Heat Energy Market Research Articles

Методичні аспекти ціноутворення на ринках теплової енергії за аукціонного підходу

The development of competition in the heat energy markets with main heating networks is possible on the basis of the organization of unilateral heat auctions between heat producers. A prerequisite for opening competition in the heat energy markets is the separation of heat generation and heat networks, as well as the provision of regulated access to heat networks for independent producers. In terms of time segmentation, it is advisable to introduce: annual auctions, where basic heat needs are being contracted; monthly auctions – for peak needs, and daily auctions – for hourly imbalances. The article proposes organizational and technological regulations for conducting annual heat auctions, which should cover 80–90% of heat needs. Heat auctions should function according to the declared pricing method, where the producers who are the auction winners receive income for the contracted volumes of heat generation at a given price, while consumers pay a single weighted average price. Heat auctions operate under centralized dispatching, which provides for the coordination of physical and commercial heat energy flows, taking into account the technical specifics of heat networks. The article substantiates variants of economic and mathematical models of auction pricing in the heat energy market with different configurations of heat networks. As such a configuration, are considered heating networks with: 1) unlimited flow connections; 2) insulated heat producers; 3) system restrictions on throughput capacities within the heating area; 4) one-way and 5) two-way flows between adjacent heating areas. Establishment of a fair price for heat energy is reduced to solving the function of minimizing the weighted average price of heat energy for consumers under the following conditions: a) full satisfaction of consumer demand for thermal energy; b) technical capabilities of heat generation; c) connections and throughput capacities of heating networks within the heating area; d) directions of flows and capacity between adjacent heating areas. Each heat network represents a unique configuration of these conditions, therefore, the solution of the economic and mathematical problem of setting the auction price for heat energy will be different in each local heat market. Approbation of the proposed approach proves that with a large number of regulatory and systemic restrictions within the heating area, the price of thermal energy will increase, while bilateral flows of thermal energy between adjacent heating areas lead to a decrease in the price of thermal energy. The proposed methodological aspects of auction pricing for thermal energy should be introduced in large and medium-sized settlements with trunk networks, which will allow independent heat producers who work on renewable energy sources or have excess and waste heat to integrate into the market, contributing to the decarbonization of the city and the country as a whole.

LIBERALIZATION OF RELATIONS IN THE RUSSIAN FEDERATION HEAT SUPPLY FIELD: BACKGROUND, FIRST RESULTS AND TARIFF CONSEQUENCES

The paper considers prerequisites and consequences analysis of the relations in the heat supply field liberalization process of taking place in the Russian Federation. The article is dedicated to theoretical and practical background for liberalization, which determine the possibility and feasibility of a radical change in the system of relations between participants in the heat energy markets. The authors considered the current forms of using competition mechanisms in heat markets: competition between centralized and decentralized heat supply, competition between heat producers, competition for admission to market entry, quasi-competition based on incentive regulation. The article examines Russian instruments for liberalizing heat energy markets. The authors identified the features of the new (target) model of the heat energy market formation and changes in the spheres of responsibility of its individual subjects, including the strengthening of the institution of unified heat supply organizations. Separately, the authors assessed the price (tariff) consequences of the transition to pricing for thermal energy using the “no more expensive than alternative sources of heat” method. This method provides for setting a contractual price for heat energy not higher than a ceiling level that the regulator approves based on the cost of heat supply from an “alternative” heat source (boiler house). The authors investigated changes in prices (tariffs) for heat energy for consumers in municipalities pioneering the transition to price zones of heat supply. The article reveals that the establishment of a tariff by the "alternative boiler house" method did not effect to a sharp rise in prices (tariffs) for consumers. This is based on the application of measures provided for by legislation. In conclusion, the authors made recommendations on further expanding the composition of price zones for heat supply.

Механізм функціонування та державного регулювання регіональних ринків теплоенергії

The article is aimed at studying the current mechanism of the State regulation in the field of heat supply, identifying directions for its reform and developing proposals as to the formation of regional heat energy markets. To achieve this aim, the existing procedure for regulating economic activity in the field of heat supply, the mechanisms of functioning of electricity and natural gas markets are analyzed, the principles of functioning of regional heat energy markets are formulated. The study analyzes the content of the concept of «energy carriers market» (on the example of electric and heat energy and natural gas), as well as the basic principles of the functioning of national and regional markets of heat energy carriers. The current mechanism of the State regulation of economic activity in the field of heat supply and natural gas and electricity markets is examined. The direction of improving the regulation of economic activity in the field of heat supply is substantiated – further decentralization of managerial functions and concentration of powers at the level of local communities; creation of regional heat energy markets, which should be in the operational and strategic management of local self-government. The composition of instruments of the State regulation of the regional heat energy market is proposed. The result of the study is the development of proposals for the classification and composition of such groups of the State regulation instruments: regulatory (licensing, establishment of mandatory rules of economic activity, approval of standard forms of contracts, etc.), tariff (approval of the methodology for substantiating the level of tariffs), financial (provision of preferential economic conditions), and monitoring. Prospects for further research on this topic are: development of a model of the regional heat energy market along with a road-map for its construction; development of methodological provision necessary for the functioning of the regional heat energy market; substantiation of directions for improving domestic legislation on the regulation of economic activity in the field of heat supply.

