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Additionally, a relatively big share of his operational costs • Electricity produced by a household CHP is (a) consumed
is the electricity balancing costs. In electricity networks, by the household, (b) delivered to the supplier, (c) used to
supply and demand always have to be physically in balance. produce heat via an electric heater, or any combination of
For each part of a certain day the supplier predicts the needed these.
amount of electricity (to supply to his customer/household), • Heat generated by a CHP can be 'blown off' into the
which he buys a day ahead on the spot market (The described environment.
situation is the Dutch case, which differs from, for example, As said, the objective of both levels is to minimize their
the U.S. model.). When the actual part of the day arrives, the operational costs and the household and supplier will make
supply needed to provide his customer with electricity will their decisions accordingly.
differ from the predicted amount. This difference is balanced The decision of a supplier could be how to set the
by the system operator via an imbalance market. The supplier electricity or gas price for a household to which he supplies
either pays an imbalance price to the market when he needs energy or from which he receives electricity. As a start, we
more electricity than predicted, or receives an imbalance price focus on deciding upon the electricity price. A supplier can
when he needs less than predicted (he then effectively sells his now influence the behaviour of his customer by adjusting the
excess electricity to the imbalance market). So, the balancing price that a household has to pay or will receive for its
costs are the costs that arise from the balancing of the actual electricity for a certain period of time. Additional to balancing
electricity supply at a certain moment relative to the predicted his predicted and actual supply via the imbalance market, the
supply for that moment. When a supplier needs more than supplier can punish or reward his customers by adjusting their
predicted, the imbalance price he has to pay is higher than the electricity price and in that way he can minimize his
price he has paid the day before. When the supplier needs less, imbalance costs. Rewarding households could lead to
he receives an imbalance price that is less than this price. (It households operating their unit while blowing off the heat
sometimes happens that a supplier has to pay for the fact that they do not need. Punishing can be seen as suppliers paying
he needs less. That situation is rare and will not be dealt with; households less for their electricity. They can even be
see [12] for details.) Either way, needing more or needing less punished to such an extent that they have to pay for feedback
than predicted at a certain moment, results in losses. The of their electricity to the grid. Punishing could lead to
supplier wants to minimize these balancing costs. households using the electricity generated by them for
In the Netherlands, households currently pay a fixed unit electrical heating.
price for their electricity and gas for the period of a year. A household then pays and receives a varying price per
When they install micro-CHP units, they will operate them period of time for the electricity it acquires from or delivers to
whenever they need heat and thus, at that same moment, they its supplier. Its operational costs are defined as the costs of gas
produce electricity. and electricity needed for providing it with power and heat. Its
A supplier predicts his electricity supply for the next day decision consists of the power level at which to operate its
based on the behaviour (demand pattern of electricity) of his micro-CHP and how much heat to blow off (subsequently
customers. If a cold day is forecasted, for example, resulting in an amount of electricity it receives from or
households are expected to switch on their units and on the provides to the supplier). A household makes its decisions in a
basis of this forecast, suppliers will buy less electricity for way to minimize its operational costs and retain a certain
tomorrow. If, however, the temperature the next day turns out comfort level. It bases its decision on:
to be higher than expected, and subsequently more electricity • how much heat and electricity is needed at a certain
is needed from the supplier because households generate less moment, and
themselves, more electricity will have to be bought that next • how much it can earn from buying or selling electricity to
day via the imbalance market and relatively high operational the supplier (rewarded, punished) with respect to the gas
costs will be incurred. costs.
In order for the example to be described as an MLDM case As a first decision problem to focus on we define the
a few additional assumptions are made (consult Fig. 2 for problem in which, for a certain time interval, the supplier
clarification): needs to set the proper electricity price for his customer
• During a day, the supplier has the authority to influence household in order to maximize his profit, and in which the
the electricity price that a household (a) receives for household decides (1) the power level of the micro-CHP and
providing the supplier with electricity or (b) has to pay (2) the amount of heat to blow off to minimize its costs (2
for acquiring electricity from him. decision variables).
• A household (or a small computer in the household)
constantly ‘knows’ its electricity consumption. It also
knows the price it has to pay or will receive for electricity III. MODEL FORMULATION OF THE DECISION PROBLEM
at a certain moment, as well as the gas price (full This section defines our analytical model of the multi-level
information availability, facilitated by intelligent decision problem. First, Fig. 2 is introduced, of which the
metering). variables are explained in Table I. Fig. 2 shows the physical
• The supplier constantly monitors the amount of electricity energy flows pertaining to the supplier and the households.
produced/consumed by a household. Additional explanation:
• e-h conv. is the conversion step between electricity and
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Assumptions (for a certain time interval):
- known values for pgt, pg,sh, pet, peb,o, peb,i, ηe and ηt;
- the predicted (edemand, hdemand) and real-time (esink, hsink)
electricity and heat demand pattern of a household for a
certain time period are known;
- all the energy losses of the micro-CHP are in the form of
heat and are contained in h, so: gsh = e + h;
- the electricity /heat production ratio of a micro-CHP unit is
fixed over full operational power range.
