Open district heating for Espoo city with marginal cost based pricing

We present the concept for an open district heating market for cities with hourly marginal cost based pricing, using the Finnish city of Espoo (265 000 inhabitants) as example. District heating (DH) with highly efficient Combined Heat and Power (CHP) production covers about 90% of heating in larger cities in Finland. We created a model with an hourly resolution, where the power plants are dispatched in the cost optimal order according to representative fuel prices and electricity spot market prices. We explored the impacts of external producers on the system operation and possible system cost savings induced by allowing external producers to provide their waste heat to the network, simulated by 20 MW waste heat production of a large metro and shopping centre. Similarly, the impacts of a large solar heat plant (5 MW) were simulated. Our results demonstrate that open heat market could be beneficial for all parties and that significant cost and fuel savings are possible with mutually beneficial business models.