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Developing a new framework for transactive peer‐to‐peer thermal energy

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DOI: 10.1049/gtd2.12150

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Received: 12 July 2020 Revised: 3 November 2020 Accepted: 19 January 2021 IET Generation, Transmission & Distribution
DOI: 10.1049/gtd2.12150

ORIGINAL RESEARCH PAPER

Developing a new framework for transactive peer-to-peer thermal

energy market

Mehdi Davoudi1 Moein Moeini-Aghtaie1 Rahim Ghorani2

1
Department of Energy Engineering, Sharif Abstract
University of Technology, Azadi Avenue, Tehran,
The rapid deployment of district heating systems in local energy markets and increasing
Iran
2
the number of small-scale heat producers along with the expansion of local electricity mar-
EVTech Company, Teymori Avenue, Tehran, Iran
kets increase the need for a transaction framework to manage the transactions between
local participants in both heat and electricity markets. This paper presents a peer-to-peer
Correspondence
Moein Moeini-Aghtaie, Department of Energy thermal energy transaction framework to manage the transactions between small-scale heat
Engineering, Sharif University of Technology, Azadi prosumers. This framework enables small-scale thermal energy producers and consumers
Avenue, Tehran, 1458889694, Iran.
to participate in the market as price maker agents. Moreover, the optimal strategy of heat
Email: [email protected]
market participants is determined by proposing a linear profit function for each agent. This
optimization problem enables the agents to determine their optimal participation strategy
in electricity and heat markets by addressing the interdependencies of electricity market,
gas price, and heat market. The numerical results successfully demonstrate the benefits
and applicability of the proposed framework.

1 INTRODUCTION algorithm is proposed in [8] to estimate the optimal dispatching

of micro-integrated energy systems. Also, the main advantages
With the increasing growth of distributed energy resources of the proposed model over the traditional ADMM method
(DERs) in the distribution sector of energy systems, passive in terms of dealing with convergence issues is investigated.
consumers will be transformed into active ones who can man- Although the above-mentioned works have mainly focused on
age their consumption in response to fluctuations of electricity the coordination of power and heating systems, employing a
and gas prices [1]. In addition, the expansion of district heating market mechanism to facilitate energy transactions between
systems and widespread utilization of solar water heaters along producers and customers is missed in these studies.
with small-scale natural gas boilers and combined heat and Encouraging new investments in district heating systems
power units (CHP) will result in more interdependency between necessitates the introduction of a heat market and also requires
electricity and gas infrastructures [2]. These events call for new approaches that enable local prosumers to simultaneously deter-
energy management procedures in energy infrastructures. mine their bidding strategies in both heat and electricity mar-
In this regard, heat and electricity integrated energy systems kets. In this regard, many scholars consider a similar structure
(HE-IES) have attracted significant attention in recent years for both heat and electricity markets. For instance, in [9], strate-
[3–7]. Authors in [5] have introduced a decentralized solution gic bidding of an energy hub in electricity and heat markets
to identify the optimum scheduling of integrated heating and is investigated based on a mathematic program with equilib-
electrical systems in urban areas. In [6], a novel framework is rium constraints (MPEC) model. In [10], a two-stage game-
proposed for stochastic planning of integrated energy systems, theoretic model, considering thermal comfort, is introduced to
considering the uncertainty of demand and resources such as trade both heat and power between integrated energy suppli-
wind turbine generations. A linear model is proposed in [7] for ers and distributed consumers. In [11], an incentive-compatible
the centralized dispatch for integrated heat and power systems mechanism based on Vickrey-Clarke-Groves auction is applied
by incorporating thorough modelling of heat storage tanks’ to enhance the efficiency of integrated energy market (IEM)
charging processes. A dual-decomposition-based distributed operations in real-time and day-ahead markets, considering high

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properly cited.
© 2021 The Authors. IET Generation, Transmission & Distribution published by John Wiley & Sons Ltd on behalf of The Institution of Engineering and Technology

1984 wileyonlinelibrary.com/iet-gtd IET Gener. Transm. Distrib. 2021;15:1984–1995.