An exemplary case that could occur is that for a certain time
interval the supplier has too much electricity. He can either
receive money for it from the balancing market, or can steer
the household to buy his electricity (at a higher price than the
balancing market can offer) A household will buy the
electricity from the supplier if the price is lower than its
operational costs for generating electricity and heat. The
household has the option to generate heat from electricity.
The decision of the household (based on the price that is set
by the supplier) results in a certain electricity flow between
the household and the supplier. The analytical model of the
decision problem is formulated as follows:
Fig. 2: Physical energy flows between the supplier and
A. Household Model
households (e = electricity, g = gas, h = heat, ‘+’ defines
positive direction). The decision variables for the household are gsh and hb
(from which esh can be derived). The constraints are the
Table I: Variables definition. following:
Variable Quantity Unit
gt; pgt gas flow to supplier; price [kWh], [€/kWh]
hb ≥ 0, hb ≤ g sh , g sh ≥ 0, g sh ≤ g sh , max (1)
et; pet electricity flow to supplier (from [kWh], [€/kWh]
producers or power market); price
eb; peb electricity balancing flow to [kWh], [€/kWh] The heat and gas flow cannot be negative; the gas flow is
supplier; price the balancing limited by the design of the unit and the heat flow is always
market asks/offers supplier smaller or equal than the gas flow. Further, the electricity and
gsh; pg,sh gas flow to household; price [kWh], [€/kWh] heat flows to and from the electric heater cannot be negative.
esh; pe,sh electricity flow between supplier [kWh], [€/kWh] This gives the final constraint:
and household; price
e, h electricity and heat flow from [kWh] hc = hsink + hb − h, with : h = ηt ⋅ g sh
micro-CHP
ηe ; ηt electric and thermal efficiency of [-] ⇒ hsink + hb − ηt ⋅ g sh ≥ 0 (2)
micro-CHP unit
esink; hsink Real-time electricity and heat [kWh] ⇒ g sh ≤ (hsink + hb ) / ηt
demand pattern of a household
ec electricity flow to electric heater [kWh] , where the real-time energy demands, esink and hsink, are
hc heat flow from electric heater [kWh] derived from a stochastic distribution around the expected
hb blow off heat flow [kWh]
demands, edemand and hdemand.
heat in an electric heater; the efficiency is taken as 100%; The objective function to be optimized is the profit
• gsh (‘sh’ stands for ‘supplier to household’) is limited by function:
the maximum power level of the micro-CHP unit: gsh,max,
which is determined by the apparatus design; ⎧⎪−esh pe , sh − g sh pg , sh if esh ≥ 0
max profithouse = ⎨ (3)
• et can be positive (electricity bought, et,i) or negative g sh hb
⎪⎩−esh pe , hs − g sh pg , sh if esh < 0
(electricity sold, et,o); where esh = esink + hsink + hb − g sh .
• eb can be positive (electricity sold to imbalance market,
eb,o, for price peb,o) or negative (electricity bought from B. Supplier Model
market, eb,i, for price peb,i); The decision variables for the supplier are pe,sh and pe,hs.
• e_sh = esh, when electricity flows from supplier to The objective function to be optimized is the profit function:
household (e_sh is then positive and the price is pe,sh), and
e_sh = ehs, when electricity flows from household to
supplier (e_sh is then negative and the price is pe,hs);
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max profitsup = g sh ⋅ pg , sh − et ⋅ pet − g t ⋅ pgt
pe ,sh , pe ,hs
⎧ pe , sh if esh ≥ 0
+esh ⎨ (4)
⎩ pe , hs if esh < 0
⎧ peb, o if eb ≥ 0
+eb ⎨
⎩ peb ,i if eb < 0
where eb = −esink − hsink + et + g sh − hb .
From known values for the household electricity and heat
demand for a certain time period, the electricity to be traded
for that period, et, is found via:
et = edemand − hdemand ⋅ηe / ηt (5)
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optimizing the problem, the MLDM approach is expected to merged and regarded as one. Optimizing the performance of
yield better results than when the problem is approached by this total system level could then be a different objective.
assuming an average response of the household to price Further, optimizing the system on environmental benefits
changes. The developed model could serve as a decision (e.g. CO2 emissions) could be undertaken and also multi-
support tool for the supplier. criteria optimization could be applied to the case presented in
Households can decide how much electricity flows to or this paper.
from their supplier while still fulfilling their electricity and Future modelling of the supplier-household interaction is
heat demands. The supplier can set the prices for this planned in a more agent-based modelling environment instead
electricity and can additionally decide to obtain his electricity of in a mathematical modelling environment. This will make
from the imbalance market. Preliminary results of the the future modelling process more convenient and flexible.
optimization problem are promising and prove the
applicability of the MLDM approach.
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