Pricing in Integrated Heat and Power Markets

TL;DR

This paper proposes a two-step method for calculating optimal dispatch and prices in integrated heat and power markets, ensuring cost recovery and revenue adequacy, which addresses a key challenge in energy market integration.

Contribution

It introduces a novel two-step approach that guarantees cost recovery and revenue adequacy in integrated heat and power market pricing.

Findings

The methodology ensures cost recovery for both heat and power.

It guarantees revenue-adequacy in the integrated market.

The approach is applicable to convex optimization models of energy markets.

Abstract

There is a growing interest in the integration of energy infrastructures to increase systems' flexibility and reduce operational costs. The most studied case is the synergy between electric and heating networks. Even though integrated heat and power markets can be described by a convex optimization problem, prices derived from dual values do not guarantee cost recovery. In this work, a two-step approach is presented for the calculation of the optimal energy dispatch and prices. The proposed methodology guarantees cost-recovery for each of the energy vectors and revenue-adequacy for the integrated market.