IDEAS home Printed from https://ideas.repec.org/a/gam/jeners/v14y2021i12p3614-d576838.html
   My bibliography  Save this article

Model-Based Contract Design for Low Energy Waste Heat Contracts: The Route to Pricing

Author

Listed:
  • Edward Wheatcroft

    (Department of Statistics, London School of Economics, London WC2A 2AE, UK)

  • Henry P. Wynn

    (Department of Statistics, London School of Economics, London WC2A 2AE, UK
    Alan Turing Institute, 96 Euston Rd, London NW1 2DB, UK)

  • Victoria Volodina

    (Alan Turing Institute, 96 Euston Rd, London NW1 2DB, UK)

  • Chris J. Dent

    (Alan Turing Institute, 96 Euston Rd, London NW1 2DB, UK
    School of Mathematics, University of Edinburgh, Edinburgh EH9 3JZ, UK)

  • Kristina Lygnerud

    (IVL Swedish Environmental Research Institute, 41133 Göteborg, Sweden)

Abstract

Urban Waste Heat Recovery, heat recovery from low-temperature urban sources such as data centres and metro systems, has a great deal of potential in terms of meeting domestic and commercial heat demands whilst significantly reducing carbon emissions. Urban sources of heat are advantageous in that they tend to be close to areas of high heat demand and are therefore highly suitable as inputs to existing and newly constructed district heating networks. This paper has two main focuses. Firstly, the issue of efficiency in waste heat recovery is addressed with a focus on Technical, Economic, Social, and Environmental (TESE) efficiencies, which we consider should be given equal consideration. Secondly, we address the question of contractual efficiency and argue that contracts should be underpinned by mathematical modelling. We then focus on the contractual relationship between the owner of the waste heat and the district heating operator and consider the question of waste heat pricing. We suggest a profit sharing approach in which the price per unit of waste heat is allowed to vary according to important aspects such as demand and the electricity price. A demonstration of this approach is presented using a simple model of a waste heat recovery system that extracts heat from a data centre in Brunswick, Germany.

