Mikhail Lifshitz: Everything that we produce today is innovation

Mikhail Lifshitz: Everything that we produce today is innovation

Almost three years ago, when the term “digitalization” was still perceived as a neologism in the Russian business lexicon, and the mass introduction of digital services, mainly imported ones, was just beginning in our domestic industry, the ROTEC JSC advancement – the Predictive Analytics and Remote Monitoring System PRANA – was registered in the Unified Register of Russian Programs.

15 Nikoloyamskaya St., Moscow, 109240, Russia
+7 (495) 644-34-60
12 February 2020

Almost three years ago, when the term “digitalization” was still perceived as a neologism in the Russian business lexicon, and the mass introduction of digital services, mainly imported ones, was just beginning in our domestic industry, the ROTEC JSC advancement – the Predictive Analytics and Remote Monitoring System PRANA – was registered in the Unified Register of Russian Programs. This is an industrial IoT solution that was far ahead of the analogues from world brands that were functionally and technologically available on the market at that time. In 2019, ROTEC launched another new product on the market, once again confirming the company’s status as one of the leading players on the high-tech power equipment market. Umnpro talks with Mikhail Lifshitz, Chairman of the Board of Directors of ROTEC JSC and Ural Turbine Works JSC, Honored Mechanical Engineer of the Russian Federation, about the market’s emerging trends, the new energy paradigm, and the future plans of ROTEC.


Svetlana Bakardzhieva,

Dmitry Tonishev

Common sense is the most viable paradigm

– You recently mentioned a new energy paradigm in your column in Forbes magazine, which is manifested, in particular, in the global trend of moving away from global energy systems and choosing local energy sources. The domestic energy industry seems to be trying to fit into this paradigm, but in practice it looks like “one step forward and two steps back,” at least judging by the pessimistic expert comments about the law on microgeneration being adopted…

All of this is actually related to common sense – a crucial yet basic concept. Life-tested: any attempt to unify the world leads either to the creation of empires, if we’re considering the political aspect, or to the emergence of monopolies, if we’re talking about business. Neither, as history shows, is long-lived. The well-known step-by-step consolidation of generation in the energy industry was carried out in a specific, rather short historical period and was linked to the technological mode existing at the time that caused this consolidation. There were few generating sources, so it was advisable to concentrate the industry. The logic is clear: the larger the unit, the lower the costs. Today, the technological mode is changing, the efficiency of small generating systems is increasing, and digital services and tools have emerged. And now, from the standpoint of common sense, we can say that it is not necessary to deliver energy from afar if it can be received directly at the place of consumption without high costs.

However, there are always those who want to fight the common sense, and for the time being, they’re doing it with varying degrees of success. But in the end, this only leads to reason winning a little later. In the recent history of the Russian energy industry, there’s an illustrative example of the senselessness of such a struggle – the period of the first CDA (capacity supply agreement) (a subsidy system that guarantees a return on investment in the construction of new power units). It was then that new generating facilities with a total power of 30 gigawatts with fairly modern combined-cycle gas technology were built in a short period of time. And in the end, the consumer paid for it all. At the same time, industrial consumers brought roughly 20 gigawatts of gas-piston and diesel units to Russia without government subsidies, guided by common sense alone. They can be used at any facility – from greenhouses to production shops or shopping centers. And thereby to eliminate their dependence on power grids and produce their own power-supply network. These non-networked installations created in an unregulated zone are consumer-friendly. So, common sense does its job one way or another.

Therefore, if we’re talking about distributed generation, renewable or non-renewable energy, all of this will be used where it is rational. Today, accessibility has become a key concept. What’s rational is what’s available. Here's an analogy: 20 years ago, household air-conditioning was not available to most apartment owners, and only very few citizens had air-conditioners at home. Today, the situation is reversed. And the same thing is happening with generation.

– But there is a fundamental difference: the generation equipment is high-tech. For example, it is enough to recall how long it took for the NPO Saturn, which is part of UEC, to develop production on the basis of GTU aircraft motors for industrial and household consumers. For a very long time, nothing worked out in terms of an acceptable price-quality relationship.