DAVOUDI ET AL. 1985

penetration of renewable energy sources. In [12], by consider- Peer-to-peer markets enable the formation of mutually bene-
ing demand elasticity and strategic providers, an integrated heat- ficial trading contracts between different agents based on agent-
power distribution system’s market equilibrium is obtained, run- to-agent negotiation [19]. For instance, in [20], bilateral con-
ning the optimal thermal flow and the optimal power flow prob- tracts for peer-to-peer energy trading are proposed, considering
lems for clearing heat and electricity markets, respectively. In agent-to-agent negotiations and real-time and forward market
[13], a tri-layer market structure enabling simultaneous electric- contracts. In [21], peer-to-peer trades are considered between
ity, gas, and heat transactions at the wholesale level is proposed. the distribution system operator and prosumers participating
Moreover, in the proposed model, demand response programs in the local flexibility market. Authors in [22] have presented a
are addressed by defining load serving entities and maximiz- market framework based on peer-to-peer negotiations to man-
ing their profit from participating in these programs. However, age electricity transactions at the distribution level. This mar-
the proposed model is unable to properly consider the gen- ket framework considers electricity as a heterogeneous product
eration capacities of prosumers, especially renewable genera- concerning attributes of its generation source, i.e. green energy,
tions. Moreover, the market players are considered as price taker fossil fuel-based generation, which are valued by each prosumer
agents in the heat market. Although all of the reviewed stud- individually. These papers successfully model peer-to-peer elec-
ies have tried to propose market-based mechanisms for mod- tricity trading or ancillary services related to electrical energy in
elling the independencies between thermal and electrical ener- distribution networks. However, to the best of our knowledge,
gies, impractical assumptions overshadow their practicality. a peer-to-peer heat trading framework has not been introduced
In these studies, it has been assumed that the market is set- yet. The framework, presented in this paper, would address the
tled by a central authority who supervises the system. As a result, aforementioned gaps in the reviewed scholarly works to manage
privacy issues arise when market participants tend to retain their the transactions of local participants in both heat and electricity
privacy and are unwilling to cede full information of their con- markets.
figurations and preferences that are necessary to settle central- Compared with the existing studies, the proposed framework
ized market frameworks [14]. Moreover, when instead of self- does not face the aforementioned concerns that the central-
dispatch by each market participant, central dispatch is utilized based market frameworks do. It would also implement mar-
by central authorities, the uplift payment issue arises. It causes ket competitions between small-scale agents at the distributions
the market participants to transmit overstated cost information level that the reviewed decentralized market frameworks fail to
to market operators to compensate for the probable uplift costs consider. Besides, the proposed framework results in a linear
[15]. Another disadvantage of central market mechanisms is the optimization problem that would guarantee the optimal solution
concerns related to the failure of the central market operator or for each market participant’s strategy. However, the peer-to-peer
any other core agent that may bring about the resilience issues market frameworks, presented in the literature, are modelled as
[16]. some nonlinear optimization problems that means no guarantee
In order to overcome the limitation of centralized mar- for reaching the optimal solution and impose a more computa-
ket schemes, decentralized market mechanisms for integrated tional burden. In contrast to the reviewed peer-to-peer market
heat and electricity markets have been considered by a few frameworks, the proposed peer-to-peer framework can address
researchers. In this context, a decentralized market frame- the interdependencies and existence of both the heat and elec-
work, enabling energy transactions between district heating tricity markets. It would result in a better market strategy for
and power networks, is proposed in [17]. However, this refer- agents, participating in both heat and electricity markets.
ence only addresses the energy transaction between the district In response, this paper, for the first time, proposes a frame-
heating and power distribution networks and fails to consider work for peer-to-peer heat trading. Besides, the optimal strate-
transactions between different small-scale prosumers. More- gies of small-scale agents who can simultaneously participate in
over, it does not consider competition in heat market since local heat and electricity markets are determined. The main con-
the contract price for thermal energy transactions is assumed tributions of this paper are:
to be fixed. In [18], a bilateral market framework is pro-
posed to enable a coupled gas-electricity market in the distri- ∙ Design a decentralized market framework that enables peer-
bution sector trading at locational marginal prices. However, to-peer thermal energy trading.
this framework only enables the transaction between gas and ∙ Determine the optimal strategies of agents participating in
electricity networks and does not consider the transactions both electricity and heat markets by a linear model.
between small-scale market participants and thermal energy ∙ Address the interdependencies between electricity, gas,
transactions. and district heating networks by considering the optimal
In brief, most of the existing decentralized frameworks fail to behaviour of market participants in these markets.
consider the market-based competitions in the heat market as
well as the electricity market. On the other hand, the privacy The rest of the paper is organized as follows. Section 2
issues and other inherent drawbacks of central market oper- presents an introduction to the proposed market. Section 3 elab-
ation are an obstacle to consider them as an applicable mar- orates on the profit optimization problem of all the market par-
ket framework. Meanwhile, for electricity markets, peer-to-peer ticipants. Section 4 describes the methodology of the proposed
frameworks have been introduced to address the requisites of a heat market. In Section 5, demonstration of the proposed heat
well-formatted decentralized market framework. market framework is attributed by presenting the results of the
1986 DAVOUDI ET AL.

FIGURE 1 Agent’s energy flow diagram

FIGURE 3 Agent’s participation in the markets

FIGURE 2 Peer-to-peer heat market negotiations

simulation case studies. In Section 6, the concluding remarks are

presented.