Organization of investment support for entrepreneurial activity in energy construction

Process of reforming and forming a new model of the heat energy market in Russia is associated with the increasing role of interaction between private business and the state in the development of Russian energy sector and achieving energy security. Due to the long overdue need to attract private investment to the industry, the issues of investing activities financing of heat supply organizations are relevant and of great research interest. The article analyzes the effectiveness of the state policy on attracting private investment in the heat supply industry and builds a model for optimizing sources of financing for investment activities of heat supply enterprises.

Problems and trends of legal regulation of the heat energy market in the Russian Federation and legal support of competition in the heat energy market

Despite the seemingly active development of legal regulation of the heat energy market, there are gaps and contradictions in the legal regulation, in the legal provision of competition in the heat energy market, which draw the attention of representatives of the expert community and government agencies. A significant number of legal disputes in the field of heat supply and acts of the constitutional Court of the Russian Federation also indicate problems in legal regulation. Based on the results of legal analysis of legal regulation and law enforcement practice, proposals were made to introduce the following provisions into the model of legal regulation: maintaining a register of companies that sell heat energy, including data on the financial, technological, and personnel status; licensing the activities of companies that sell heat energy; licensing of companies that provide services to heat networks and heat supply facilities, including heat‑receiving equipment for consumers; introduction of a system for intelligent accounting of heat consumption.

MATHEMATICAL MODELING AND OPTIMIZATION OF THE MONOPOLY HEATING MARKET

District heating plays a major role in many countries. Unlike markets of natural gas and electric power, district heating systems are local markets and in most cases, they organized as natural monopoly markets. This article examines the several variants for the formation of prices for household consumers on the heat energy market. For the conditions liberalized economy proposed a method of forming the price on the heat energy based on the search for market equilibrium of supply and demand on the monopoly heating market. For the conditions of the regulated heating market, the variants of forming the price of heat energy on the basis of average total and marginal costs are considered. To perform calculations, a mathematical model of the monopoly heating market is developed. It is based on the classical model of monopoly, basic models of the theory of hydraulic circuits and the theory of industrial markets and allows us to take into account the economic interests of the parties in fulfillment of physical and technical conditions and restrictions on the heat sources and heat networks. Practical calculations with help developed mathematical models were made for a real district heating system.Keywords: District Heating, Monopoly, Regulation, Mathematical Modeling, Optimization, Analysis.JEL Classifications: L43, L51, L95DOI: https://doi.org/10.32479/ijeep.9284

Economic potential for substitution of fossil fuels with liquefied biomethane in Swedish iron and steel industry – Synergy and competition with other sectors

In Sweden, the iron and steel industry (ISI) is a major source of greenhouse gas (GHG) emissions. Most of the emissions result from the use of fossil reducing agents. Nevertheless, the use of fossil fuels for other purposes must also be eliminated in order to reach the Swedish emissions reduction targets. In this study, we investigate the possibility to replace fossil gaseous and liquid fuels used for heating in the ISI, with liquefied biomethane (LBG) produced through gasification of forest residues. We hypothesize that such utilization of fuels in the Swedish ISI is insufficient to independently drive the development of large-scale LBG production, and that other sectors demanding LBG, e.g., for transportation, can be expected to influence the economic potential for the ISI to switch to LBG. The paper investigates how demand for LBG from other sectors can contribute to, or prevent, a phase-out of fossil fuels used for heating purposes in the ISI under different future energy market scenarios, with additional analysis of the impact of a CO2 emissions charge. A geographically explicit cost-minimizing biofuel production localization model is combined with heat integration and energy market scenario analysis. The results show that from a set of possible future energy market scenarios, none yielded more than a 9% replacement of fossil fuels used for heating purposes in the ISI, and only when there was also a demand for LBG from other sectors. The scenarios corresponding to a more ambitious GHG mitigation policy did not achieve higher adoption of LBG, due to corresponding higher biomass prices. A CO2 charge exceeding 200 EUR/tonCO2 would be required to achieve a full phase-out of fossil fuels used for heating purposes in the ISI. We conclude that with the current policy situation, substitution of fossil fuels by LBG will not be economically feasible for the Swedish ISI.

