Electricity pricing, capacity, and predictive maintenance considering reliability

Yu-Chung Tsao () and Thuy-Linh Vu
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Yu-Chung Tsao: National Taiwan University of Science and Technology
Thuy-Linh Vu: National Taiwan University of Science and Technology

Annals of Operations Research, 2023, vol. 322, issue 2, No 16, 1011 pages

Abstract: Abstract Operations and maintenance management for renewable energy (RE) projects has become increasingly important in improving energy system models’ precision. Specifically, some elements are uncertain and difficult to predict, such as temperature conditions or system reliability, and these result in more complicated RE projects. Suitable maintenance and insurance policies are vital to reduce risks for RE system operators. This paper formulates a profit model that integrates system reliability, predictive maintenance, and green insurance into electricity pricing and capacity problems. A non-linear optimization solution procedure is proposed to determine the optimal electricity price, capacity, investment plan, predictive maintenance budget, and insurance level while maximizing company profit. The theoretical results indicate that RE systems’ increased reliability decreases the insurance level. However, an increase in the insurance level decreases RE project investments. Therefore, companies can attract more investments for RE projects if RE system reliability increases while insurance costs decrease. Additionally, this work not only presents a numerical analysis with examples and a sensitivity analysis to illustrate the model, but also discusses the opportunities this work offers for managers and analysts in practice.

Keywords: Renewable energy; Pricing; Capacity; Reliability; Predictive maintenance (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s10479-023-05164-1

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