2 GENERAL STRUCTURE OF THE

PROPOSED PEER-TO-PEER HEAT
MARKET

In the proposed framework, it has been assumed that market

participants can purchase natural gas, trade electricity in the day-
ahead local electricity market, and also participate in the day-
ahead peer-to-peer heat market to conduct transactions. The
agents may have combinations of the following installations and
appliances, depicted in Figure 1. Since this paper is concentrated
FIGURE 4 The proposed framework for the participation of agents in the
on the peer-to-peer heat market, a simple conventional transac- markets
tive market structure is assumed for the electricity market, in
which the agents are assumed to be price takers. The concep-
tual figure representing the peer-to-peer heat market for N mar- broadcast their selling and purchasing contracts to the other
ket participants is illustrated in Figure 2. As it can be inferred heat market participants. The agents with approximately the
from this figure, each agent negotiates directly with other agents same selling and purchasing contract prices will be matched, and
to broadcast its contracts. The results, accepted/rejected con- the associated contract will be accepted. Besides, if the mutual
tracts, are also broadcasted between agents by direct negotia- contracts’ prices are not close enough to settle the contracts, the
tions. Besides, the conceptual figure of the agents’ participation agents would inform each other that their proposing prices are
in the markets is illustrated in Figure 3. rejected.
The proposed peer-to-peer heat market is operated based Subsequently, agents modify and resubmit their contract
on an iterative algorithm, as depicted in Figure 4. In each prices to the upcoming market iteration to make their rejected
market iteration, agents run their profit optimization problem, contracts be accepted by other agents. In this regard, produc-
explained in Section 4, to identify their price-quantity contracts ers would reduce their rejected contract prices, and consumers
to propose for all 24 h of the day-ahead heat market and their would increase their rejected contract prices by adding a con-
optimum operation schedule for the next 24 h. Then agents stant step. This procedure will continue in the next iterations of
DAVOUDI ET AL. 1987

the market until there is no remaining offer in the heat market, Pei,t = P̄ i,t − Pi,t − Peeth,i,t (4)
or the agents are not willing to modify their contract prices in
two consecutive iterations anymore. Therefore, the heat market
( )
is finalized, and agents realize the final thermal energy contracts P̄ i,t CLi,t
ELi,t + + ≤ P .𝜂T + Qoe,i,t − Qie,i,t + PVt
to fulfil in the next day. Then agents re-run their profit maxi- 𝜂T 𝜂AC _ i,t
mization problems to determine the required natural gas to pur-
chase from the gas distribution system and associated electricity + Pgc,i,t .𝜂gte (5)
that has to be traded in the electricity market to reach the opti-
mum operation of the next day.
HLi,t + QNsi,t,k + TSi,t,k ≤ Pgc,i,t .𝜂gth + Pgb,i,t .𝜂b + Pswt
p
3 THE PROFIT OPTIMIZATION + Qoh,i,t − Qih,i,t + QNi,t,k + TPi,t,k + Pggtha,i,t .𝜂gtha
PROBLEM
+ Pehi,t .𝜂T .𝜂etha (6)
As explained in the proposed framework for the heat market,
each agent in each heat market iteration needs to run an opti-
mization problem to determine its selling/purchasing contracts. Pgc,i,t . 𝜂gte ≤ Pc (7)
This linear optimization problem is as follows:

MAXPei,t ,QNs p (Pi ) Pgb,i,t .𝜂b ≤ Pb (8)

i,t,k ,QNi,t,k ,Pggtha,i,t ,Pgc,i,t ,Pgb,i,t
∑
= 𝜆et Pei,t
t ∈T Pggtha,i,t ≤ Pgtha (9)
∑ p p
+ (QNsi,t,k 𝜆hsi,t,k − QNi,t,k 𝜆hi,t,k )
( )
t ∈T ( ) Qo𝛼,i,t−1
E𝛼,i,t = 1 − E𝛼st .E𝛼,i,t −1 + Qi𝛼,i,t−1 .𝜂𝛼 + − , 𝛼 ∈ {e, h}
∑( ) 𝜂𝛼 −
− Pggtha,i,t + Pgc,i,t + Pgb,i,t 𝜆gt (10)
t ∈T ( )
( ) Qo𝛼,i,24
∑ ( ) E𝛼,i,1 = 1 − E𝛼st .E𝛼,i,24 + Qi𝛼,i,24 .𝜂𝛼 + − (11)
𝜂𝛼 −
− CEP CEc .Pgc,i,t .𝜂gte + CEb .Pgb,i,t . 𝜂b
t ∈T
∑
− OC.Pgc,i,t . 𝜂gte (1) 0 ≤ Q𝛽e,i,t ≤ Q𝛽e , 𝛽 ∈ {i, o} (12)
t ∈T

