Pricing heat in an open heat network

Abstract

As heating forms a large share of the primary energy consumption in the Netherlands, district heating networks are regarded as an effective means to address the emissions- and renewable energy targets. In the Province of Zuid-Holland, the aim is to construct a large-scale regional open heat network that should create a more sustainable built environment. Since open heat networks are a novel phenomenon, challenges arise that relate to the organisation of this market, how heat should be priced and more specifically how to deal with the unique characteristics of transmission losses with heat. In this thesis, evaluate several conventional pricing mechanisms are evaluated and an alternative pricing mechanism including a transmission loss allocation method is developed by means of an algorithm, to investigate if it improves the market performance. This alternative pricing mechanism succeeds in allocating the transmission losses to loads on the basis of fairness, but overall fails to improve the wholesale market performance compared to other pricing mechanisms. The allocation method can be improved, depending on the desirable market outcomes, by adapting several assumptions and procedures in the algorithm.