Valuation and Optimization of PHM‐Enabled Maintenance Decisions

This chapter explains a prognostics and health management (PHM)‐enabled predictive maintenance optimization approach based on real options analysis (ROA). It presents a case study applied to a single wind turbine system indicating a remaining useful life (RUL). The chapter describes how the requirements from an outcome‐ based contract are incorporated into the predictive maintenance optimization process. It discusses several future research opportunities. Outcome‐based logistics refers to a group of strategies for system support. A product service system (PSS) is a common product management approach that can include elements of outcome‐based contracting. Power purchase agreements (PPAs), also called energy performance contracting (EPC), are long‐term contracts to buy electricity from a power plant that are outcome‐based contracts that are in use in the United States and Europe. In‐situ health monitoring provides interesting opportunities for the warranty management of systems. Contract engineering includes three key elements: mechanism design, contract/firm theory and co‐design.