Strategic investment for district heating systems participating in energy and reserve markets using heat flexibility

Jin Tan, Qiuwei Wu, Menglin Zhang

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    Abstract

    The flexibility of district heating systems can be utilized to provide ancillary services for electric power systems and hence the investors can make profits by taking advantage of the arbitrage in multiple markets. This paper proposes a strategic investment scheme for a district heating system participating in both electricity energy and reserve markets, which enables the enhanced investment decisions for the installation of combined heat and power units, heat pumps, and thermal energy storage. A new business model is proposed for the district heating system that acts as a prosumer participating in energy and reserve markets, where the flexibility region of the district heating system is particularly modeled to ensure the feasibility of deployed reserves. The strategic behavior is modeled as a bi-level optimization problem. The upper-level problem determines the capacities and optimal offering/bidding strategies of district heating system, while the lower-level problem represents the energy and reserve market clearing over a set of representative days. The bi-level model is converted into a single-level mathematical program with equilibrium constraints using Karush-Kuhn-Tucker optimality conditions, and then reformulated as a mixed-integer linear problem by linearizing the nonlinear terms. Simulation results demonstrate that the total investment and operational costs of the district heating system are reduced by strategically offering in reserve market and the investor prefers to invest in thermal energy storage to shave peak heat load and combined heat and power units to increase the district heating system's flexibility other than heat pumps. The effectiveness of the flexibility model of the district heating system for feasible reserve deployment is also verified.
    Original languageEnglish
    Article number107819
    JournalInternational Journal of Electrical Power and Energy Systems
    Volume137
    Number of pages11
    ISSN0142-0615
    DOIs
    Publication statusPublished - 2022

    Keywords

    • Bi-level optimization problem
    • District heating system
    • Energy and reserve markets
    • Flexibility
    • Strategic investment

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