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Journal of Business Economics

, Volume 85, Issue 6, pp 663–692 | Cite as

Capacity determination of ultra-long flexibility investments for district heating systems

  • Katrin SchulzEmail author
  • Brigitte Werners
Original Paper

Abstract

Energy companies with district heating systems usually operate at least one combined heat and power (CHP) plant that generates power and heat simultaneously. Trading power on the spot market, energy companies strive to realize additional revenues or cost savings. However, the needed flexible operation of the CHP plant is limited as a steady supply of district heat has to be ensured. Decoupling heat demand and supply provides further flexibility for the operation of the CHP plant and trading at the spot market. Thus, energy companies consider ultra-long flexibility investments such as heat storage to improve the profitability of their district heating system. Capacity determination of such a flexibility investment constitutes a challenge because the investment has to be integrated into an existing district heating system. Due to its uncertain long-term development, the lifetime of the investment exceeds the planning horizon. Therefore, the benefit of the investment in its remaining lifetime has to be taken into account for the investment decision. For the capacity determination of such an ultra-long flexibility investment, a step-wise structured decision process is developed: an optimization model for unit commitment within the planning horizon is expanded for capacity determination to analyze the operational deployment of the investment in combination with the existing district heating system. Regarding uncertainty, the amortization time is not restricted to the planning horizon but adapted according to the decision maker’s risk attitude in order to consider the investment’s ultra-long benefit. For the remaining lifetime, the seized investment capacities are evaluated by considering their possible future operation and adaptability. The advantage of this approach is demonstrated for a heat storage investment.

Keywords

Ultra-long investments Capacity sizing Operational and strategic planning Combined heat and power (CHP) plant 

JEL classification

C61 M11 Q41 

Notes

Acknowledgments

The authors would like to thank two anonymous referees for their valuable comments on an earlier version of this paper.

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Copyright information

© Springer-Verlag Berlin Heidelberg 2015

Authors and Affiliations

  1. 1.Chair of Operations Research and AccountingRuhr-Universität BochumBochumGermany

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