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

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.