The first term of the objective function indicates the 0 ≤ Q𝛽h,i,t ≤ Q𝛽h , 𝛽 ∈ {i, o} (13)
agent’s net revenue of electricity exchanges, with the underly-
ing assumption that the agent can participate in the electricity
market right after the current heat market iteration. The sec- 0 ≤ E𝛼,i,t ≤ E𝛼 , 𝛼 ∈ {e, h} (14)
ond term indicates the agent’s net revenue achieved as a result
of participating in the heat market if all its proposed contracts Equations (2) and (3) satisfy the loading limit of the trans-
are accepted in the upcoming market iteration. The next term former and electricity-to-heat appliances. Equation (4) deter-
quantifies the cost of consumed natural gas. Carbon emission mines the net exchanged electricity of the agent with the grid.
penalties and operating costs of micro CHP are also considered Power and heat balance constraints are enforced in Equations
in the function’s two last terms. It should be noted that the price (5) and (6), respectively. The natural gas input rate limit in
$
of carbon emission penalty, CEP, is considered 20 of carbon each time interval t is determined by Equations (7)–(9). The
ton
emission [23]. Also, the total carbon emission penalty costs are state of charge of electrical (e) and heat (h) storage units is
calculated based on the boiler and CHP output thermal, elec- evaluated by Equation (10), and Equation (11) ensures that
trical energy, respectively [24–26]. It is worth mentioning that the energy stored in the first time interval of the time hori-
the proposed formulation is general, and this term can be omit- zon to be equal to the energy stored at the first time inter-
ted if there is no regulation on environmental pollutions. The val of its next day. Finally, input and output power rates
associated constraints of the linear optimization problem are: and the maximum capacities of storage units are restricted in
Equations (12)–(14).
−PT ≤ Pei,t ≤ PT (2) The abovementioned optimization problem determines the
optimal strategy of a typical agent with micro CHP, boiler, solar
Peeth,i,t .𝜂T ≤ Peth (3) water heater (SWH), photovoltaic arrays, air conditioners, gas
1988 DAVOUDI ET AL.

to heat, and electricity to heat appliances. However, if an agent

does not have either of these appliances, the associated con-
straints and variables of the specified item would be ignored for
that agent.

4 OPERATION OF THE PROPOSED

PEER-TO-PEER HEAT MARKET
FIGURE 5 Sample hypothetical participation of a prosumer agent in the
As discussed earlier, the proposed framework is based on an
heat market
iterative algorithm for the heat market. As it can be inferred
from Figure 4., the agent’s first iteration contract prices are con-
sidered as input data in the algorithm and are obtained before
the first market iteration. To do so, an agent for each time inter- ( )
val, according to the operating costs of its energy converters NCsi,t,k = QNsi,t,k , 𝜆hsi,t,k (18)
and sources, defines a maximum and minimum price that each
1 kWh of thermal energy is valued to him. Therefore, the agent In the proposed market framework, these contracts are called
can choose a price within this price interval to propose in the negotiable selling/purchasing contracts. Negotiable contracts
heat market to sell or purchase every unit, 1 kWh, of thermal are contracts that their associated prices can be changed in the
energy. The initial maximum and minimum prices, which are next iterations. On the other hand, there is another category
defined before the first iteration for the selling and purchasing of contracts whose prices are fixed in different iterations. As a
s s p p
contracts, are denoted as 𝜆hi,t , 𝜆hi,t , 𝜆hi,t , 𝜆hi,t , respectively. note, the concept of negotiable and non-negotiable contracts is
Meanwhile, for the selling contracts, if an agent can sell its further discussed in the following subsection.
generated thermal energy at the highest possible price, it will be
willing to offer the maximum quantity of thermal energy to gain
maximum benefit from energy exchange. Whilst for a buyer 4.2 Forming non-negotiable contracts
agent, if the agent can purchase thermal energy at the lowest
possible price, it will be willing to purchase the highest amount Non-negotiable contracts are those contracts whose prices are
of thermal energy. Therefore, as agents selling (purchasing) defined once and cannot be changed any further during market
thermal energy try to maximize their profit, they are willing to iterations. As mentioned earlier, in each iteration, agents may
propose their defined maximum (minimum) prices as contract reduce (increase) their selling (purchasing) contract prices to
prices to gain more benefit from thermal energy transactions. sell (purchase) their available (required) thermal energy. How-
This means that the contract prices for each agent to propose ever, reducing (increasing) the proposed thermal energy price
for 1 kWh of thermal energy at each time interval for the first would also reduce the proposed quantity since the agent is
market iteration is as follows: less willing to trade energy at lower (higher) prices. Thus an
agent can propose the amount of reduced proposed quantity
s at higher (lower) prices of the previous iteration while reduces
𝜆hsi,t,1 = 𝜆hi,t (15)
(increases) the proposed price for the remaining available pro-
duction capacity (required demand). This means that in each
p p iteration, there could be some newly identified non-negotiable
𝜆hi,t,1 = 𝜆hi,t (16) contracts that can be proposed to the market for the current
and subsequent iterations, while the remaining portion of the
When these prices are obtained, the heat market can be production capacity (required demand) can be proposed with
started. To do so, in each iteration, the following steps are lower (higher) prices. The contracts with reduced (increased)
taken. prices that can be reduced (increased) further in next iterations
are called negotiable selling (purchasing) contracts. As an exam-
ple, for the selling contracts, this concept is illustrated in Figure
4.1 Forming negotiable contracts 5, representing hypothetical sample participation of a prosumer
agent in the heat market.
As the first step of each market iteration, the purchasing and As depicted in Figure 5, after each market iteration, the agent
selling contracts of agents in each time interval are obtained run- reduces its selling contract prices to reduce the gap between its
ning the optimization problem addressed in Equations (1)–(14), offered prices and other agents’ purchasing contract prices for
which are denoted as the mutual contract. Consequently, the agent’s offered quantity
( ) for thermal energy with negotiable contracts might be reduced
p p p in each iteration in comparison with its previous one, which
NCi,t,k = QNi,t,k , 𝜆hi,t,k (17)
creates a gap between the iterations’ proposed quantities. The
DAVOUDI ET AL. 1989

