D5.1 Analysis of price models

Flexibility in the energy system has been studied previously but few results have been implemented in district energy (DE) pricing models. This means that pricing models are not reflecting the system costs, making them less efficient than they need to be. We have studied if and how price models (PM) of DE company can harvest flexibility. A systematic literature search with content analysis of resulting scientific peer-reviewed publications and project reports have been performed. Thereby, the different PMs which have been described in the literature have been aiming at generating knowledge about DE flexibility. Preliminary findings show that most DE grids are slow to recognise and capture flexibility that can be catalysed through end-users, thermal inertia, heat pumps, and other. Similarly, DE companies employ a marginal cost logic to determine whether flexibility should be operationalised, and often their business models and PMs are not oriented towards expressing that value logic to their customers. We identify that there is a potential for DE companies to further capitalise on flexibility in the energy system. By inclusion of flexibility incentives in PMs, a win-win can be established by cutting operational costs for the DE provider and energy consumption of the end-user. This deliverable also includes a case study, where different PMs have been analysed to see how well they capture flexibility in buildings where both heat pumps and district heating are available as heat technologies. To do this, we apply a demand-side cost optimisation for different PMs, based on real data collected from buildings in two of the Swedish demo-sites, Borås and Eskilstuna. Furthermore, we compare the optimisation results to a baseline scenario which uses the heat pump as baseload for the building’s heating demand. Finally, the changes in energy use, economic savings and profits, and carbon emissions are analysed. The general findings and conclusions from the study imply that higher competitiveness between district heating and heat pump operations with a high temporal resolution reflecting the real costs of heat production would enable flexibility for both the power system and the district heating network and could also lead to lower costs for end-users as well as larger profits for DE companies. Reductions in carbon emissions could be achieved depending on the emission factor of the fuel used in the marginal heat production unit, it would however be interesting to study how a variable electricity emission factor could affect these results.