WO2007056816A1 - A method or system for trading in a commodity - Google Patents

A method or system for trading in a commodity Download PDF

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Publication number
WO2007056816A1
WO2007056816A1 PCT/AU2006/001724 AU2006001724W WO2007056816A1 WO 2007056816 A1 WO2007056816 A1 WO 2007056816A1 AU 2006001724 W AU2006001724 W AU 2006001724W WO 2007056816 A1 WO2007056816 A1 WO 2007056816A1
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Prior art keywords
demand
commodity
variable
trading
residual
Prior art date
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PCT/AU2006/001724
Other languages
French (fr)
Inventor
Scott Anthony Macdonald
Original Assignee
Man Financial Australia Limited
Priority date (The priority date is an assumption and is not a legal conclusion. Google has not performed a legal analysis and makes no representation as to the accuracy of the date listed.)
Filing date
Publication date
Priority claimed from AU2005906519A external-priority patent/AU2005906519A0/en
Application filed by Man Financial Australia Limited filed Critical Man Financial Australia Limited
Publication of WO2007056816A1 publication Critical patent/WO2007056816A1/en

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    • G—PHYSICS
    • G06—COMPUTING; CALCULATING OR COUNTING
    • G06Q—INFORMATION AND COMMUNICATION TECHNOLOGY [ICT] SPECIALLY ADAPTED FOR ADMINISTRATIVE, COMMERCIAL, FINANCIAL, MANAGERIAL OR SUPERVISORY PURPOSES; SYSTEMS OR METHODS SPECIALLY ADAPTED FOR ADMINISTRATIVE, COMMERCIAL, FINANCIAL, MANAGERIAL OR SUPERVISORY PURPOSES, NOT OTHERWISE PROVIDED FOR
    • G06Q40/00—Finance; Insurance; Tax strategies; Processing of corporate or income taxes
    • G06Q40/04—Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange
    • G—PHYSICS
    • G06—COMPUTING; CALCULATING OR COUNTING
    • G06Q—INFORMATION AND COMMUNICATION TECHNOLOGY [ICT] SPECIALLY ADAPTED FOR ADMINISTRATIVE, COMMERCIAL, FINANCIAL, MANAGERIAL OR SUPERVISORY PURPOSES; SYSTEMS OR METHODS SPECIALLY ADAPTED FOR ADMINISTRATIVE, COMMERCIAL, FINANCIAL, MANAGERIAL OR SUPERVISORY PURPOSES, NOT OTHERWISE PROVIDED FOR
    • G06Q50/00—Systems or methods specially adapted for specific business sectors, e.g. utilities or tourism
    • G06Q50/06—Electricity, gas or water supply

