Optimizing Market Engagement: Strategic Models for District Heating Companies’ Participation in Electricity Markets

Abstract

District heating companies in Sweden are presented with opportunities to participate in newer electricity markets beyond the spot market, such as intraday and ancillary markets. However, navigating these markets requires advanced and complex strategies due to the varying market rules, market timings, and operational constraints of combined heat and power units. This thesis develops a flexible mixed-integer linear programming model to optimize multi-market participation for district heating companies. The model integrates the market rules and all possible operational constraints to determine profit-maximizing strategies across electricity markets. Simulations using historical data showed that there is great value in participating in one additional ancillary market, with increases in profit ranging from 35% to 1100% depending on season. We also noticed that participation in more than two to three markets yields less profit increase, but on the other hand an increased complexity for daily operations in the district heating companies, suggesting that two to three markets is a balanced amount of participation. Since the technical qualifications for the ancillary markets are tough, many district heating companies might not have the opportunity to participate in more than one or two such markets, which strengthens this result. A comparison with Utilifeed’s baseline model highlights the accuracy of our model and the added value of incorporating it in Utilifeed’s model. The results show the importance of enabling district heating companies to navigate the complexity of multi-market participation, improving profitability while supporting the grid balancing.