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

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.