The Effect of Prosumer Duality on Power Market: The Effect of Market Regulation

Electricity prosumers are energy subsystems that not only consume, but also produce electricity. They are present in distribution level networks as traditional utility customers who have installed distributed energy resources. They are also present in transmission level networks as large conglomerates own both generation assets and large industrial loads. Previous work on the economics of prosumers has demonstrated that prosumers in a market have incentives to behave more competitively compared to producers and consumers in traditional markets. This paper further explores the behavior of prosumers and their response to market policies including the allocation of network losses and the impact of net metering. We extend a Cournot model of a dual prosumer and find that prosumers respond with higher supply quantities if network losses are allocated to demand base. They respond with lower supply quantities if network losses are allocated to supply base. Allocating network losses to demand base also causes equilibrium prices to decline. Markets where prosumers first satisfy their own load and then sell the balance of electricity to the grid have lower quantities and higher prices compared to markets where prosumers buy and sell at locational marginal price.