Definitions

  • the present invention broadly relates to a method or system for trading in a commodity.
  • the present invention relates to trading in commodities with a time variable demand and cannot be stored, such as electricity.
  • Electricity is typically provided to end users via electricity retailers. Any given wholesale electricity market typically involves a number of electricity generators, retailers and traders. As is the case with most commodities the price of electricity varies depending on the supply/ demand ratio.
  • Uniform load reflects a constant load quantity throughout the different time intervals of a trading period whereas variable load reflects changeable load quantities for the different time intervals throughout a given trading period.
  • Uniform load electricity pricing typically involves: an average price for all time intervals within a specified trading period; an average price for all peak time intervals within a specified trading period; or an average price for all off-peak time intervals within a specified trading period. These forms of uniform load electricity trading are known as flat, peak and off-peak respectively.
  • Variable load pricing of electricity typically involves specific time intervals of work and/or non-work days.
  • the cost of electricity for each time interval is calculated by multiplying the load quantity of electricity during that interval by the market price of electricity per unit during that interval.
  • the cost of electricity for the trading period is typically based on the sum of the costs for each specific time interval of the trading period.
  • the average price of electricity during any given trading period is typically calculated by dividing the cost for the trading period by the total load quantity during the trading period. The resulting average price is referred to as the load weighted average price.
  • Wholesale electricity trading may involve an intermediary in the form of a broker and / or an exchange. These intermediaries typically facilitate trade between electricity generators, retailers and traders. However, because of the complicated manner in which variable load pricing is calculated and the individuality of variable load requirements by participants, the intermediaries typically only facilitate trade involving uniform load pricing. As the demand for electricity may vary greatly throughout any given 24-hour period it may be typically difficult for market participants to execute a trade or trades of a desired load profile.
  • a method of trading a commodity comprising the steps of: determining a variable commodity demand; assigning a reference uniform demand to the commodity demand, said reference uniform demand being equal to or greater than the maximum value of the variable commodity demand; deriving a residual commodity demand by comparison of the reference uniform demand and the variable commodity demand; and calculating a price for: the variable commodity demand; or the residual commodity demand; or the reference uniform demand.
  • x is, or is representative of, the variable commodity demand
  • y is, or is representative of, the residual commodity demand
  • z is, or is representative of, the reference uniform demand
  • a is a price for the variable commodity demand
  • b is a price for the residual commodity demand
  • c is a price for the reference uniform demand.
  • the above step may be repeated for the creation of multiple variable commodity demands of different structure.
  • variable commodity demand varies over a predetermined time period.
  • a second aspect of the present invention there is provided a method of an intermediary facilitating trade between a buyer and a seller in the variable commodity demand and/or the residual commodity demand as calculated in the first aspect of the invention.
  • the method of the second aspect involves the intermediary obtaining bids and/or offers from market participants which result in a trade in the variable commodity demand and/or the residual commodity demand.
  • a system for trading a commodity comprising: data input means for inputting data defining a variable commodity demand, and a reference uniform demand corresponding to the variable demand; data processing means in communication with the data input means and configured for processing the input data; and data output means in communication with the data processing means and configured for outputting a residual commodity demand.
  • the data processing means of the third aspect of the present invention is preferably arranged to derive the residual commodity demand in accordance with the method described above.
  • the method also comprises the step of defining the variable commodity demand.
  • the variable commodity demand is preferably defined by a series of three or more discrete commodity demand values, which correspond to specific time intervals within the predetermined time period.
  • the variable commodity demand may be defined by a series of inputs representing the relative value of the variable commodity demand against the reference uniform demand for each specific time interval within the predetermined time period.