This is the natural course of business. A high-tech product adapting to new operating conditions requires considerable time. After all, an aircraft motor used for its intended purpose is put into repair long before its wear becomes threatening. And when they begin to "ground" the motor, as practiced by manufacturers of aircraft motors around the world incidentally, including Rolls-Royce and Pratt & Whitney, its operating mode becomes completely different. Let’s take temperature conditions, for example. When it is minus 50 Celsius overboard during the flight of an airplane, the issue of motor cooling during operation is not the most relevant. If you look at the compressor blades, the airplane only has problems in takeoff mode, and the unit does not need flushing. Dust and dirt fall on the compressor blades of a "grounded" GTU, and we must somehow deal with this. And the GTU isn’t tasked with withdrawing the motor from service long before the first sign of problems. And so on. In general, before the new, ground-based use of motors, no one even knew these signs. So a fairly long path, at first glance, is normal. And now "Saturn" is producing large quantities of these units. And other companies that are part of UEC are also supplying them, while the revenue from these sales is comparable to that received from fulfilling orders for aircraft motors.

As for service, the service of an industrial large gas turbine is always expensive. On average, 10% of its total cost is spent on maintenance every year. In fact, all of today’s manufacturer earnings are derived from this 10 percent. And it’s the same throughout the world: competing market players are in the low-profitability zone when selling units, and their main profit comes from after-sales service.

And the conservatives have become innovators

– Today, the transition to new technologies in equipment and IT infrastructure is on the agenda of the energy sector, as well as that of the entire domestic industry. In your view, what are the main restraining factors for us in the process of intensive energy upgrading, in addition to the sanctions regime? And to what extent can they be eliminated?

I don’t agree with the assertion that sanctions significantly hinder upgrading processes. Our purely-internal problems, including the very disorder of the mind mentioned by Bulgakov's Professor Preobrazhensky, are much more significant. The process of customer consolidation – both generating and grid companies – seems endless. The Russian energy industry now has several major players that account for up to 80% of the total market, while the remaining 20% is occupied by all of the other players. And the larger the structure, the more inert it becomes, making the acceptance and adoption of innovations much more difficult. After all, one of the main motivations for the introduction of innovations is eliminating hard physical work. And most of the staff of large companies is not engaged in hard physical work. In addition, our industry’s regulatory framework is virtually written for these companies: The Ministry of Energy, when developing the next regulatory document or development program, consults and asks for the advice of those who will be responsible for their implementation, that is, the major players.

It's worth noting that in this sense, we don’t have a “special way” at all – the situation is much the same in Europe. In some ways, it’s ahead of us – from the standpoint of renewable energy, for example. But perhaps that’s a good thing: now, when introducing innovations here, we can learn from the mistakes of the pioneers and not repeat them. For example, Germany significantly “distorted” its energy balance through the massive introduction of renewable-power generation. At the same time, there are almost no industrial solar cell manufacturers in Europe. They went bankrupt en masse because there was no clear requirement for localization, and all of the batteries were supplied from China. In Russia, the power-equipment localization issue was raised very harshly. However, we haven’t escaped distortions in the other direction – there is a requirement mandating that the metal for turbine casings be Russian-made, which is a technological requirement of dubious soundness. Previously, we bought metal from suppliers in Italy, the Czech Republic and China, which is of higher-quality and cheaper. Now, we have to buy castings in Russia, where the products are still inferior in terms of quality to their imported analogues. In addition, for example, Chinese castings come with a ready-made X-ray allowing the customer to visually assess the condition and integrity of the metal, while our manufacturers don’t offer this yet.

– It seems that this is a question of the industry’s political element influencing the fight against common sense!

Of course! After all, what difference does it make whose metal the turbine casing is made of? If we were talking about buying a license in Europe, we might still have something to worry about. But here – the advancements are from our own design bureau, and the production is also our own...

– After all, metal isn't software, where you can download something malicious, right? Incidentally, predictive software is one of ROTEC’s core products. Please tell us more about how your PRANA is evolving.

Our predictive software is initially downloaded in the turbine at the plant, and the customer receives the unit with all the sensors. The only thing left to do is to connect the system. This is our important competitive advantage, as this solution makes connection cheaper, easier and more convenient.

– But must the customer have its own data center?

Not necessarily: you can connect to the PRANA system directly – we have clients who are connected to our data center.

- Is PRANA your most iconic innovative product today?

I suppose that everything we produce today is in the area of innovation. In particular, the most conservative part of our assets is the Ural Turbine Works, where we have managed to significantly diversify our portfolio over the past six or seven years. Previously, UTW was an enterprise producing turbines for СНРs – and only for Russia, since the export component for this product ended a long time ago. And if we had only remained in these positions, the plant would no longer exist. Today, we make a lot of turbines for industrial generation, turbines for waste incineration plants, and about 50% of our revenue comes from export deliveries.

– To the near abroad or also beyond?

