Incentive-based coordination mechanism for distributed operation of integrated electricity and heat systems

Abstract Pipeline energy storage in district heating networks (DHNs) has shown to be capable of improving energy efficiency in an integrated electricity and heat system (IEHS). However, most electric power networks (EPNs) and DHNs are managed by different entities, while the incentives inducing such flexibilities from DHNs have been seldom discussed. This paper fills the research gap by investigating price incentives offered by EPNs to encourage DHN operators to fully utilize pipeline energy storage. Individual interests of EPNs and DHNs are addressed via a bi-level model, where the EPN operator determines the best price incentive based on optimal power flow (OPF) in the upper-level, while the lower-level problem describes the optimal response of the DHN operator based on optimal thermal flow (OTF). To preserve the privacy of DHNs in distributed operation, a reduced and accurate OTF model is then proposed where internal states are eliminated and system parameters are not exposed, which also relieves model complexity. Finally, a price-quantity decomposition method along with warm-start strategies are proposed to solve the reduced bi-level model, and the solution obtained is interpreted as the equilibrium of Stackelberg competition between EPNs and DHNs. Case studies of two IEHSs validate that the proposed decomposition method can efficiently reach Stackelberg equilibrium in a distributed setting, while the introduced incentive-based coordination mechanism can effectively improve social welfare by lowering total costs in both EPNs and DHNs.