  • the reference uniform demand may be assigned a value of 1 and the variable commodity demand being defined by the relative proportion for each specific time interval within the predetermined time period.
  • the reference uniform demand is preferably equal to a maximum value of the variable commodity demand during the predetermined time period. However, the reference uniform demand may also be greater than the maximum value of the variable commodity demand.
  • the residual commodity demand is preferably derived by subtracting each specific time interval of the variable commodity demand from the corresponding specific time interval of the reference uniform demand over the predetermined time period.
  • the method also comprises the step of facilitating trading in the commodity.
  • the method preferably further comprises the step of the intermediary facilitating trading in the commodity for the variable commodity demand, or the residual commodity demand or both the variable commodity demand and residual commodity demand.
  • variable commodity demand or the residual commodity demand is one of a plurality of variable commodity demands.
  • the present invention at least in its preferred form creates tradeable parcels of variable load electricity.
  • Figure 1 is a graph representing uniform load (flat) electricity
  • Figure 2 is a graph representing variable load electricity
  • Figure 3 is a table of data including variable commodity demand, reference uniform demand and residual commodity demand corresponding to and derived from Figures 1 and 2;
  • Figure 4 is a graph representing one example of residual commodity demand corresponding to the data from the table of Figure 3 ;
  • Figure 5 is a comparative table corresponding to the variable load data of Figure 2 and from which the load weighted average price is calculated using traditional practices;
  • Figure 6 is a schematic view of one example of an output screen of a trading system of the present invention showing input and output data of calculations based on the actual data of Figures 1 to 5;
  • Figure 7 is a graph representing another example of a variable commodity demand titled "Commodity Demand 1";
  • Figure 8 is a graph representing one example of a reference uniform demand corresponding to the commodity demand of Figure 7;
  • Figure 9 is a table of data including variable commodity demand, reference uniform demand and residual commodity demand corresponding to and derived from Figures 7 and 8;
  • Figure 10 is a graph representing residual commodity demand corresponding to the data from the table of Figure 9;
  • Figure 11 is a graph which illustrates the relationship between variable commodity demand, reference uniform demand and residual commodity demand corresponding to or derived from the data of Figures 7 to 10;
  • Figure 12 is a graph representing a further example of a variable commodity demand titled "Commodity Demand 2";
  • Figure 13 is a table including variable commodity demand, reference uniform demand and residual commodity demand corresponding to and derived from Figures 8 and 12;
  • Figure 14 is a graph representing residual commodity demand corresponding to the data from the table of Figure 13.
  • Figures 1 - 14 concern electricity loads and electricity pricing and show examples of the present invention. These examples illustrate the relationship with the market-standard parcels of uniform load electricity and the benefits of the created tradeable parcels of variable load electricity.
  • Figure 1 shows one example of uniform load electricity, commonly referred to as flat electricity, over a 48 hour trading period and divided into 96 half-hourly intervals. Referring to the horizontal axis, the first 24 hours represents a work day and the remaining 24 hours represents a non-work day. The vertical axis represents electricity load data, which may be expressed in mega watts (MW).
  • MW mega watts
  • Figure 2 shows one example of a variable commodity demand which is similar to Figure 1 except that it has variation in the electricity load over the intervals of the same 48 hour trading period.
  • Figure 3 are tables corresponding to data derived from Figures 1 and 2 which gives a value for each interval of the trading period.
  • the first column of the left hand table gives the time intervals of the work days within the trading period.
  • the first column of the right hand table gives the time intervals of the non-work days within the trading period.
  • the second columns of each of the tables gives the variable load value for the commodity demand of Figure 2.
  • the third columns of each of the tables gives the load value for the uniform load of Figure 1.
  • the load values in the fourth columns of each of the tables of figure 3 correspond to what according to a preferred form of the present invention is referred to as residual commodity demand.
  • the value for each interval of the residual commodity demand is calculated by subtracting the corresponding variable commodity demand value from the reference uniform demand value.