To the near abroad. As for the rest... There’s the well-known “cost of sales” concept, denoting the cost of goods sold. And in our case, if we can sell a product in the near abroad, it will be cheaper for us than if we break into other markets. And if, for example, we start fighting for contracts in Venezuela and simultaneously let our Western competitors enter our traditional zone of presence, that would be wrong. The turbine market is quite cyclical around the world, and the cycle is now in global decline. And in this situation, the fight against the global players Siemens and General Electric in the zone of their presence may be a beautiful story, but it is unlikely to bring serious earnings right now. But successfully working in our traditional markets of Belarus, Kazakhstan, Mongolia, and Eastern Europe is an entirely reasonable and feasible task.

However, we will continue pursuing the issue of diversification. Today, UTW is also producing onboard units for nuclear propulsion ships – we supply them to the Baltic plant, and there are other plans to expand the portfolio as well. Increasing export opportunities is one of the plant’s objectives. Plus, there’s the ongoing tasks of technological upgrading, for example – the introduction of new designs for the water passage of high pressure cylinders. We’re also making new turbine retrofit packages. This is a very popular product: the industry is currently working on the CDA-2 program, which is aimed at the upgrading of existing power. Due to the scale of this program, there is a need to increase productivity. And since we’re increasing the scope of supplies to the domestic market, in order to maintain the balance, we need to increase the scope of exports.

Therefore, I repeat: even our conservative component is filled with modern innovative products.


Transparency without witch-doctors

– Let’s return to the PRANA system. In a previous interview with our publication in 2017, you said that one of the main problems with the system’s developers is to somehow stop their constant attempts to “keep polishing” the product in their pursuit of something perfect…

Creative people are always prone to flights of fancy and gushing ideas. As a rule, the developer sits on the sidelines of business issues, reveling in the creative process itself – for them, the practicality of the result isn’t important. And here, it’s important to gently steer their creative energy in the right direction.

As for the PRANA system’s problems, they boil down to a mode issue. After all, what does PRANA do? The customers who have introduced it get a completely unexpected effect: technological transparency. And what this means in practice can be considered using the example of the typical car-owner. Today, we generally understand the engineering of our car just enough to drive it without getting lost in typical road situations. And if something serious happens to the car, we go to the service center. They quickly make up a long list of supposedly-vital and very expensive jobs. And the owner can’t argue over anything – they’re out of the loop. Now imagine that you’re driving your car equipped with a PRANA-type system, and if something goes wrong, the car itself explains to you clearly and in detail through the interface where the problems occurred and what caused them. For example: that the left shoe has worn out, that you can keep driving one-and-a half thousand kilometers on the existing tires, and that it’s time to change the brake fluid. And when you arrive at the service center, you no longer pay attention to the “witch-doctor dances” of its staff, but give the employees a printout with the report received from the car. What do you think: how happy will the “witch-doctoring” repairmen be with such a client, for whom they are no longer the holders of sacred knowledge? And the client themselves suddenly becomes convinced that they no longer need third-party witch-doctor-diagnosticians. In other words, the situation has fundamentally changed for all interested parties. Now imagine that a similar story is unfolding with equipment that costs $200 mln, that is – with a power plant. Everything becomes technologically transparent there as well, and getting used to it is rather difficult, first and foremost – for the sacred-knowledge holders of the operation service and the service provider. Nor is it easy for those who suddenly become the holders of this knowledge thanks to the PRANA system. They still have lingering doubts as to its credibility. Therefore, the market promotion of the PRANA system involves the need to teach some and bring others the idea of the inevitability of the emergence of such tools, because a change in the technological mode is currently underway.

– But has it become easier to introduce the PRANA system, now that digitalization is increasingly entering the industrial environment? Or, on the contrary, has it become harder, since competitors have become more active in fighting for customers in this market segment?

Of course there’s competition. As for “easier” or “harder”... Any product, especially a high-tech one, must have stages of market promotion, stages of adapting customers to it. And with our PRANA, we’re in approximately the same place and logic where we should be. This year, we achieved a twofold increase in sales for the PRANA system. The most successful solution, in my opinion, is that we completely “disconnected it from the wrench” at a certain stage. The fact is that initially, this monitoring system was part of the service contract and predictive analytics was a tool that improves the convenience of our services, which were its operator. At a certain stage, we separated the service and the “figure,” and PRANA became an independent product or service unrelated to unit maintenance. When this service became digital and took on a life of its own, we were the first to introduce the word “predictive analytics” into the industry's lexicon. The first tender in which predictive analytics were mentioned was held by Mosenergo. And the industry saw that they could buy such a service. Other, similar offers have already appeared on the market, but we were the pioneers here – as a product, as a service, and as a phenomenon. And today, we’re still far ahead of our competitors – and not only Russian ones. Schneider Electric is, first and foremost, software for electrical engineering, and mostly of its own production. Both Siemens and GE are geared towards their own turbines. PRANA is still the only product in this series that has a significant presence in the established fleet, and it is not linked to anything. The units made by Siemens, GE, NPO Saturn, UTW, LMZ, etc., and also all types of turbines, generators, transformers, boilers and other power equipment with a variety of automatic process control systems, can be connected to PRANA. That is – it’s a multiprotocol system. When we start working with the customer, the question that arises is how long it will take us to make a model of our equipment. Our model unit is automatically built in 75 seconds. No one is as quick yet. In terms of the speed of introduction. PRANA is a complex system. It’s clear that the introduction of such a high-tech and expensive product can’t be fast. The connection and introduction service is our busiest as of today.

