Research Interests: Sustainable operations; energy market, battery control, risk management, data-driven decision making
Working Papers
1. Cost-Saving Synergy: Energy Stacking in Battery Energy Storage Systems (with Roman Kapuscinski and John Silberholz). Forthcoming in Management Science
Despite the significant potential of battery energy storage systems (BESS) for electrical grids, standalone BESS usage is often not economical due to high upfront costs and limited lifespans. Energy stacking—using a single BESS for multiple services—has garnered interest to enhance profitability. However, key questions remain, such as the mechanism by which stacking improves profitability and by how much. This paper analytically demonstrates a cost-saving synergy in stacking, where performing two services simultaneously costs less than doing each individually, leading to higher profits. We also identify grid and market conditions that maximize this synergy and establish a theoretical upper bound, showing that simultaneous stacking can nearly double the profit of the best standalone service.
2. Dynamic Operational versus Financial Hedging for a Risk-Averse Firm (with Roman Kapuscinski and Wanshan Zhu). Under review at Management Science
A multinational risk-averse newsvendor produces goods domestically and sells both locally and overseas, facing risks from foreign exchange (FX) rates and uncertain demand. This paper examines the effectiveness of two hedging strategies: financial hedging (e.g., futures, forwards) and operational hedging, which involves flexible production and transshipping between domestic and overseas markets. Using a present certainty equivalent value (PCEV) framework, we analyze optimal dynamic hedging decisions under these risks. Our findings reveal that simple futures contracts can be optimal for financial hedging, and we explore how demand and FX risks influence capacity decisions. While financial and operational hedging often act as substitutes, they can be complementary when the domestic market share is high. Numerical studies suggest that operational hedging generally outperforms financial hedging, but combining both strategies can be particularly beneficial in certain scenarios.
3. Dynamic Valuation of A Battery with Performance Degradation (with Roman Kapuscinski and John Silberholz). Targeted for Operations Research, paper available upon request
Quantifying battery operating costs is crucial for profitability in the battery industry but remains challenging due to two types of performance degradation: capacity and energy efficiency. An effective policy must balance immediate revenue from intensive usage with future benefits from economical use. Due to the complexities of modeling these trade-offs, much existing research relies on simplistic heuristics, like amortizing replacement costs or ignoring operating costs without rigorous analysis. This paper presents an analytical study of an optimal dynamic policy considering both degradation types. We find that while common heuristics may be near-optimal in cases of capacity degradation, they significantly reduce profits when efficiency degradation is involved. We show that, in a general setting where a battery experiences both types of degradation, the optimal policy exhibits a U-shaped (high-low-high) pattern.
Publication
4. A Recommending System for Mobile Games Using the Dynamic Nonparametric Model (with Jinkyoo Park, Jeonghye Choi, and Seung Bum Soh), 2023. Journal of Business Research
5. Count-Based Change Point Detection via Multi-Output Log-Gaussian Cox Processes (with Jinkyoo Park), 2020. IISE Transactions (formerly IIE Transactions)
Work In Progress
6. Joint Valuation of a Battery Portfolio: Benefits of Heterogeneity (with Roman Kapuscinski and John Silberholz)
7. Improving the Scheduling of Energy Storage System: Case of South Korean Energy Market (with Jinkyoo Park and Hyun-Soo Sim)
Joonho Bae 