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

Distributed energy resources and market deregulation enable traditional electricity consumers to become prosumers (producers/consumers) that can use their idle production capacity or concentrate production and consumption assets. Emerging prosumers can provide benefits to the system by exchanging energy and energy-related services. More importantly, they can do so in a 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. We further extend these findings to model prosumer behavior in the presence of transmission constraints, production uncertainty, demand, and production costs.