The Effect of Prosumer Duality on Power Market: Evidence from the Cournot Model

TL;DR

This paper extends the Cournot model to analyze how prosumer duality influences market competitiveness, showing that prosumers tend to behave more competitively than traditional producers, which can benefit the power system.

Contribution

It introduces a game-theoretic extension of the Cournot model to incorporate prosumer duality, revealing its impact on market competitiveness.

Findings

Prosumers' best response supply is closer to competitive levels.

Prosumer duality promotes more competitive market behavior.

Extended model demonstrates improved market efficiency.

Abstract

Distributed energy resources behind the meter and automation systems enable traditional electricity consumers to become prosumers (producers/consumers) that can participate in peer-to-peer exchange of electricity and in retail electricity markets. Emerging prosumers can provide benefits to the system by exchanging energy and energy-related services. More importantly, they can do so in a more honest and more competitive way than the traditional producer/consumer systems. We extend the traditional Cournot model to show that the dual nature of prosumers can lead to more competitive behavior under a game theoretic scenario. We show that best response supply quantities of a prosumer are usually closer to the competitive level compared to those of a producer.