Abstract Owing to the high penetration of renewable energy sources, power systems require more flexibility to respond to the fluctuation of variable renewable energy sources. However, flexibility provision by distributed energy resources (DERs) installed on the demand side is a cost-effective measure. In this study, we proposed a scheme that utilizes time-of-use (TOU) electricity rates as an incentive to encourage residential prosumers to provide more flexibility by controlling the DERs. In particular, we developed an energy management system model that applies model predictive control. The TOU rates were designed by an aggregator who traded with markets and prosumers. The DERs of residential prosumers were fuel cells with combined heat and power, CO2 heat pump water heaters, or batteries. Numerical simulations using measured energy demand and insolation data were performed to evaluate the performance of the developed model. According to the results, the developed model could integrate prediction errors and provide flexibility to the grid. Finally, the economies of the aggregator and prosumers were also evaluated.