Impact of Prosumer Growth on Electricity Market Prices, Supplier Profitability, and Prosumer Investment: Evidence from Lithuania

Lithuania is a success case in the prosumer-driven deployment of distributed solar photovoltaic (PV) systems. Supported by generous investment subsidies and a net-metering scheme, behind-the-meter solar PV capacity expanded at an exponential rate. This study examined how the rapid growth of prosumer-based solar PV generation has affected the broader electricity market, prosumers, and electricity suppliers. Using electricity market data, the research evaluated impacts on electricity market price formation, electricity suppliers’ profits, prosumer costs, and the prosumers’ investment decisions. The results indicate that, during the early stages of deployment, distributed solar PV systems improved market outcomes by reducing average electricity market prices and enhancing consumer welfare. However, as the installed solar PV capacity increased rapidly, structural imbalances emerged. High solar output during low-demand periods contributed to increased electricity market price volatility, including frequent close-to-zero and even negative price episodes, while periods of low solar availability—particularly during windless winter days—were associated with sharp price spikes. These dynamics generated negative revenue streams for electricity suppliers and weakened investment signals for market-based generation projects. While prosumers, who are predominantly middle- and upper-income households, benefited substantially from reduced electricity costs and stable returns, the findings suggest that non-participating consumers, including vulnerable households, may have faced higher electricity costs. The study highlights the need for adaptive support mechanisms and market design reforms to ensure an equitable and investment-friendly energy transition.