  • Figure 4 shows one example of a residual commodity demand of the present invention using the calculated values of the table of Figure 3.
  • Figure 5 is a table of data used to calculate the load weighted average price (LWAP) of electricity for the previous example given a market price for each half -hourly interval of the trading period.
  • LWAP load weighted average price
  • a market price for each interval is ascertained (column 3) and then multiplied by the load per interval (column 2) to provide a "Load x Price" per interval (column 4).
  • These "Load x Price" values for each interval are then summed for all periods and divided by the total of the load values to obtain the LWAP.
  • the LWAP is calculated as $27.72.
  • Figure 6 is an example of an output screen of a preferred form of the present invention which relates to the data of Figures 1 to 4.
  • a market price of $25.71 is given for flat electricity for the 48 hour trading period and a market price of $22.99 is given for the commodity demand residual for the same trading period.
  • a power generator desires to sell flat electricity for this trading period at $25.71 and gives this offer to an intermediary in the form of a broker.
  • the broker canvasses the market and for this trading period receives a bid of $22.99 for the commodity demand residual of this embodiment of the invention from Retailer A.
  • Retailer B expresses buying interest in the variable commodity demand of this example of the invention for this trading period.
  • the broker conveys this information to the power generator.
  • the power generator makes an offer of the variable commodity demand at $27.72. If in this example Retailer B purchases the variable commodity demand for a price of $27.72 and the power generator also sells the commodity demand residual to Retailer A for $22.99 then all parties to the trades are satisfied.
  • Figure 7 shows one example of a variable commodity demand, titled “Commodity Demand 1", which is applied to the peak hours of electricity.
  • This "shape" may for example generally reflect a summer electricity load profile.
  • Figure 8 shows one example of uniform load electricity commonly referred to as peak electricity which is used as the reference uniform demand for the variable commodity demand examples of Figures 7 and 12.
  • Figure 9 is a table corresponding to and derived from Figures 7 and 8 which gives a value for each interval of the trading period.
  • the first column gives the time intervals of the work days within the trading period.
  • the second column gives the load values of the variable commodity demand of Figure 7.
  • the third column gives the load values of the reference uniform demand of Figure 8 and the fourth column gives the load values for the residual commodity demand by subtracting the corresponding variable commodity demand value from the reference uniform demand value.
  • Figure 10 shows one example of a residual commodity demand of the present invention, titled "Commodity Demand 1 Residual" using the calculated values of the table of Figure 9.
  • Figure 12 shows another example of a variable commodity demand, titled “Commodity Demand 2", which is also applied to the peak hours of electricity.
  • This "shape” may for example generally reflect a winter electricity load profile.
  • Figure 13 is a table corresponding to and derived from Figures 12 and 14 which gives a value for each interval of the trading period.
  • the first column gives the time intervals of the work days within the trading period.
  • the second column gives the load values of the variable commodity demand of Figure 12.
  • the third column gives the load values of the reference uniform demand of Figure 8 and the fourth column gives the load values for the residual commodity demand by subtracting the corresponding variable commodity demand value from the reference uniform demand value.
  • Figure 14 shows another example of a residual commodity demand of the present invention, titled “Commodity Demand 2 Residual” using the calculated values of the table of Figure 13.
  • variable or residual commodity demand (a) it allows quick pricing for a variable or residual commodity demand and avoids the traditional method of obtaining the load weighted average price for a variable load, which is to assign a price for every internal within a trading period; and (b) it allows the creation of variable parcels of a commodity such as electricity which have a constant relationship to the market standard parcels known as flat, peak and off-peak.
  • variable commodity demand loads as shown may be altered or applied to other trading periods.
  • the corresponding commodity demand residual loads would then be calculated as described above.
  • the commodity need not be limited to electricity but may extend to other energy sources, goods and industrial raw materials.
  • present embodiments are, therefore, to be considered in all respects as illustrative and not restrictive.