– Are these services your own startups or outsourcers?

These are not startups! This is the internal advancement of a large team.

– But when a large company creates a new division for an innovative product, it still works in startup mode for a while.

Not necessarily. It’s very important to lay down the correct industrial logic for the project’s development. Because startups often collapse when they switch from cooperative mode to corporate mode. This applies not only to startups, but also to any business passing through a period of growing from small to medium. And my task as a business-owner and manager is to minimize this stage and create an industrial mindset for the staff members.


2.5 thousand parameters per second

– Tell us more about how PRANA works now.

The system collects more than 2.5 thousand parameters per second from the power unit. It selects the “hot ten” from among those that could potentially lead to some kind of problem with the equipment. The system ranks this data as well. The image displayed on the monitor uses a color identification system. If the data is in the green zone, it means that they are within the normal range; color changes indicate a problem of varying degrees of depth and severity. That is, it’s possible to track emerging worrying trends from the very beginning. There’s also an integral criterion that evaluates all 2.5 thousand parameters.

The main difference between the PRANA system and our competitors’ products is that the studied signals are displayed on the monitor of a conventional monitoring system, and only then do the experts start working with them. Our system makes their work as easy as possible, because it immediately shows the ten most important currently-relevant factors. An update occurs every second. And then it can open mnemonic diagrams, indicating precisely where the problem is occurring. The projection horizon is up to three months. Over the years of the PRANA system’s existence, which has been in commercial operation since 2015, it has already prevented several major accidents, the damage from which could have amounted to tens of millions of euros as estimated by experts. It paid off in the first year of installation for two Russian customers. Now, 130 equipment units are connected to it in Russia and Kazakhstan. We are also working on bringing the system to Mongolia.

It’s based on the combined-cycle gas turbine (CCGT unit) as the most expensive equipment, but there are also small installations connected to it, for example, autonomous units in places of remote oil-and-gas fields, which can only be reached by helicopter. Consequently, if something happens to the power equipment there, production will stop.

In addition to our experts, the system also allows you to connect experts from the customer side, if required. There’s a mobile version for tablets – both for IOS and Android. For example, one of our customers has a highly-qualified specialist in compressor equipment, and he has the ability to work for the needs of all of the company’s facilities and give the necessary recommendations without leaving the office.

Even more importantly: a few months ago, we started a so-called customer-feedback log, similar to the operational log used at power plants. Now, we display information about possible problems on the customer’s equipment and see the operating personnel’s reaction. For example, we write a recommendation to wash the filters of a complex air-cleaning device and specify the timeframe for doing this, and the client company’s chief engineer sees how his staff has reacted to this. That is, it provides a double control mechanism – both on the customer side and on our side. Generally speaking, the system develops not only according to our ideas, but also in constant interaction with our customers.

The pool of our clients is also expanding. We recently started working with Rosseti. Whereas transformers and other station equipment used to be connected to our system, the first substation, more precisely, the 110-kilovolt power-supply center in Izhevsk, will be connected in the near future.

In Kazakhstan, we applied the acoustic-emission method for the first time by installing special sensors on the turbine unit’s foundation. This method makes it possible to see the origin of defects inside the concrete and prevent the appearance of cracks in the foundation at the earliest stages. No one is doing this yet – we’re the pioneers in this field.

– How has digitalization affected your company’s business model?

Thanks to the use of digital tools, the design time of the turbine was cut in half over five years. Generally speaking, we view digitalization as a tool that’s convenient in some areas, but not in others. And as one that should be used in production processes just as other tools are. We have an electronic-document flow, and our CNC machines have an extensive library of parts that can be retrieved if necessary. The designer can send a 3D model to the process engineer, who adapts it to a specific machine.

Honeycombs for both Saturn and Rolls-Royce

– How relevant is the production of in-house ionistors today? Who’s buying supercapacitors from your TEEMP subsidiary, and do they have export potential?

