# Integration of 50 % wind power in a CHP-based ... - Ea Energianalyse

Integration of 50 % wind power in a CHP-based ... - Ea Energianalyse

Building the Mathematical Model 53out at a given electricity generation. The shadow price can therefore be used for indicatingconstrained heat- and electricity production.In the case of electricity generation being constrained by the district heating demand,electricity prices are often lower that the price it would take to cover the marginal powergeneration costs. Therefore, the contribution for covering the loss from generating constrainedpower (at a lower price) will additionally come from an increasment of the marginalheat cost.As the electricity prices are expected to drop due to an increased wind capacity of in thefuture, the heat production costs of the marginal utility will often be influenced by theunpleasant amount of “waste electricity”. Figure 5.4 describes the two markets are connected,by showing heat price as a function of el. price for a system with an extractionunit (being the marginal heat producer)El.c vHeat pricec mHeatEl. priceP h maxFigure 5.4, In a system with extraction unit as marginal producer, the relation betweenheat and el. price is given by an isoquant-like function, formed by the upper boilerlimit as well as lower backpressure limit, respectively (Source: Balmorel brunch).Economic system equivalenceIn many ways, the characteristics of the unit commitment model differ from the realpower and market system. First of all, performing an economic optimization of the wholeeconomic system like in the model would in the real system correspond to the existenceof just one producer with a complete monopoly 19 . At the real market, producers each decidewhich price is attractive producing under (Nord pool spot) and they add biddingconditions such as block offers. Nonetheless, the mathematical model in this project canbe assumed equivalent to a system where, first of all, the market players at all timesseek to maximize their profit, and second of all, that the market players are pricetakers20 .Unfortunately, a consequence of this is that the model, in its basic form, cannot includemarket power, and thus, that the total costs of the system will be underestimated tosome extent (Bregnbæk 2008)19In the monopoly days, technical considerations of the different power plants were often taking intoaccount with higher when scheduling operation hours.20By price-takers are meant, that they can alter their rate of production and sales without significantlyaffecting the market price of their product, which would be the case when all players are infinitelysmall (Investopedia 2009).

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