Abstract

The present invention relates generally to a method or system for trading in a commodity, such as electricity. The invention at least in a preferred form allows for a price calculation of either variable commodity demand or residual commodity demand based on a price for the other together with reference uniform demand, said price being determined according to the formula ax + by = cz where: x is, or is representative of, the variable commodity demand; y is, or is representative of, the residual commodity demand; z is, or is representative of, the reference uniform demand; a is a price for the variable commodity demand; b is a price for the residual commodity demand; and c is a price for the reference uniform demand.

Description

A METHOD OR SYSTEM FOR TRADING IN A COMMODITY
FIELD OF THE INVENTION
The present invention broadly relates to a method or system for trading in a commodity. In particular, the present invention relates to trading in commodities with a time variable demand and cannot be stored, such as electricity.
BACKGROUND OF THE INVENTION
Electricity is typically provided to end users via electricity retailers. Any given wholesale electricity market typically involves a number of electricity generators, retailers and traders. As is the case with most commodities the price of electricity varies depending on the supply/ demand ratio.
It is typically difficult to store large amounts of electricity. The rate of production of electricity is therefore controlled to meet predicted rates of consumption. There is typically large variation in the rate of consumption of electricity throughout any given 24 hour period. It is however difficult to correspondingly vary electricity production. As a result, there is a large variation in the supply/ demand ratio. This results in large variations in the price of electricity throughout any given 24 hour period.
Due to the volatile nature of electricity prices, market participants typically enter into trades within the wholesale market on a forward basis. Electricity retailers enter into trades to hedge their customer load requirements. Electricity generators also enter into trades to secure a price for electricity, which they may generate, and traders provide added liquidity to the market by entering into trades with the aim of financial gain.
Wholesale electricity is typically traded in either a uniform load or a variable load. Uniform load reflects a constant load quantity throughout the different time intervals of a trading period whereas variable load reflects changeable load quantities for the different time intervals throughout a given trading period. Uniform load electricity pricing typically involves: an average price for all time intervals within a specified trading period; an average price for all peak time intervals within a specified trading period; or an average price for all off-peak time intervals within a specified trading period. These forms of uniform load electricity trading are known as flat, peak and off-peak respectively.
Variable load pricing of electricity typically involves specific time intervals of work and/or non-work days. The cost of electricity for each time interval is calculated by multiplying the load quantity of electricity during that interval by the market price of electricity per unit during that interval. The cost of electricity for the trading period is typically based on the sum of the costs for each specific time interval of the trading period. The average price of electricity during any given trading period is typically calculated by dividing the cost for the trading period by the total load quantity during the trading period. The resulting average price is referred to as the load weighted average price.
Wholesale electricity trading may involve an intermediary in the form of a broker and / or an exchange. These intermediaries typically facilitate trade between electricity generators, retailers and traders. However, because of the complicated manner in which variable load pricing is calculated and the individuality of variable load requirements by participants, the intermediaries typically only facilitate trade involving uniform load pricing. As the demand for electricity may vary greatly throughout any given 24-hour period it may be typically difficult for market participants to execute a trade or trades of a desired load profile.
SUMMARY OF THE INVENTION
In a first aspect of the present invention there is provided a method of trading a commodity, said method comprising the steps of: determining a variable commodity demand; assigning a reference uniform demand to the commodity demand, said reference uniform demand being equal to or greater than the maximum value of the variable commodity demand; deriving a residual commodity demand by comparison of the reference uniform demand and the variable commodity demand; and calculating a price for: the variable commodity demand; or the residual commodity demand; or the reference uniform demand. Preferably the price calculation is performed according to a formula ax + by = cz where: x is, or is representative of, the variable commodity demand; y is, or is representative of, the residual commodity demand; z is, or is representative of, the reference uniform demand; a is a price for the variable commodity demand; b is a price for the residual commodity demand; and c is a price for the reference uniform demand.
The above step may be repeated for the creation of multiple variable commodity demands of different structure.
Generally the variable commodity demand varies over a predetermined time period.
In a second aspect of the present invention there is provided a method of an intermediary facilitating trade between a buyer and a seller in the variable commodity demand and/or the residual commodity demand as calculated in the first aspect of the invention.
Preferably the method of the second aspect involves the intermediary obtaining bids and/or offers from market participants which result in a trade in the variable commodity demand and/or the residual commodity demand.
In a third aspect of the present invention there is provided a system for trading a commodity, the system comprising: data input means for inputting data defining a variable commodity demand, and a reference uniform demand corresponding to the variable demand; data processing means in communication with the data input means and configured for processing the input data; and data output means in communication with the data processing means and configured for outputting a residual commodity demand.
