  Distributed energy resources (DERs) such as solar panels have small supply
capacities and cannot be directly integrated into wholesale markets. So, the
presence of an intermediary is critical. The intermediary could be a
profit-seeking entity (called the aggregator) that buys DER supply from
prosumers, and then sells them in the wholesale electricity market. Thus, DER
integration has an influence on wholesale market prices, demand, and supply.
The purpose of this article is to shed light onto the impact of efficient DER
aggregation on the market power of conventional generators. Firstly, under
efficient DER aggregation, we quantify the social welfare gap between two
cases: when conventional generators are truthful, and when they are strategic.
We also do the same when DERs are not present. Secondly, we show that the gap
due to market power of generators in the presence of DERs is smaller than the
one when there is no DER participation. Finally, we provide explicit
expressions of the gaps and conduct numerical experiments to gain deeper
insights. The main message of this article is that market power of conventional
generators can be mitigated by adopting an efficient DER aggregation model.