sources of this gap are illustrated in Figure 5, sold thermal

energy in previous iterations, and possibly identified non- Psj,t,k − PPi,t,k < 𝜀 (23)
negotiable selling contracts in each iteration. It can be inferred
from the figure that the agent would offer all its generating It is worth mentioning that the transacted quantity for
capacity in the first iteration when the offered price is high (P1 ). accepted mutual contracts between every two agents is the
However, it fails to sell any quantity of thermal energy in the minimum proposed quantity of the two agents proposing that
first iteration. Consequently, it reduces its offered price by a con- contract. Also, if a purchasing contract price of a buyer agent
stant step, which results in the price of P2 that leads to offering matches the selling contract price offered by more than one
0.8 Qm of negotiable selling contract, 0.2 Qm less than the pre- seller agent simultaneously, the quantity of the contract to trade
vious iteration. This reduced quantity is due to the reduction with the qualified sellers is allocated based on the weighted aver-
of the contract price that brings about the non-negotiable con- age of their contracts’ proposed quantities. As a result, at the end
tract with P1 price. This contract can be offered in this iteration of this step, agents identify their accepted and rejected contracts.
and the following ones with this fixed price. Subsequently, the
agent reduces its offer price in the third iteration, which leads to
forming a negotiable contract with P3 price and quantity of 0.7 4.4 Modifying contract prices for rejected
Qm . The reduced quantity, 0.1 Qm , is the result of sold thermal contracts
energy in the second iteration at P2 price. In the next iteration,
the agent reduces its offer price again that leads to an offer of For rejected contracts, agents realize that their broadcasted
0.4 Qm at P4 price. The reduced quantity, 0.3 Qm , is the result prices are not acceptable for other agents. Therefore, for pur-
of 0.2 Qm sold thermal energy in the third iteration and 0.1 chasing (selling) contracts, they increase (decrease) their rejected
Qm of the reduced quantity that can be proposed with a non- contracts’ prices for the next market iteration by a constant step.
negotiable selling contract with P3 price in this iteration and the This increase (decrease) is done if the modified prices do not
subsequent ones. As an example, the identified non-negotiable violate the maximum (minimum) predefined limits for agents in
selling contract with P3 price is each time intervals, which were identified before the first market
( ) iteration. This concept is shown in Equations (24) and (25)
′h,s
NNCsi,t,4 = QNNsi,t,4 , 𝜆i,t,4 = (0.1Qm , P3 ) (19) ( s )
s
𝜆hsi,t,k+1 = Max 𝜆hi,t − (k ) Δb, 𝜆hi,t (24)
As a result, total selling (purchasing) contracts of an agent,
for each time interval, and in each market iteration is the union ( p)
p p
of the negotiable selling (purchasing) contract in that iteration, 𝜆hi,t,k+1 = Min 𝜆hi,t + (k ) Δb, 𝜆hi,t (25)
with the union of the non-negotiable selling (purchasing) con-
tracts from the previous iterations until the current one as
(l =k
) 4.5 Energy contracts broadcasting
⋃ ⋃
Csi,t,k = NNCsi,t,l NCsi,t,k (20)
l =1
Finally, for each time interval, agents realize their successful sell-
ing and purchasing quantity of thermal energy from the begin-
(l =k
) ning iteration until the current one. The total purchasing quan-
⋃ ⋃ tity of negotiable contracts for each agent are
CPi,t,k = NNCPi,t,l NCPi,t,k (21)
l =1
l =k
∑
TPNi,t,k = PNi,t,l (26)
l =1
4.3 Contract broadcasting and selection
in which the PNi,t,l is the quantity that an agent succeeds in
When the potential contracts are determined by the agents, each
purchasing in each specific iteration and time interval of nego-
agent broadcasts its available contracts. Subsequently, agents
tiable purchasing contracts. Also, the total purchased thermal
compare their contract price for every unit of thermal energy,
energy of the non-negotiable purchasing contracts of an agent
1 kWh, in each time interval with the broadcasted contract
equals:
prices, which they have received from other agents. For each
mutual contract proposed for the same time intervals, if the l =k
prices are close enough to satisfy the below constraint, the con- ∑
TPNNi,t,k = PNNi,t,l (27)
tract is finalized between the agent and the other agent, propos- l =1
ing the contract.
Total sold heat, from the first market iteration until the cur-
Psi,t,k − PPj,t,k < 𝜀 (22) rent one, of negotiable selling contracts for an agent, TSNi,t,k ,
1990 DAVOUDI ET AL.

is equal to:

l =k
∑
TSNi,t,k = SNi,t,l (28)
l =1

Similarly, the total sold thermal energy of the non-negotiable

selling contracts of an agent, TSNNi,t,k , equals:

l =k
∑
TSNNi,t,k = SNNi,t,l (29)
l =1

As a result, each agent’s total sold and purchased quantities

of thermal energy is obtained from the following equations,
respectively:

