Business Models for District Energy Systems Using Stackelberg Pricing Games

Fifth-generation district heating and cooling (5GDHC) is one of the latest trends in the energy transition of the heating sector. These networks are characterized by low temperature levels of 5–40 °C, and they use distributed heat pumps and compression chillers to obtain the required temperature levels locally. Therefore, they offer manifold options for waste heat integration, have few requirements for thermal isolation, and a high overall efficiency, with multiple options for electric feed-in from renewables.This study assesses business models for these networks from both a provider and consumer perspective based on a case study for a district currently being planned and constructed in Hassel, Germany. For that purpose, an optimization-based energy system model is transformed into a Stackelberg pricing game to account for a contractually governed interaction between the consumers and energy provider with price-setting power. We investigate different contract structures with respect to the costs and profits of the stakeholders, and their deviation from an overall social welfare optimum. Furthermore, legal regulations and federal funding options, such as CO2 taxation and investment subsidization are considered, which are analyzed with respect to their impact on individual decision-making, total system costs, and resulting CO2 emissions.We find that in district systems, contractually governed constant energy prices can induce false incentives for energy consumers and providers, leading to deviations from the social welfare optimum. Furthermore, the analysis of sixteen different regulation schemes reveals that efficient ones should comprise subsidies for incentivizing investments into climate-friendly technologies and simultaneously penalize deviating behaviors