The system may also be configured to calculate the price for any one of: the variable commodity demand; or the reference uniform demand; or the residual commodity demand when input with a price for the other two, said price being determined according to the formula ax + by = cz where: x is, or is representative of, the variable commodity demand; y is, or is representative of, the residual commodity demand; z is, or is representative of, the reference uniform demand; and a is a price for the variable commodity demand; & is a price for the residual commodity demand; and c is a price for the reference uniform demand.
The data processing means of the third aspect of the present invention is preferably arranged to derive the residual commodity demand in accordance with the method described above.
Preferably the method also comprises the step of defining the variable commodity demand. The variable commodity demand is preferably defined by a series of three or more discrete commodity demand values, which correspond to specific time intervals within the predetermined time period. However, the variable commodity demand may be defined by a series of inputs representing the relative value of the variable commodity demand against the reference uniform demand for each specific time interval within the predetermined time period. Using this method the reference uniform demand may be assigned a value of 1 and the variable commodity demand being defined by the relative proportion for each specific time interval within the predetermined time period.
The reference uniform demand is preferably equal to a maximum value of the variable commodity demand during the predetermined time period. However, the reference uniform demand may also be greater than the maximum value of the variable commodity demand.
The residual commodity demand is preferably derived by subtracting each specific time interval of the variable commodity demand from the corresponding specific time interval of the reference uniform demand over the predetermined time period.
Preferably the method also comprises the step of facilitating trading in the commodity. The method preferably further comprises the step of the intermediary facilitating trading in the commodity for the variable commodity demand, or the residual commodity demand or both the variable commodity demand and residual commodity demand.
Generally the variable commodity demand or the residual commodity demand is one of a plurality of variable commodity demands.
The present invention at least in its preferred form creates tradeable parcels of variable load electricity.
BRIEF DESCRIPTION OF THE FIGURES
A preferred embodiment of the present invention will now be described, by way of example only, with reference to the following figures in which:
Figure 1 is a graph representing uniform load (flat) electricity;
Figure 2 is a graph representing variable load electricity;
Figure 3 is a table of data including variable commodity demand, reference uniform demand and residual commodity demand corresponding to and derived from Figures 1 and 2;
Figure 4 is a graph representing one example of residual commodity demand corresponding to the data from the table of Figure 3 ;
Figure 5 is a comparative table corresponding to the variable load data of Figure 2 and from which the load weighted average price is calculated using traditional practices;
Figure 6 is a schematic view of one example of an output screen of a trading system of the present invention showing input and output data of calculations based on the actual data of Figures 1 to 5;
Figure 7 is a graph representing another example of a variable commodity demand titled "Commodity Demand 1";
Figure 8 is a graph representing one example of a reference uniform demand corresponding to the commodity demand of Figure 7; Figure 9 is a table of data including variable commodity demand, reference uniform demand and residual commodity demand corresponding to and derived from Figures 7 and 8;
Figure 10 is a graph representing residual commodity demand corresponding to the data from the table of Figure 9;
Figure 11 is a graph which illustrates the relationship between variable commodity demand, reference uniform demand and residual commodity demand corresponding to or derived from the data of Figures 7 to 10;
Figure 12 is a graph representing a further example of a variable commodity demand titled "Commodity Demand 2";
Figure 13 is a table including variable commodity demand, reference uniform demand and residual commodity demand corresponding to and derived from Figures 8 and 12; and
Figure 14 is a graph representing residual commodity demand corresponding to the data from the table of Figure 13.
DETAILED DESCRIPTION OF THE [INVENTION/PREFERRED EMBODIMENT]
Figures 1 - 14 concern electricity loads and electricity pricing and show examples of the present invention. These examples illustrate the relationship with the market-standard parcels of uniform load electricity and the benefits of the created tradeable parcels of variable load electricity.
Figure 1 shows one example of uniform load electricity, commonly referred to as flat electricity, over a 48 hour trading period and divided into 96 half-hourly intervals. Referring to the horizontal axis, the first 24 hours represents a work day and the remaining 24 hours represents a non-work day. The vertical axis represents electricity load data, which may be expressed in mega watts (MW).
Figure 2 shows one example of a variable commodity demand which is similar to Figure 1 except that it has variation in the electricity load over the intervals of the same 48 hour trading period. Figure 3 are tables corresponding to data derived from Figures 1 and 2 which gives a value for each interval of the trading period. The first column of the left hand table gives the time intervals of the work days within the trading period. The first column of the right hand table gives the time intervals of the non-work days within the trading period. The second columns of each of the tables gives the variable load value for the commodity demand of Figure 2. The third columns of each of the tables gives the load value for the uniform load of Figure 1.
Importantly, the load values in the fourth columns of each of the tables of figure 3 correspond to what according to a preferred form of the present invention is referred to as residual commodity demand. The value for each interval of the residual commodity demand is calculated by subtracting the corresponding variable commodity demand value from the reference uniform demand value. Figure 4 shows one example of a residual commodity demand of the present invention using the calculated values of the table of Figure 3.