TSi,t,k = TSNi,t,k + TSNNi,t,k (30)

TPi,t,k = TPNi,t,k + TPNNi,t,k (31)

The total net revenue associated with the sold and purchased
thermal energy quantities from the beginning iteration until the
current one can be obtained for each agent as follows:

k t∑
∑ =24
TTHRi,K = h,s
(𝜆i,t,l ∗ SNi,t,l + 𝜆́ i,t,l
h,s
∗ SNNi,t,l )
l =1 t =1

k t∑
∑ = 24
(𝜆i,t,l ∗ PNi,t,l + 𝜆́ i,t,l ∗ PNNi,t,l )
h,p h,p
−
l =1 t =1
(32)

As discussed earlier, these iterative processes are done until

there is no remaining offer in the heat market, or the agents
are not willing to modify their contract prices in two consec-
utive iterations anymore. It is worth mentioning that the itera-
tive market framework is guaranteed to converge. Since, as men-
tioned before, the seller (buyer) agents would decrease (increase)
their proposing prices step by step in consecutive market iter-
ations until these prices equal the defined minimum (maxi-
mum) prices, which the agents determine individually for each
time interval before the first market iteration. These maximum
and minimum prices are limited values, constrained by each FIGURE 6 An agent’s heat market participation process
agent’s heat generation costs. So, after running some market
iterations, the seller agents’ contract prices would reach their
defined minimum prices. On the other hand, the buyer agents’
contract prices would also reach their defined maximum prices. peer-to-peer heat market steps for an agent participating in the
So the agents would not be willing to adjust their propos- market.
ing prices anymore, which results in the finalizing of the heat
market.
When the heat market is finalized, the agents, based on their 5 RESULTS AND DISCUSSION
accepted contracts, re-run their profit optimization problem
to participate in the electricity market and purchase gas from In this section, the simulation results in a case study are pre-
the gas distribution system. In order to summarize the afore- sented to demonstrate the feasibility of the proposed algorithm.
mentioned processes, the flowchart of Figure 6 illustrates the The simulations are done using the Cplex solver in General
DAVOUDI ET AL. 1991

TABLE 1 Agent’s installations and appliances parameters [28]

Device Parameter Value Unit

Transformer PT 6 kW
𝜂T 0.98 —
Micro CHP Pc 10 kW
𝜂gte 0.35 —
𝜂gth 0.4 —
OCP 0.006 $/kWh
CEc 130 g/kWh
Boiler Pb 6 kW FIGURE 7 Forecasted electricity price [30]
𝜂b 0.9 —
CEb 50 g/kWh
Air conditioner 𝜂AC 0.6 — The prosumers are categorized into three groups, AS1 , AS2 ,
AS3 . Each agent in the first category of prosumers has a micro
Electricity (heat) storage Ee (Eh ) 2 (2) kWh
units CHP to supply their thermal and electrical demand. The second
category’s agents have a boiler to supply their thermal demand.
Qie (Qih ) 0.3 (1.5) kW
The last category’s agents have SWH to supply their thermal
Qoe (Qoh ) 0.6 (1.8) kW
demand, yet due to the uncertainty and lack of enough sup-
𝜂e + (𝜂h + ) 0.95 (0.9) — plied energy of SWH, this category’s agents are also assumed
𝜂e − (𝜂h − ) 0.95 (0.9) — to be equipped with gas-to-heat appliances. Moreover, all of
these categories are assumed to have PV units with a similar
generation profile. The consumers are also categorized into two
different categories, AB1 , AB2 . The first category’s agents have
Algebraic Modelling System (GAMS) on an Intel Core i5 with a only electricity-to-heat appliances. The second category’s agents
2.4 GHz processing clock and 4 GB of RAM. have only gas-to-heat appliances. None of the consumers have
PV units. The gas price is considered as 3.3 ¢$/kWh constant
during the whole day [29]. As mentioned earlier, the agents are
5.1 System under study and main considered price takers in the electricity market with an accu-
assumptions rate price forecasting unit. The forecasted electricity price for
the next day is considered as depicted in Figure 7 [30].
In this section, the numerical results of implementing the pro- In the following, the proposed market is implemented, and
posed peer-to-peer thermal energy market are illustrated. It is the results are elaborated.
worth mentioning that the required market iterations equal 40,
and the computational time of the whole market’s clearing is
equal to 15 min since all the computations are done through a 5.2 The optimum strategy of market
single computational system. However, in real applications, the participants
aforementioned processes are done individually by each agent,
and this would decrease the computational time significantly. In this part, the heat market is executed for the next day’s 24 h,
The value of ε is considered as 0.003 $. The price adjustment and the optimum strategy of different agents is obtained after
$
parameter, ∆b, is also considered as 0.0015 . It should be market closure. One agent from each category of market par-
kWh
noted that any other values can be considered for these two ticipants is selected, and its optimum strategy is analysed. The
parameters, resulting in different computational time and con- result of a sample agent from the first category of prosumers,
tracts’ prices accuracy. The case study consists of 50 market P1 , is illustrated in Figure 8. As can be inferred from Figure 8,
participants, including 20 prosumers who can sell or purchase in most time intervals, P1 not only satisfies its own demand but
thermal energy and 30 consumers who only consume ther- also sells thermal energy to the market. This is because of the
mal energy. The electrical load data and PV units’ generations high electricity price, which justifies the operation of the micro
are obtained from the UK Customer-Led Network Revolution CHP and enables the agent to offer lower selling contract prices
project’s data [27]. for thermal energy. On the other hand, for time intervals 2 AM
The solar water heater generation profile, thermal and cool- and 3 AM, P1 decides not to operate its micro CHP as low
ing energy demands are also assumed based on the modification electricity price and low thermal demand in the market leads
of data obtained from [24]. The agents’ installations parameters to utilizing the energy stored in the storage unit to satisfy its
are listed in Table 1 [28]. For a better comparison between dif- thermal energy demand. The next agent is a sample agent from
ferent prosumers’ optimum strategy and their profit objective the second category of prosumers, P2 . As can be inferred from
values, the load profiles are assumed to be similar for all pro- Figure 9, in most cases, P2 succeeds in selling thermal energy
sumers. to other agents and also uses its own generation to supply its
1992 DAVOUDI ET AL.

