Economic feasibility of supra-regional district heating networks: Addressing technical and economic considerations

Abstract

Various models exist for pricing heat in district heating networks, with most assuming that the heat supplier holds a natural monopoly position within the network. However, a supra-regional district heating network can break this natural monopoly, creating a new market with multiple heat suppliers. Operation strategies and thus pricing models for such structures are rare, often failing to reimburse the full costs incurred by heat suppliers and lacking sufficient control strategies. This paper introduces a novel heat pricing model in combination with an operation strategy that addresses all key aspects of operating these networks by implementing a merit-order bid price system based on levelized costs of heat, with caps and floors. In addition, it provides an analysis of these structures by applying the operational strategy and the novel pricing model to a case study. The results demonstrate that a supra-regional district heating network can be economically and technically integrated into the examined area without any limitations in temperature levels. This integration leads to reduced heat costs for some customers compared to scenarios without this network. Moreover, industrial waste heat suppliers and biomass plants experience a notable increase in their full-load hours.