Abstract – This paper presents MASCEM - a multi-agent based electricity market simulator. MASCEM uses game theory, machine learning techniques, scenario analysis and optimization techniques to model market agents and to provide them with decision-support. This paper mainly focus on the MASCEM ability to provide the means to model and simulate Virtual Power Players (VPP). VPPs are represented as a coalition of agents, with specific characteristics and goals. The paper details some of the most important aspects considered in VPP formation and in the aggregation of new producers and includes a case study based on real data. Keywords - Decision-making, Distributed Generation, Electricity Markets, Intelligent Agents Coalitions, Virtual Power Producers, Virtual Power Players I. INTRODUCTION HE increase of distributed generation (DG) has brought about new challenges in electricity markets and in DG units operation and management. Despite the favorable scenario to DG growth, there are important aspects to consider, both of economic and technical nature. Issues such as the dispatch ability (namely in wind and photovoltaic technologies), the participation of small producers in the market and the maintenance high cost require further attention. Virtual Power Producers are composed of multi-technology and multi-site heterogeneous production entities, which can enable overcoming some of these problems. They can also aggregate consumers and other energy resources such as storage, becoming Virtual Power Players (VPP). This paper presents a market simulation tool, MASCEM (Multi-Agent Simulator of Competitive Electricity Markets), which models several electricity market mechanisms. Agents, representing the different independent entities in Electricity Markets, are allowed to establish their own objectives and decision rules. They have dynamic strategies that consider other agents’ behavior, learning from past situations and agents’ past actions. MASCEM uses game theory, machine The authors would like to acknowledge FCT, FEDER, POCTI, POSI, POCI, POSC and POTDC for their support to R&D Projects and GECAD Unit. P. Oliveira, T. Pinto, H. Morais, Z. Vale and I. Praça are with GECAD – Knowledge Engineering and Decision-Support Research Center of the Electrical Engineering Institute of Porto – Polytechnic Institute of Porto (ISEP/IPP), Rua Dr. António Bernardino de Almeida, 431, 4200-072 Porto, Portugal (e-mail: pmrfop@gmail.com ; tmp@isep.ipp.pt ; hgvm@isep.ipp.pt ; zav@isep.ipp.pt ; icp@isep.ipp.pt ). learning techniques and scenario analysis to model market agents. MASCEM includes simulation modules to deal with VPP operation, from production and load forecasting to real-time operation, after market clearance and generation dispatch. These tools provide resources for the set of tasks that VPP have to deal with, including reserve management, strategic bidding and producers’ remuneration. This paper mainly focus VPP formation and producers’ aggregation. These must take into account VPPs’ strategic goals. MASCEM considers producers’ classification, determined by each VPP, as well as the identified VPP needs, according to their importance in the considered context. MASCEM treats VPPs as agent coalitions, so VPP formation uses the process used in multi-agent systems for coalition formation. This attends to general goals of coalitions as well as to specific goals of the VPP. Section 2 explores the concept of VPPs and producers aggregation and Section 3 gives an overview of MASCEM. Section 4 deals with coalitions, in the context of multi-agent systems, detailing its use for VPP modeling in MASCEM. Section 5 presents a case study and, finally, section 6 presents the most relevant conclusions of the paper. II. VIRTUAL POWER PRODUCERS In the scope of a VPP, producers can make sure their generators are optimally operated and that the energy has a good chance of being sold on the market. At the same time, VPPs are able to commit to a more robust generation profile, raising the value of non-dispatchable generation technologies [1]. Under this context, VPPs can ensure secure and environmentally friendly generation and optimal management of heat, cold and electricity. They can also provide the means to ensure optimal operation, maintenance of generation equipment and electricity market participation. In practice, VPPs will have three distinct fields of activity: 1) Energy markets - In this area VPPs have the function of a trading floor with intentions of selling the maximum energy to brokers at the best price at a particular moment, guaranteeing the supply security. VPPs will have to define delivery points, as well as possible alternative scenarios to account for variations of their associates’ generation. VPPs can also act in ancillary services markets; 2) Aggregated producers - VPPs act as a dispatch center, determining the power delivered by each associated producer; 3) Parallel markets - VPP can negotiate in other business areas such as carbon markets and selling the hot/cool water obtained with some DG technologies. MASCEM – An Electricity Market Simulator providing Coalition Support for Virtual Power Players Pedro Oliveira, Tiago Pinto, Hugo Morais, Zita A. Vale, Member, IEEE, and Isabel Praça T