Variable heat pricing to steer the flexibility of heat demand response in district heating systems

Flexibility from low-temperature district heating (LTDH) systems favors the integration of renewable energy in power systems. Flexibility from LTDH systems may be revealed and steered through dynamic pricing for heat. For the purpose of optimal heat pricing, the heat market with variable heat pricing is modeled as a Stackelberg game (i.e., with a bi-level structure). The upper-level problem of the heat provider is to maximize net profit by issuing hourly heat prices day-ahead, while the lower-level problem of heat consumers is to minimize costs by adjusting heat demand based on the dynamic price. The proposed model is tested on a groundwater-based LTDH system with one provider and three consumers. It is evaluated based on the operational cost of the heat provider and the average heat unit price for the consumers, compared to flat heat pricing.