IE Department Seminar Harvesting Solar Power Foments Prices in a Vicious Cycle
Tarih:
14:00-15:00, Friday December 27, 2019 @A329
Abstract: Solar power generation by consumers is growing but not necessarily benefiting the utility (power generation and transmission) firms. Reducing the power demand, it hinders the coverage of utility costs with reasonable retail electricity prices. Utilities in practice tend to raise retail prices, unintentionally reducing both affordability and demand of electricity, and are hence said to be caught in a utility death spiral. The reduced affordability adversely affects financially challenged consumers that cannot invest into solar power. Environmentally desirable solar power paradoxically can be socially undesirable. Facing this paradox, market regulators are challenged to keep retail prices low within the current pricing mechanisms. We provide a novel revenue maximization formulation for a regulated utility and reveal the interaction between optimal retail price increases and growing solar power adoption. Iterating with this interaction, we analytically explain when and how the utility death spiral occurs. We consider new pricing mechanisms that involve a buyback price and a subscription fee paid only by harvesters. The fee mitigates the optimal retail price increase by allowing for the coverage of fixed costs in part. We find appropriate values for the buyback price and subscription fee to respectively slow or stop the death spiral. These mechanisms and values are important not only for the utility and its regulator, but also for all electricity consumers.
Authors: Fariba F. Mamaghani and Metin Çakanyıldırım
Bio: Metin Çakanyıldırım is a Professor of Operations Management at School of Management at University of Texas at Dallas. He focuses on making good decisions in the presence of uncertainty. He employs mathematical models to formulate problems arising in real-life contexts and then uses optimization methods or heuristics to come up with decisions. He has investigated problems from various contexts: capacity, inventory management, transshipments, contracts, forecasting and cargo overbooking.
Dr. Çakanyıldırım teaches courses on Managing Energy; Demand and Revenue Management; Production Management; Operations Management; Supply Chain Management; Advanced Supply Networks. He is the president of INFORMS-DFW since 2010. He is the Vice President of Education and the Associate Executive Director of the POM Society. He participates in GARP (Global Association for Risk Professionals), CSCMP (Council of Supply Chain Management Professionals), ISM (Institute of Supply Management). He is the associate editor for MSOM journal and senior editor for the POM journal, and served/serving on the editorial board of other journals.
Dr. Çakanyıldırım received B.S. in Industrial Engineering from Bilkent University, Turkey; M.S. in Management Sciences from University of Waterloo, Canada; Ph.D. in Operations Research from Cornell University, USA. He has best published paper awards from Naval Research Logistics and IIE Transactions. He has received Wickham Skinner early career research award from POMS.