In order to reduce CO2 emission, district heat networks and carbon-neutral heat energy production are being developed in the Netherlands. This resulted in an increasing amount of district heating systems (DHS) in the horticulture areas. A DHS in a region called the ”B3-Hoek” connects multiple producers with horticulture companies in a single-buyer market model with long term bilateral contracts. This market model has some undesirable aspects that contribute to the willingness of introducing a short term heat market model in the system. However, such a short term market is still prone to market failures, if producers have considerable market power. The aim of this research is to investigate how a short term market can be designed for a DHS in the Netherlands, how producers and large consumers behave on a short term market and how this affects the performance of the market. An interactive simulation of a short term heat market was created, based on the DHS in the B3-Hoek to investigate this.
The findings in this research give a conceptual model of the new market design and it showt that in a short term heat market prices will converge to marginal cost levels when market conditions are not tight. There is a balance of market power between the producers and the horticulture companies collectively. The results of short term market will not be comparable to the case of a perfectly competitive market due to Cournot competitive behaviour, but they can still be considered desirable for both horticulture companies and producers.