Mathematical Modeling of the Heat Energy Market on a Single Heat Supplier Basis

Abstract

Organizational models of the heat energy market on a Single Heat Supplier basis (SHS) operating in free (liberalized) and regulated tariff environments are considered. An equilibrium mathematical model is proposed for the liberalized tariff setting conditions based on a microeconomic monopolistic market model. This mathematical model allows for taking into account energy production and transportation costs as part of a single economic criterion and to determine the supply-and-demand equilibrium for heat energy. A regulated heat energy market model on the SHS basis considers an option of a tariff setting for consumers of the housing and utility sector at the level of average total costs and on the demand basis for industrial consumers. Hydraulic circuit theory models and methods, as well as basic microeconomic provisions, are adopted as a scientific and methodological basis describing the proposed mathematical models. To solve the energy supply and demand equilibrium problem, an algorithm is developed for both energy tariff options based on univariate relaxation using redundant design schemes and simple iteration. The developed mathematical models fully reflect the current “rules of the game” between heat energy producers and consumers and allow a maximum consideration for the interests of all participants of the heat supply process under physical and engineering constraints on heat energy sources and heat networks. By means of the developed mathematical models, practical studies are carried out on the effect of the adopted heat energy price calculation method on both the market supply-and-demand equilibrium and on the main technical and economic characteristics of the real heat supply system of the city of Angarsk. Technical and economic assessments performed according to the indicated tariffs make it possible to conclude that the lack of regulation will lead to an uncontrolled rise in prices for heat energy for consumers and gaining of abnormal profits by energy suppliers.