7, 8 With the decreasing costs of assets, each local energy system could develop and purchase additional resources - distributed generation, storage, electric vehicles (EVs), sophisticated management software, etc. 5, 6 As an example, in Europe, there are more than 7,700 energy communities with over 2 million consumers who are increasingly adopting DERs, where some of them have independent electricity prices for their members. Local energy systems, e.g., microgrids and energy communities, are seen as an integral component of the transition to renewable and decentralized energy systems. 3, 4 On a large scale, this trend may lead to a massive structural change, whose reasons and implications must be better understood. For instance, if a consumer pays a high monthly fee to the utility regardless of its actual consumption from the grid, and in addition may generate power using low-cost local generators, he/she may choose to disconnect. 1, 2 Grid defection refers to the physical disconnection of consumers from the electric grid, and may occur when generating power from distributed sources is cheaper than consuming it from the grid. Specifically, the broadly discussed possibility of grid defection is becoming more realistic than ever and must be addressed by policy makers and all relevant stakeholders. The rapidly growing adoption of distributed energy resources (DERs) is leading to structural changes in electric grids. However, we indicate how, by properly incorporating defection considerations into the grid’s design, social welfare can be improved. We also demonstrate that centralized design approaches may lead to inefficient outcomes, e.g., redundant grid expansions, because of the inherent inability to predict potential defections. Our results reveal that although individual consumers benefit from staying connected at the distribution level, the defection of small energy communities from the grid may lead to the defection of larger communities. Here, we develop a game-theoretic framework that demonstrates how conflicting interests among consumers - an aspect that previous studies overlooked - may lead to complex dynamics of grid defection. On a large scale, this may lead to price inflation, hindrance of the energy transition, and even a “death spiral” – a domino effect of disconnections. Decreasing costs of distributed generation and storage, alongside increasing network charges, provide consumers with a growing incentive to defect from the main grid.
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