FIGURE 10 Solar water heater generation profile [22]

FIGURE 8 Thermal energy trade of P1

FIGURE 9 Thermal energy trade of P2 FIGURE 11 Thermal energy trade of P3

demand. Although the whole market’s thermal demand is low

at 2 AM and 3 AM, the agent sells a high quantity of thermal ket for each prosumer is the ability to sell and purchase thermal
energy in these time intervals. This is due to the fact that the energy for the same time interval in different iterations. This
prosumers who have micro CHP, AS1 , and prosumers who have means that an agent like P3 can sell and purchase thermal energy
a solar water heater, AS3 , are not willing to generate thermal for the same hour at different market iterations. For instance,
energy in these time intervals due to the low electricity price or at 6 PM, P3 uses its heat storage to sell 0.528 kWh of thermal
lack of solar generation. Hence, P2 and other AS2 agents, ben- energy at 5.8 ¢$/kWh in the 21st market iteration. On the other
efiting from high gas-to-heat efficiency, can sell a high amount hand, it purchases 1.34 kWh of thermal energy at 4.45 ¢$/kWh
of thermal energy in these time intervals. On the other hand, in the 28th market iteration to satisfy its thermal energy demand.
at midnight and 5 AM, due to the low thermal energy demand The next agents are selected from consumers’ categories, C1
of other agents and a medium electricity price that causes the from AB1 and C2 from AB2 . These agents succeed in pur-
AS1 prosumers to offer low selling contract prices, P2 fails to chasing thermal energy to supply their demands for the whole
sell thermal energy in the heat market and utilizes its whole gen- day. This is because the prosumers can generate and propose
eration to satisfy its demand. It is worth mentioning that due to thermal energy at lower prices than the consumers’ generation
the constant gas price throughout the day, P2 does not utilize its costs, which seems reasonable for the consumers to accept the
heat storage. prosumers’ selling contracts’ prices. The results for C1 and C2
The next agent is a sample agent from the third group of trades are illustrated in Figures 12 and 13.
prosumers, P3 . In Figures 10 and 11, the generation profile of
the solar water heater and P3 thermal energy transactions are
illustrated. Due to the low thermal energy generation by the
SWH, P3 in most time intervals purchases thermal energy from
the market to supply its own demand yet succeeds in selling its
excess energy in the heat market at some hours. Despite the high
generation at 3 PM, P3 is not willing to propose its full capac-
ity in the heat market and stores its excess thermal energy in
the heat storage and utilizes the stored energy at 5 PM and 6
PM. This is because of the fact that P3 can sell thermal energy
at 5 PM and 6 PM at a higher price due to the higher electric-
ity price, which leads to high purchasing contract prices by AB1
consumers. One of the inherent benefits of the proposed mar- FIGURE 12 Thermal energy trade of C1
DAVOUDI ET AL. 1993

FIGURE 13 Thermal energy trade of C2 FIGURE 15 Total transacted thermal energy in different market structures

net costs equal the summation of all prosumers’ and consumers’

