Optimal phasing of district heating network investments using multi-stage stochastic programming

Most design optimisation studies for district heating systems have focused on the optimal sizing of network assets and on the location of production units. However, the strategic value of the flexibility in phasing of the inherently modular heat networks, which is an important aspect in many feasibility studies for district heating schemes in the UK, is almost always neglected in the scientific literature. This paper considers the sequential problem faced by a decision-maker in the phasing of long-term investments into district heating networks and their expansions. The problem is formulated as a multi-stage stochastic programme to determine the annual capital expenditure that maximises the expected net present value of the project. The optimisation approach is illustrated by applying it to the hypothetical case of the UK’s Marston Vale eco town. It was found that the approach is capable of simulating the optimal growth of a network, from both a single heat source or separate islands of growth, as well as the optimal marginal expansion of an existing district heating network. The proposed approach can be used by decision makers as a framework to determine both the optimal phasing and extension of district heating networks and can be adapted simply to various, more complex real-life situations by introducing additional constraints and parameters. The versatility of the base formulation also makes it a powerful approach regardless of the size of the network and also potentially applicable to cooling networks