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Long-Term Service Agreement in Power Systems

Author

Listed:
  • Panos Kouvelis
  • Hirofumi Matsuo
  • Yixuan Xiao
  • Quan Yuan

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.

Suggested Citation

  • Panos Kouvelis & Hirofumi Matsuo & Yixuan Xiao & Quan Yuan, 2023. "Long-Term Service Agreement in Power Systems," Foundations and Trends(R) in Technology, Information and Operations Management, now publishers, vol. 16(3-4), pages 288-303, July.
    • Handle: RePEc:now:fnttom:0200000106-7
    DOI: 10.1561/0200000106-7
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    References listed on IDEAS

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