Figure 5 is a table of data used to calculate the load weighted average price (LWAP) of electricity for the previous example given a market price for each half -hourly interval of the trading period. To calculate the LWAP a market price for each interval is ascertained (column 3) and then multiplied by the load per interval (column 2) to provide a "Load x Price" per interval (column 4). These "Load x Price" values for each interval are then summed for all periods and divided by the total of the load values to obtain the LWAP. In this example the LWAP is calculated as $27.72.
Figure 6 is an example of an output screen of a preferred form of the present invention which relates to the data of Figures 1 to 4. In this example, a market price of $25.71 is given for flat electricity for the 48 hour trading period and a market price of $22.99 is given for the commodity demand residual for the same trading period. The LWAP is according to a preferred embodiment of this invention calculated using the formula ax + by = cz where a is the price to be determined for the variable commodity demand, b is $22.99 being the price for the residual commodity demand, is $25.71 being the price for the reference uniform demand, x is 27.6 being the commodity demand, y is 20.4 being the residual commodity demand, and z is 48 being the reference uniform demand. This gives an output price or LWAP for the given variable commodity demand in this example of $27.72. Importantly this calculation in using the residual commodity demand eliminates the need for a market price for each of 96 individual intervals in determining the LWAP for the variable commodity demand.
In a practical application of trading within the wholesale electricity market, a power generator desires to sell flat electricity for this trading period at $25.71 and gives this offer to an intermediary in the form of a broker. The broker canvasses the market and for this trading period receives a bid of $22.99 for the commodity demand residual of this embodiment of the invention from Retailer A. Retailer B expresses buying interest in the variable commodity demand of this example of the invention for this trading period. The broker conveys this information to the power generator. Using the formula ax + by = cz a price is calculated for the variable commodity demand where the power generator is able to offer in order to achieve selling Flat electricity for $25.71. Through the broker, the power generator makes an offer of the variable commodity demand at $27.72. If in this example Retailer B purchases the variable commodity demand for a price of $27.72 and the power generator also sells the commodity demand residual to Retailer A for $22.99 then all parties to the trades are satisfied.
Figure 7 shows one example of a variable commodity demand, titled "Commodity Demand 1", which is applied to the peak hours of electricity. This "shape" may for example generally reflect a summer electricity load profile.
Figure 8 shows one example of uniform load electricity commonly referred to as peak electricity which is used as the reference uniform demand for the variable commodity demand examples of Figures 7 and 12.
Figure 9 is a table corresponding to and derived from Figures 7 and 8 which gives a value for each interval of the trading period. The first column gives the time intervals of the work days within the trading period. The second column gives the load values of the variable commodity demand of Figure 7. The third column gives the load values of the reference uniform demand of Figure 8 and the fourth column gives the load values for the residual commodity demand by subtracting the corresponding variable commodity demand value from the reference uniform demand value. Figure 10 shows one example of a residual commodity demand of the present invention, titled "Commodity Demand 1 Residual" using the calculated values of the table of Figure 9.
Figure 11 is a graphical representation of the relationship in the preferred form of the present invention between the variable commodity demand, the reference uniform demand and the residual commodity demand. Located within Figure 11 are the "Commodity Demand 1" of Figure 7 with the addition of "Commodity Demand 1 Residual" of Figure 10 combined to create the example of uniform load given in Figure 8 which is referred to as peak electricity. This illustrates the relationship for each time interval within the preferred form of the present invention as: Variable Commodity Demand + Commodity Demand Residual = Reference Uniform Demand
Figure 12 shows another example of a variable commodity demand, titled "Commodity Demand 2", which is also applied to the peak hours of electricity. This "shape" may for example generally reflect a winter electricity load profile.
Figure 13 is a table corresponding to and derived from Figures 12 and 14 which gives a value for each interval of the trading period. The first column gives the time intervals of the work days within the trading period. The second column gives the load values of the variable commodity demand of Figure 12. The third column gives the load values of the reference uniform demand of Figure 8 and the fourth column gives the load values for the residual commodity demand by subtracting the corresponding variable commodity demand value from the reference uniform demand value.
Figure 14 shows another example of a residual commodity demand of the present invention, titled "Commodity Demand 2 Residual" using the calculated values of the table of Figure 13.
Now that several preferred embodiments of the present invention have been described in some detail it will be apparent to those skilled in the art that the method or system for trading in a commodity have the following advantages:
(a) it allows quick pricing for a variable or residual commodity demand and avoids the traditional method of obtaining the load weighted average price for a variable load, which is to assign a price for every internal within a trading period; and (b) it allows the creation of variable parcels of a commodity such as electricity which have a constant relationship to the market standard parcels known as flat, peak and off-peak.
It will be appreciated by persons skilled in the art that numerous variations and/ or modifications may be made to the invention as shown in specific embodiments without departing from the spirit or scope of the invention as broadly described. For example, the variable commodity demand loads as shown may be altered or applied to other trading periods. The corresponding commodity demand residual loads would then be calculated as described above. The commodity need not be limited to electricity but may extend to other energy sources, goods and industrial raw materials. The present embodiments are, therefore, to be considered in all respects as illustrative and not restrictive.