net costs. In this regard, each agent’s net cost equals the negative
value of its profit optimization problem objective’s value, −Pi .
As can be inferred from Figure 14, although the prosumers’
total net cost in the proposed method has the highest amount
among other strategies, the consumers’ total net cost has
decreased in a manner that results in the lowest total agents’
net cost among other two strategies. Thus, it can be concluded
that the proposed method has settled the market more fairly in
FIGURE 14 Agents’ net costs in different market structures comparison with the other two strategies.
Moreover, the total transacted thermal energy under the
aforementioned market schemes is investigated, as depicted in
Figure 15. As can be inferred from this figure, the total trans-
5.3 Comparison between the proposed acted thermal energy in the peer-to-peer heat market has the
market framework and other strategies highest amount among two other strategies. This is due to
the price adjustment process in the peer-to-peer market, which
In this part, the pros and cons of the proposed method and enables the agents to resubmit their proposing prices in the
two other common strategies for settling the heat market are market if they are not acceptable by other agents. Thus, more
put under investigation. Since, in most cases [31–33], a cen- trades have been made in the proposed peer-to-peer heat mar-
tral pool-based heat market framework is proposed, this mar- ket. Besides, as mentioned before, the proposed market frame-
ket structure is applied to the system under study. To do so, work would eliminate the concerns related to central-based mar-
each market participant submits quantity and price bids for each ket frameworks while the other two common strategies are deal-
hour of the next day along with their technical operational lim- ing with. In this regard, the privacy concerns, computational
its. Subsequently, the market operator collects all the demand burden, and core agent’s failure issues are eliminated in the pro-
and supply bids and clears the market for each time interval. As posed peer-to-peer market framework.
a result, the final heat transactions along with their prices, which
each agent should fulfil in the day-ahead heat market, will be
realized. 6 CONCLUSION
Meanwhile, another common strategy to settle the heat mar-
ket transactions is applied as the second method for the sake of In this paper, a peer-to-peer framework is designed to manage
comparative studies. Based on this method, a constant price for thermal energy transactions in district heating systems. In this
each 1 kWh of heat in the heat market is taken into considera- regard, at first, agents’ bidding strategy to participate in the heat
tion [17]. Thus the agents would only submit quantities of heat market is investigated by a linear optimization problem. Intro-
as bids in the heat market. In order to implement this strategy ducing different strategies for selling/purchasing contracts of
in the same case study, heat price is considered as 6.5 ¢$/kWh agents, the main steps of running the proposed heat market are
and constant during the whole next day [34]. In the following, thoroughly discussed.
the proposed peer-to-peer market framework and the other two The proposed framework also addresses the interdependen-
strategies are employed, and the results are investigated. cies between the electricity market and the heat market as the
To do so, the total net costs of different agents are reported electricity price effects on agents’ optimum behaviour in the
in Figure 14. It is worth mentioning that all consumers’ net costs heat market clearly illustrate this concept. The numerical results
represent the summation of the total net costs of AB1 and AB2 demonstrate the efficiency of the proposed framework that not
agents. Also, all prosumers’ net costs indicate the summation of only all of the market participants gain benefits from partici-
total net costs of AS1 , AS2 , and AS3 agents. Similarly, all agents’ pating in the market but also even small-scale heat producers
1994 DAVOUDI ET AL.

can be regarded as price maker agents. The linearity of the pro- Pei,t Net electricity traded with the grid
posed optimization problem makes the applicability of the pro- Peeth,i,t Purchased electricity from grid to supply
posed framework easier due to the reduction of the required heat
computational burdens. Therefore, it can be applied by small- Pggtha,i,t Purchased gas from grid to use in gas-to-
scale domestic prosumers, lacking the high-performance com- heat appliances
putational tools. Pgc,i,t Purchased gas from grid to use in CHP
For future studies, the proposed market framework can be Pgb,i,t Purchased gas from grid to use in boiler
extended to address the peer-to-peer electricity and heat trans- Qi,t Storage charging or discharging power
actions between the agents at the distribution level. This mar- Ei,t Storage energy capacity
ket framework would not only obtain the optimal strategy and CEc (CEb ) Micro CHP (Boiler) carbon dioxide emis-
operation of the agents but also would manage the electricity sion
p
and heat transactions between the agents by such a previously NCsi,t,k (NCi,t,k ) Negotiable selling (purchasing) contract
explained iterative market framework. p
Csi,t,k (Ci,t,k ) Selling (purchasing) contract
p
Nomenclature Psi,t,k (Pi,t,k ) Selling (purchasing) contract price
SNi,t,k (PNi,t,k ) Sold (purchased) thermal energy with
negotiable prices in each iteration
Set SNNi,t,l (PNNi,t,l ) Sold (purchased) thermal energy with
T Time periods, T = {1,2,…,24} non-negotiable prices in each iteration
p
QNsi,t,k (QNi,t,k ) Proposed quantity of negotiable selling
Indices (purchasing) contract
p
i,j Index for market participants 𝜆hsi,t,k (𝜆hi,t,k ) Proposed price of negotiable selling (pur-
t Index for time periods, t ∈ T chasing) contract
k,l Index for heat market iterations 𝜆́ i,t,k
h,s ́ h,p
(𝜆i,t,k ) Proposed price of non-negotiable selling
Parameters (purchasing) contract
p p
𝜆hi,t ,𝜆hi,t Min. and max allowable purchasing con-
𝜆et , 𝜆gt Electricity, gas price in each time interval
tract price of agent i in time interval t
PVt Output power of photovoltaic system in t (kW) s s
Pswt Output power of solar water heater (SWH) in t 𝜆hi,t ,𝜆hi,t Min. and max allowable selling contract
(kW) price of agent i in time interval t
PT Transformer power limit (kW) P̄ i,t (Pi,t ) Sold (purchased) electricity to (from) grid
ELi,t Electrical Load of participant i at time t
HLi,t , CLi,t Heat, cooling loads of participant i at time t
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