Learning and Competitive Bevaviour in District Heating Networks

Abstract

To decrease the dependence on fossil fuels and strive for a more sustainable heat provision in the Netherlands, district heating is a solution. Although district heating networks are not novel, the Dutch ministry of Economic affairs desires a change in the district heating sector: ‘open’ district heating networks in which competition between multiple heat producers is introduced. In order to allow access for multiple (new) heat producers and fair competition a suitable market design is required. An agent-based model of a competitive market design is created to explore how multiple heat producers and greenhouse owners (as consumers) will behave, learn and adapt in open district heating networks. Results shows that in an open district heating network with insufficient supply and elastic demand, strategic behaviour of greenhouse owners prevents producers from exercising their market power and the ability to drive market prices up. However, this behaviour is only possible in theory since in an actual district heating network, producers will respond aggressively on strategic behaviour of greenhouse owners to prevent them to influence losses in profits for producers.