Long-Term Service Agreement in Power Systems

Panos Kouvelis, Hirofumi Matsuo, Yixuan Xiao and Quan Yuan

Foundations and Trends(R) in Technology, Information and Operations Management, 2023, vol. 16, issue 3-4, 288-303

Abstract: We study a long-term service agreement (LTSA) in a power system between an Original Equipment Manufacturer (OEM) of a conventional power generator and a utility firm. The OEM offers the LTSA to the utility firm which specifies the service fee and the maintenance interval. The utility firm dynamically chooses among different resources (conventional, renewable, or emergency) to meet energy demand. Different from traditional supply chain contracts, an LTSA contracts on a generator’s long-term production schedule (i.e., usage time and the number of starts). We characterize that the conventional generator’s optimal operating mode (i.e., on or off) follows a two-threshold policy, which shows a hysteresis phenomenon, and capture the OEM’s tradeoff between the service margin and the usage of the conventional generator in the LTSA design.

Keywords: Operations; Research (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:now:fnttom:0200000106-7

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