Suggested Citation

  • Edward Wheatcroft & Henry P. Wynn & Victoria Volodina & Chris J. Dent & Kristina Lygnerud, 2021. "Model-Based Contract Design for Low Energy Waste Heat Contracts: The Route to Pricing," Energies, MDPI, vol. 14(12), pages 1-15, June.
    • Handle: RePEc:gam:jeners:v:14:y:2021:i:12:p:3614-:d:576838
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/1996-1073/14/12/3614/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/1996-1073/14/12/3614/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Patrick Bolton & Mathias Dewatripont, 2005. "Contract Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262025760, April.
    2. Keith J. Crocker & Kenneth J. Reynolds, 1993. "The Efficiency of Incomplete Contracts: An Empirical Analysis of Air Force Engine Procurement," RAND Journal of Economics, The RAND Corporation, vol. 24(1), pages 126-146, Spring.
    3. Farrell, Joseph, 1987. "Information and the Coase Theorem," Journal of Economic Perspectives, American Economic Association, vol. 1(2), pages 113-129, Fall.
    4. Black, John & Hashimzade, Nigar & Myles, Gareth (ed.), 2012. "A Dictionary of Economics," OUP Catalogue, Oxford University Press, edition 4, number 9780199696321.
    5. Howells, Mark & Rogner, Holger & Strachan, Neil & Heaps, Charles & Huntington, Hillard & Kypreos, Socrates & Hughes, Alison & Silveira, Semida & DeCarolis, Joe & Bazillian, Morgan & Roehrl, Alexander, 2011. "OSeMOSYS: The Open Source Energy Modeling System: An introduction to its ethos, structure and development," Energy Policy, Elsevier, vol. 39(10), pages 5850-5870, October.
    6. Fare, Rolf & Knox Lovell, C. A., 1978. "Measuring the technical efficiency of production," Journal of Economic Theory, Elsevier, vol. 19(1), pages 150-162, October.
    7. Lygnerud, Kristina & Wheatcroft, Edward & Wynn, Henry, 2019. "Contracts, business models and barriers to investing in low temperature district heating projects," LSE Research Online Documents on Economics 101286, London School of Economics and Political Science, LSE Library.
    8. Joseph Schumpeter, 1909. "On the Concept of Social Value," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 23(2), pages 213-232.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Kristina Lygnerud & Sarka Langer, 2022. "Urban Sustainability: Recovering and Utilizing Urban Excess Heat," Energies, MDPI, vol. 15(24), pages 1-11, December.
    2. Ziemele, Jelena & Dace, Elina, 2022. "An analytical framework for assessing the integration of the waste heat into a district heating system: Case of the city of Riga," Energy, Elsevier, vol. 254(PB).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Harstad, Bård, 2016. "The market for conservation and other hostages," Journal of Economic Theory, Elsevier, vol. 166(C), pages 124-151.
    2. Mingfeng Lin & Yong Liu & Siva Viswanathan, 2018. "Effectiveness of Reputation in Contracting for Customized Production: Evidence from Online Labor Markets," Management Science, INFORMS, vol. 64(1), pages 345-359, January.
    3. Radygin Alexandr & Entov Revold & Apevalova E. & Shvetsov P., 2008. "Market Discipline and Contracts: Theory, Empiric Analysis, Law," Research Paper Series, Gaidar Institute for Economic Policy, issue 117P.
    4. Morstyn, Thomas & Collett, Katherine A. & Vijay, Avinash & Deakin, Matthew & Wheeler, Scot & Bhagavathy, Sivapriya M. & Fele, Filiberto & McCulloch, Malcolm D., 2020. "OPEN: An open-source platform for developing smart local energy system applications," Applied Energy, Elsevier, vol. 275(C).
    5. Després, Jacques & Hadjsaid, Nouredine & Criqui, Patrick & Noirot, Isabelle, 2015. "Modelling the impacts of variable renewable sources on the power sector: Reconsidering the typology of energy modelling tools," Energy, Elsevier, vol. 80(C), pages 486-495.
    6. Giat, Yahel & Subramanian, Ajay, 2013. "Dynamic contracting under imperfect public information and asymmetric beliefs," Journal of Economic Dynamics and Control, Elsevier, vol. 37(12), pages 2833-2861.
    7. H Peyton Young, 2014. "The Evolution of Social Norms," Economics Series Working Papers 726, University of Oxford, Department of Economics.
    8. Ariño, Africa & Reuer, Jeffrey J., 2004. "Alliance contractual design," IESE Research Papers D/572, IESE Business School.
    9. Ashrafi, Ali & Seow, Hsin-Vonn & Lee, Lai Soon & Lee, Chew Ging, 2013. "The efficiency of the hotel industry in Singapore," Tourism Management, Elsevier, vol. 37(C), pages 31-34.
    10. Juan Aparicio & Jesus T. Pastor & Jose L. Sainz-Pardo & Fernando Vidal, 2020. "Estimating and decomposing overall inefficiency by determining the least distance to the strongly efficient frontier in data envelopment analysis," Operational Research, Springer, vol. 20(2), pages 747-770, June.
    11. Schottmuller, C. & Boone, J., 2012. "Stochastic Mechanisms and Quasi-Linear Preferences," Discussion Paper 2012-047, Tilburg University, Center for Economic Research.
    12. Dean V. Williamson, 2010. "Financial-Market Contracting," Chapters, in: Peter G. Klein & Michael E. Sykuta (ed.), The Elgar Companion to Transaction Cost Economics, chapter 24, Edward Elgar Publishing.
    13. Gordon L Clark & Ashby H B Monk, 2014. "The Geography of Investment Management Contracts: The UK, Europe, and the Global Financial Services Industry," Environment and Planning A, , vol. 46(3), pages 531-549, March.
    14. Roussey, Ludivine & Soubeyran, Raphael, 2018. "Overburdened judges," International Review of Law and Economics, Elsevier, vol. 55(C), pages 21-32.
    15. Espínola-Arredondo, Ana & Muñoz-García, Félix, 2013. "When does environmental regulation facilitate entry-deterring practices," Journal of Environmental Economics and Management, Elsevier, vol. 65(1), pages 133-152.
    16. Ravelojaona, Paola, 2019. "On constant elasticity of substitution – Constant elasticity of transformation Directional Distance Functions," European Journal of Operational Research, Elsevier, vol. 272(2), pages 780-791.
    17. Østergaard, P.A. & Lund, H. & Thellufsen, J.Z. & Sorknæs, P. & Mathiesen, B.V., 2022. "Review and validation of EnergyPLAN," Renewable and Sustainable Energy Reviews, Elsevier, vol. 168(C).
    18. Tae Ho Eom & William Duncombe & Phuong Nguyen-Hoang & John Yinger, 2014. "The Unintended Consequences of Property Tax Relief: New York’s STAR Program," Education Finance and Policy, MIT Press, vol. 9(4), pages 446-480, October.
    19. Nieken, Petra & Schmitz, Patrick W., 2012. "Repeated moral hazard and contracts with memory: A laboratory experiment," Games and Economic Behavior, Elsevier, vol. 75(2), pages 1000-1008.
    20. Birgitte Grøgaard & Asmund Rygh & Gabriel R. G. Benito, 2019. "Bringing corporate governance into internalization theory: State ownership and foreign entry strategies," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 50(8), pages 1310-1337, October.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jeners:v:14:y:2021:i:12:p:3614-:d:576838. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.