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Optimal operation of a CHP plant participating in the German electricity balancing and day-ahead spot market

Nadine Kumbartzky, Matthias Schacht, Katrin Schulz and Brigitte Werners

European Journal of Operational Research, 2017, vol. 261, issue 1, 390-404

Abstract: During the last years, operators of combined heat and power (CHP) plants are challenged by changing circumstances in the electricity markets. While ensuring a stable heat and power supply for customers, CHP plant operators seek to maximise the profitability of the CHP plant operation. We propose a comprehensive concept and illustrate its potential for increasing the profitability when operating a CHP plant with heat storage by participating in multiple electricity markets. For this purpose, the structure of the decision-making process consisting of bid submission, market clearing and CHP plant operation planning is represented. A multistage stochastic mixed-integer linear programming (MILP) model is developed that simultaneously optimises the operation of the CHP plant with heat storage and bidding in sequential electricity markets. Price uncertainty is captured by means of stochastic processes. The proposed concept is applied to the real case of a municipal energy supply company that participates in the German day-ahead spot and balancing market. Results of the case study illustrate how trading in sequential electricity markets can result in an increased profitability of the CHP plant operation, where additional revenues from trading offset higher generation costs. Furthermore, we exemplify how the optimal operation of the CHP plant and heat storage device are adjusted according to revenue potential in multiple electricity markets.

Keywords: OR in energy; Combined heat and power; Multistage stochastic programming; Bidding; Electricity markets (search for similar items in EconPapers)
Date: 2017
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Handle: RePEc:eee:ejores:v:261:y:2017:i:1:p:390-404