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Calculating the marginal costs of a district-heating utility


  • Sjödin, Jörgen
  • Henning, Dag


District heating plays an important role in the Swedish heat-market. At the same time, the price of district heating varies considerably among different district-heating utilities. A case study is performed here in which a Swedish utility is analysed using three different methods for calculating the marginal costs of heat supply: a manual spreadsheet method, an optimising linear-programming model, and a least-cost dispatch simulation model. Calculated marginal-costs, obtained with the three methods, turn out to be similar. The calculated marginal-costs are also compared to the actual heat tariff in use by the utility. Using prices based on marginal costs should be able to bring about an efficient resource-allocation. It is found that the fixed rate the utility uses today should be replaced by a time-of-use rate, which would give a more accurate signal for customers to change their heat consumptions.

Suggested Citation

  • Sjödin, Jörgen & Henning, Dag, 2004. "Calculating the marginal costs of a district-heating utility," Applied Energy, Elsevier, vol. 78(1), pages 1-18, May.
  • Handle: RePEc:eee:appene:v:78:y:2004:i:1:p:1-18

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    References listed on IDEAS

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    3. Johannes Schmidt & Sylvain Leduc & Erik Dotzauer & Georg Kindermann & Erwin Schmid, 2009. "Using Monte Carlo Simulation to Account for Uncertainties in the Spatial Explicit Modeling of Biomass Fired Combined Heat and Power Potentials in Austria," Working Papers 432009, Institute for Sustainable Economic Development, Department of Economics and Social Sciences, University of Natural Resources and Life Sciences, Vienna.
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    8. Mezősi, András & Beöthy, Ákos & Kácsor, Enikő & Törőcsik, Ágnes, 2016. "A magyarországi távhő-szabályozás modellezése. A megújuló energiára alapozott hőtermelés
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    11. Björkqvist, Olof & Idefeldt, Jim & Larsson, Aron, 2010. "Risk assessment of new pricing strategies in the district heating market: A case study at Sundsvall Energi AB," Energy Policy, Elsevier, vol. 38(5), pages 2171-2178, May.
    12. Wetterlund, Elisabeth & Söderström, Mats, 2010. "Biomass gasification in district heating systems - The effect of economic energy policies," Applied Energy, Elsevier, vol. 87(9), pages 2914-2922, September.
    13. Difs, Kristina, 2010. "National energy policies: Obstructing the reduction of global CO2 emissions? An analysis of Swedish energy policies for the district heating sector," Energy Policy, Elsevier, vol. 38(12), pages 7775-7782, December.
    14. Amiri, S. & Moshfegh, B., 2010. "Possibilities and consequences of deregulation of the European electricity market for connection of heat sparse areas to district heating systems," Applied Energy, Elsevier, vol. 87(7), pages 2401-2410, July.
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