software such as the SCADA dispatching system, where telemetry data on the state of networks is collected. 95% of this market is shared by several large international companies.
- That is, technological software is the same for all system operators?
- The core of the calculation is one, and everything else is written for a specific operator, depending on the network topology. Well, plus, in the USA the frequency is now 60 Hz, and not 50, as in our country and Europe. Otherwise, no one has come up with anything new over the past 10 years.
Markets, that is, commerce, do work differently. The structure of market ownership, the structure of types of generation, consumption, and consumption schedules are different. Accordingly, it is impossible to buy software for market management on a "plug and go" basis. A kernel that operates purely mathematically can be tricky. For example, we had Austrian software and it took a while to teach it to work according to the rules of our market.
- Do you mean problems with MMS? In specialized telegram channels, incorrect invoicing is still remembered to you ...
- When they say that MMS issues the wrong bills for the wrong amount of electricity, we must not forget that these volumes are taken from commercial metering service providers who are operators of distribution systems, more commonly speaking - regional power distribution companies.
And here a paradox arises, which we have been trying to resolve for a year and a half. The same regional power distribution company at the same time loads some data into our MMS and gives others to the market participant. They explain this by the fact that they have written billing for their clients (market participants) a long time ago, and for MMS they collect data differently.
If all the data were loaded correctly, and there were complaints about how they were calculated, then this would really be our problem. And so it's the same as filling a passenger car with diesel fuel, and then be indignant at why it does not go. It is not for nothing that the Regulator, despite numerous checks, did not write us a single act of violations, although it checked us.
I can understand the indignation of market participants when we give them one thing, and regional power distribution companies- another. The first feeling is that there are problems with the calculations. Besides, the regional power distribution companies are close, and Nemirovskyi with his MMS is far away, which means there are problems there.
Besides, the Regulator and I came to an understanding that when the Market Rules change, we need some time to adapt to the system. And after that, I don’t remember that we had any significant claims.
- We discussed the problems, let's talk about interesting things. Tell us about the DataHub project?
- This is a software package that should perform several functions:
- Collect and store commercial accounting data from every meter in the country, no matter whether digital or integral;
- Predict how much will be consumed by each meter in the future;
- Transfer regional power distribution companies data for invoicing to consumers based on forecasts of their hourly consumption.
“But if you feed it with the wrong information, DataHub will also give weird bills. What then is the advantage?
“This is where digital magic begins. First, it will contain data on consumers for a fairly long period. They will take into account how much, for example, an apartment consumes during the heating season, how much in summer, how much at night, how much during the day, and many other factors. All these statistics will be superimposed on the formulas, and as a result, we will be able to calculate how much a two-room apartment with three people living in it consumes on average in a particular month. If at the next reading of indicators from the counter it turns out that the forecast data differ from the actual, the payment of the difference will be transferred to the next month. That is if we predicted that your apartment will consume 500 kWh in 5 months, and the meter shows only 490 kWh, then the payment for the difference of 10 kWh will go towards the next month.
- Will it work out like in the gas market when the population is offered to pay for the predicted capacity of the pipe, and people demand to pay after the fact?
- I don’t want to disappoint you, but no one pays after the fact, this is manipulation. The consumer pays for gas delivery according to the volumes of the previous heating season.
By the way, we had an idea for a joint DataHub with gas workers. I do not know at what stage this project is now, but from the point of view of the state, it would be the most correct option.
- Having on hand all the information on light and gas, you would not need to seize the telephone, telegraph and bank ...
- I don't see anything wrong with that (smiles). Today, the difference in indicators given by the population of regional power distribution companies are colossal in different regions. And I have no answer to the question of why a two-room apartment in the Ternopil region consumes noticeably more electricity than an apartment of the same size in Kyiv. It is impossible to analyze now: comparing only two apartments is unrepresentative, comparing the general indicators of regions - a different number of apartments of the same square footage. And DataHub, accumulating information from all over the country, would make all these manipulations explicit.
Implementing a unified metering system will not be easy even compared to the opening of the electricity market. We will have to significantly change the legislation and regulatory framework.
Ukrenergo studied the experience of DataHub implementation and operation in other countries. Photo: press service of Ukrenergo
- Aren't you afraid of accusations of monopolizing the market, collecting such an array of data on consumers?
- We are not talking about a monopoly, since the same providers of commercial accounting services will collect and verify the primary data. The only difference is that now they provide us with a single figure for the region, and in the future, they will break it down for all consumers. And then it will be immediately clear where the numbers were accidentally mistaken once, and where they have been systematically “mistaken” for many years. Not everyone will agree with this, there will be many conflicts, the road will not be easy.
This is another reason for the creation of Ukrenergo Digital Solutions - changes in the DataHub functionality will be enough for a third-party contractor to make the project three times more expensive.
- Are there examples of effective work of DataHub in other countries, and is their experience useful for us?
- The third version of such a complex is now working in Denmark. They wrote and launched the first 10 years ago, but it, as they say, “did not take off” due to problems with the regulatory base. Tens of millions of euros were spent on the completion of the second, for some time it worked for them. In the end, they decided for themselves to write a third option by local companies.
Moreover, a consortium of system operators is now being created in Europe, guaranteeing common accounting rules, and all countries are "thrown off" on a common DataHub - their integration is so deep. It would be interesting to participate, but with our level of market development, we can only stand close by.
While we are trying to just use the best from the European experience - our model is close to the Danish one. We looked at the Polish version, but it does not do half of what we need and costs about 60 million euros. Besides, we are related to Denmark by the fact that not every apartment has an automated meter, so the conditions are quite similar.
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