Long-Term Service Agreement in Power Systems
By Panos Kouvelis, Olin Business School, Washington University in St. Louis, USA, kouvelis@wustl.edu | Hirofumi Matsuo, Institute for International Strategy, Tokyo International University, Japan, hmatsuo@tiu.ac.jp | Yixuan Xiao, Carson College of Business, Washington State University, USA, yixuan.xiao@wsu.edu | Quan Yuan, School of Management, Zhejiang University, China, quanyuan@zju.edu.cn
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.
Frontiers in Supply Chain Finance and Risk Management
This monograph contains eight thought-leading contributions on various topics related to supply chain finance and risk management: “Disruption Mitigation and Pricing Flexibility” by Oben Ceryan and Florian Lücker. “Optimal Newsvendor IRM with Downside Risk” by Paolo Guiotto and Andrea Roncoroni. “Competitive Forward and Spot Trading Under Yield Uncertainty” by Lusheng Shao, Derui Wang, and Xiaole Wu. “The Impact of Commodity Price Uncertainty on the Economic Value of Waste-to-Energy Conversion in Agricultural Processing” by Bin Li, Onur Boyabatlı, and Buket Avcı. “Corporate Renewable Procurement” by Selvaprabu Nadarajah. “Blockchain-Based Digital Payment Obligations for Trade Finance” by Jing Hou, Burak Kazaz, and Fasheng Xu. “Long-term Service Agreement in Power Systems” by Panos Kouvelis, Hirofumi Matsuo, Yixuan Xiao, and Quan Yuan. “The Bullwhip Effect in Servicized Manufacturers” by Jiang Shenyang, Jiang Zhibin, Niu Yimeng, and Wu Jing.
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Foundations and Trends® in Technology, Information and Operations Management, Volume 16, Issue 3-4 Special Issue: Frontiers in Supply Chain Finance and Risk Management
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