S.E.R.G. WP Series #05-2025: "The economic governance of residential prosumers in smart grids"

2025 - Diego Cebreros, Yannick Perez and Jan Lepoutre

As smart grids increasingly integrate decentralized energy resources (DERs), their success de- pends on managing residential prosumers—households that consume and produce electricity through assets such as electric vehicles and rooftop solar panels. However, integrating prosumers introduces new risks, including privacy concerns over prosumer data and the challenge of designing appro- priate economic incentives. There are multiple, often fragmented, perspectives on how prosumers should be integrated, with many overlooking the risks they may face. This paper examines the various organizational structures proposed for prosumer integration through a unifying framework based on transaction cost theory (TCT). By focusing on two key dimensions that drive transaction costs—monitoring and switching costs—we identify four main governance models and analyze their impact on prosumer transaction costs and risks of opportunism. When applied to a compara- tive case study of business models in France, the United Kingdom, and California, our framework reveals a clear gap in organizations that could offer prosumers the lowest risk of third-party op- portunism. This suggests untapped opportunities to develop business models to mitigate these risks and attract prosumers. Finally, our findings contribute to policy discussions on transparency, standardization, automation, and market power, offering insights to advance residential prosumer integration.

Residential; Prosumers; Smart grids.