Оценка состояния теплового хозяйства Республики Саха (Якутия)

The article assesses the state of the heat economy of the Northern region. The purpose of the article is to reveal the reasons for chronic backwardness of the region's industry from the average Russian indicators. To achieve the goal, solved the following problems: the features of heat economy in the North, analyzes the housing development, production and consumption of heat energy, as the sources of heat energy and heat networks, and also reforms in the heat economy of the region, based on which conclusions on assessment of the heat economy of the region. In recent years, there has been a twofold decrease in the rate of renewal of fixed assets of the heat economy against the norm, low rates of introduction of the resource-saving technologies in the heat economy, and in general, in the housing and communal services of the region. The level of marginal balance of supply and demand in the heat energy market is determined. The article is written to correct the decisions of the Federal and regional Executive authorities in terms of ensuring the reliability of heat economy of the Northern region.

Goals of Further Development of Legal Regulation in Heat Supply and Protection of Rights of Participants in the Heat Energy Market in the Constitutional Court of the Russian Federation

Goals of Further Development of Legal Regulation in Heat Supply and Protection of Rights of Participants in the Heat Energy Market in the Constitutional Court of the Russian Federation

Unified Heat Supply Organization: Mathematical Modeling and Calculation

Organizational model of the heat energy market on a unified heat supply organization is 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. The search for an optimal solution to the developed mathematical model of the unified heat supply organization is based on the univariate relaxation method with the subsequent use of methods of redundant design and simple iterative schemes. The developed mathematical model 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.

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

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.

METHODICAL APPROACHES TO THE FORMATION OF THE TARIFF POLICY OF THERMAL ENERGY PRODUCTION IN THE CONDITIONS OF MULTI-FUEL MODE

Introduction. In the conditions of formation a society of sustainable development the important task of the communal heat power engineering of Ukraine is to provide housing and communal, budget, social, and commercial spheres with the services on the supply of thermal energy at the level of European standards. However, the institutional, organizational and economic environment that has developed in municipal heat and power engineering does not allow solving this issue in its entirety. The urgency of the problem is exacerbated in the context of the integration intentions of Ukraine. Ukraine in its legislative initiatives declares the choice of a European model for the functioning of energy markets, as well as its desire to integrate into the European energy space, which requires the development of market relations in areas where the regime of natural monopoly operates. Formation of market relations in the municipal heat energy market means the development of a competitive environment and the emergence of independent heat energy producers using different types of fuels. The cost of producing heat depends on the type of fuel, that is, the market has a multi-fuel mode of its production. For this reason, the problem of tariff policy formation, which would reflect the economic relations that are emerging in the market, arises. Purpose. The article aims to substantiate and develop practical recommendations for the formation of the tariff policy of thermal energy production in Ukraine in the conditions of multi-fuel mode. Results. The basic models of the functioning have been determined with the help of systematization and generalization of international experience of functioning of competitive markets of thermal energy in developed countries. In this context, the basic model of functioning of the competitive heat energy market has been determined. This model is defined as an acceptable one for Ukrainian realities. It is determined that an acceptable model for developing a competitive environment in the heat energy market is the "Single Buyer" model, which is a compromise in modern Ukrainian economic realities. This model gives a moderate reduction in the average weighted tariff for the end user, stimulates the operator to increase the efficiency of its own production, and fosters fair competition between the operator and the independent producer.

Search for an equilibrium between heat demand and supply in heating systems under a unifiedheat supply organization

Organizational model of the heat energy market on a unified heat supply organization is 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. The search for an optimal solution to the developed mathematical model of the unified heat supply organization is based on the univariate relaxation method with the subsequent use of methods of redundant design and simple iterative schemes. The developed mathematical model 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.

Эволюция подходов к регулированию рынка тепловой энергии

Эволюция подходов к регулированию рынка тепловой энергии

Introduction of the Target Model of the Heat Energy Market

Introduction of the Target Model of the Heat Energy Market

Optimization of Developing Heat Supply System in Competitive Market Environment

The paper is aimed at working out the mathematical models and methods to solve the problems of operation of developing heat supply systems in a competitive market environment. The formation of new principles of functioning in this field is conditioned by the market mechanisms emerging due to the interaction between different owners of heat economy facilities within the single system. Today heat energy markets are represented by a great number of enterprises with different types of ownership that operate heat energy sources and heat networks. It is obvious that such a situation explicitly causes conflicts of interests among the heat energy market participants and unbalances the responsibility for production reliability, heat energy supply efficiency and its quality among the participants of centralized heat supply (heat sources – heat networks - consumers). A reasonable solution to this problem can make it possible to determine optimal conditions for operation of the developing heat energy market, and their implementation can increase technical, economic and energy efficiency of heat energy. These problems are solved by using the methods of hydraulic circuit theory, nonlinear dynamic programming and two level programming. The studies performed allowed the creation of mathematical models and methods for optimal construction of efficient heat supply systems, organization of their operation that ensure the realization of full energy saving potential in the field of heat supply to consumers, taking into account the interests of all participants of the heat energy market.