Yes, they’re advancing on the market, maybe more slowly than we would like, but we understand that this has to do with the changing technological mode, and our product appeared before most of the market realized how to use it. Today, the manufacturers of railway equipment are its main customer, and, for example, their introduction on locomotives as start/stop systems provides seasonal fuel savings of up to 30% on average. Transport is another segment of its use. We’re installing them on special equipment made by Sollers, on hybrid buses produced by Belarusian Belkommunmash, and we’re installing them as a frequency-controlled-converter protection system in the power industry and in oil production. So, this project is advancing, serial products are in demand.


– Please tell us about your most significant achievement in 2019 – the mastering of the production of welded honeycomb seals for turbines.

This is really our pride! ROTEC strictly follows this rule: every year, we bring a new product to the market. In 2019, these were the welded honeycomb strip and honeycomb blocks. There are only seven companies in the world that produce these products: two in the USA, one in the United Kingdom, three in China – and now our company, too. Welded honeycomb seals are a very important component of a gas turbine, whether ground- or air-based, as well as of a steam turbine or a compressor. Today, we provide this product to all domestic manufacturers of aircraft motors. And not only to them: they are also purchased from us for Rolls-Royce and GE turbines.

– And do you use Russian metal?

We use both Russian and imported metal, depending on the customer’s requirements.

– What are the advantages of this ROTEC product in comparison with similar offers from competitors? And in what areas do you still need to grow?

We did not make it our top priority to make our seals better, for example, than American ones, because they look quite simple both geometrically and materially. But due to the fact that our equipment is newer and that we used new solutions in its manufacture, including digital quality-control and other modern tools, we have better geometry – or so customers say. As for where we should push forward. Today, we not only make the honeycomb itself, we also produce finished products. And we see rather broad opportunities for their application – not only in turbines, but everywhere where high strength at a light weight is required, or where high-heat resistance and good porosity are needed. For example, in the manufacturing of compressors.

– Tell us more about your honeycomb-production equipment.

Until recently, the equipment that currently produces our honeycomb strip simply didn’t exist on the market. It was fully developed by our designers and process engineers. And here, we travelled the same path as all global manufacturers of honeycomb and finished products made of honeycomb: all of them developed and then started producing their own unique equipment that is not supplied to the market. It’s fundamentally impossible for third parties to get into the production of this product.

Power transmission without power lines

– At the end of our conversation, I’d like to briefly return to the topic of emerging trends in the global energy industry. One of these trends involves the creation of autonomous energy-storage systems. Do you think there are prospects for the widespread use of this technology in Russia?

Such systems are primarily in demand by those who depend on renewable energy sources, such as solar or wind. And when there is no sun or wind, you need to either buy power from the grid, or accumulate it if possible. This is a step towards grid-autonomy and decentralization. It’s already being implemented in subsidized renewable-energy zones, for example, in California – where the population benefits from investing in these technologies, and wall-mounted batteries are in high demand.

There are other problems here. For example, to this day, no one includes reclamation costs in the business model during the construction of a solar power plant. But they should. Nor do many people stop to consider that the overly-broad and active introduction of lithium-ion batteries could lead to dangerous consequences. One of them is a distorted energy balance in the period when these two systems, two paradigms, coexist. Germany, with both a traditional energy industry and renewable-power generation, is a good example: their modern CCGTs are stopped today because they have weak maneuverability, and they’re only using old coal blocks to compensate for the cyclicity of renewable generation.

There are very different energy-storage systems. There are hydro-accumulating, electrochemical batteries, which are traditional batteries, and then there are ones built on the use of electrolysis. Of course, energy-storage systems will change the look of the industry. Here’s an example. There’s a small company – OMC – in India, which today supplies electricity to poor villages. They bring batteries in a container and an inverter to these locales. The local population can connect a refrigerator to this device, charge their cell phones and other gadgets. Payment is made using a special card. When the battery is discharged, a message comes to the company office and a replacement is brought to the village. In other words, the arrangement is a bit like supplying our villages and cottage coops with liquefied gas in cylinders. In this case, such energy supplies are cheaper than if you put a power line there. The fact is that electricity, as a resource, has received an alternative method of transportation and storage. And, of course, this will develop according to common sense. It certainly wouldn’t be advisable to use it everywhere: if you take a megacity like Moscow or New York, they’re doomed to have large generation, because there’s a hyper-concentration of consumers. But in areas with a low-density population, with low industrial consumption (there’s only one sawmill in the entire district), these energy-production or storage systems will be introduced if the cost decreases and the availability increases.


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15 Nikoloyamskaya St., Moscow,
109240, Russia