Optimal integration and placement of prosumers in distribution systems considering bilateral economic benefits

The growing participation of prosumers equipped with renewable generation and storage systems is reshaping distribution network operation. However, most existing studies treat technical and economic objectives separately, often neglecting coordinated demand response (DR) and reactive power management. This paper proposes a comprehensive optimization framework for the optimal placement and operation of prosumers integrating photovoltaic (PV), wind, and hybrid systems with battery energy storage (BESS). The model minimizes total operational cost by jointly considering power purchase and sale, distribution losses, battery degradation, curtailed renewable energy, reactive power penalties, and DR incentives, ensuring balanced techno-economic trade-offs. Furthermore, inverter-based PV and BESS units are leveraged for reactive power support and power factor improvement, while flexible EV charging is modeled as a time-shiftable load to enhance demand-side flexibility. The proposed framework is tested on the IEEE 33-bus distribution network under twelve scenarios combining variations in prosumer placement, DR participation, and reactive power pricing. Results show that coordinated prosumer integration with DR leads to a 50.5 % reduction in energy purchase costs and a 37.5 % drop in reactive power penalties compared to the base case. However, excessive active power injection degraded the network power factor below 0.5, highlighting the necessity of reactive-power control. Time-variable capacitor compensation at buses with high reactive loads (low power factor) effectively improved the network power factor above 0.9 and reduced the total cost by 52.6 %. The model also demonstrates that optimal placement of a limited number of prosumers achieves nearly the same performance as the unrestricted case, confirming its robustness. • A model optimizes prosumer placement with solar, wind, and hybrid energy systems. • Demand response incentives reduce grid costs more than energy buyback increases. • Active power injection lowers power factor, requiring compensation strategies. • Power factor improved using reactive penalties and time-variable capacitors. • Even limited prosumer placement offers strong technical and economic benefits.