The pricing methods on the monopoly district heating market

Abstract

District heating plays an important role in many countries with cold climates. District heating are local systems and in most cases, they organized as natural monopoly markets. This article examines the three variants for the formation of prices for household consumers on monopoly district heating market: market equilibrium of supply and demand for heat energy (liberalized district heating market) and forming the price of heat energy based on average total and marginal costs (regulated heating market). To perform calculations, a mathematical model of the district heating market is developed. It is based on the classical model of monopoly market. The model was applied to conduct the studies on a heat supply system with three heat sources. Keywords: Heat supply system, Monopoly district heating market, Heating pricing, Market equilibrium, Regulation, Mathematical modeling