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

Sammanfattning

District heating companies in Sweden are presented with opportunities to participatein newer electricity markets beyond the spot market, such as intraday and ancillarymarkets. However, navigating these markets requires advanced and complex strategiesdue to the varying market rules, market timings, and operational constraints ofcombined heat and power units. This thesis develops a flexible mixed-integer linearprogramming model to optimize multi-market participation for district heatingcompanies. The model integrates the market rules and all possible operational constraintsto determine profit-maximizing strategies across electricity markets. Simulationsusing historical data showed that there is great value in participating inone 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 threemarkets yields less profit increase, but on the other hand an increased complexityfor daily operations in the district heating companies, suggesting that two to threemarkets is a balanced amount of participation. Since the technical qualifications forthe ancillary markets are tough, many district heating companies might not have theopportunity to participate in more than one or two such markets, which strengthensthis result. A comparison with Utilifeed’s baseline model highlights the accuracy ofour model and the added value of incorporating it in Utilifeed’s model. The resultsshow the importance of enabling district heating companies to navigate the complexityof multi-market participation, improving profitability while supporting thegrid balancing.