Claims

1. A method of trading a commodity, said method comprising the steps of: determining a variable commodity demand; assigning a reference uniform demand to the commodity demand, said reference uniform demand being equal to or greater than the maximum value of the variable commodity demand; deriving a residual commodity demand by comparison of the reference uniform demand and the variable commodity demand; and calculating a price for: the variable commodity demand; or the residual commodity demand: or the reference uniform demand.
2. A method of trading a commodity as defined in claim 1 also comprising the step of an intermediary facilitating trade between a buyer and a seller in the variable commodity demand and/or the residual commodity demand.
3. A method of trading a commodity as defined in claim 2 wherein the intermediary obtains bids and/or offers from market participants which result in a trade in the variable commodity demand and/or the residual commodity demand.
4. A method of trading a commodity as defined in any one of the preceding claims also comprising the step of defining the variable commodity demand.
A method of trading a commodity as defined in claim 4 wherein the variable commodity demand is defined by a series of three or more discrete commodity demand values, which correspond to specific time intervals within a predetermined time period.
5. A method of trading a commodity as defined in claim 4 wherein the variable commodity demand is defined by a series of inputs representing the relative value of the commodity demand against the reference uniform demand for specific time intervals within a predetermined time period.
6. A method of trading a commodity as defined in any one of the preceding claims wherein the residual commodity demand is derived by subtracting each specific time interval of the variable commodity demand from the corresponding specific time intervals of the reference uniform demand over a predetermined time period.
7. A method of trading a commodity as defined in any one of the preceding claims also comprising the step of an intermediary facilitating trading in the commodity.
8. A method of trading a commodity as defined in claim 8 wherein the intermediary facilitates trading in the commodity for the variable commodity demand, or the residual commodity demand or both the variable commodity demand and residual commodity demand.
9. A method of trading a commodity as defined in any one of the preceding claims wherein said price being determined according to the formula ax + by = cz where: x is, or is representative of, the variable commodity demand; y is, or is representative of, the residual commodity demand; z is, or is representative of, the reference uniform demand; a is a price for the variable commodity demand; b is a price for the residual commodity demand; and c is a price for the reference uniform demand.
10. A system for trading a commodity, the system comprising: data input means for inputting data defining a variable commodity demand, and a reference uniform demand corresponding to the variable commodity demand; data processing means in communication with the data input means and configured for processing the input data; and data output means in communication with the data processing means and configured for outputting a residual commodity demand.
PCT/AU2006/001724 2005-11-18 2006-11-17 A method or system for trading in a commodity WO2007056816A1 (en)

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AU2005906519A AU2005906519A0 (en) 2005-11-18 A method of and device for trading in a commodity
AU2005906519 2005-11-18
US78637006P 2006-03-28 2006-03-28
US60/786,370 2006-03-28

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Citations (8)

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US20010032197A1 (en) * 2000-02-25 2001-10-18 Gautam Chandra System and process for transactional infrastructure for energy distribution
US20020147670A1 (en) * 1999-07-21 2002-10-10 Jeffrey Lange Digital options having demand-based, adjustable returns, and trading exchange therefor
US20020152111A1 (en) * 2001-02-02 2002-10-17 Wisconsin Alumni Research Foundation Method and system for accurately forecasting prices and other attributes of agricultural commodities
US20030225676A1 (en) * 2002-03-11 2003-12-04 Siemens Power Transmission & Distribution L.L.C. Security constrained transmission and load dispatch for electricity markets
US20040093175A1 (en) * 2000-06-19 2004-05-13 Tan William Henry Forecasting group demand
US20040177019A1 (en) * 2003-03-05 2004-09-09 Vlado Slavov Method for pooling commodity purchases
US20050004858A1 (en) * 2004-08-16 2005-01-06 Foster Andre E. Energy advisory and transaction management services for self-serving retail electricity providers
US20050027636A1 (en) * 2003-07-29 2005-02-03 Joel Gilbert Method and apparatus for trading energy commitments

Patent Citations (8)

* Cited by examiner, † Cited by third party
Publication number Priority date Publication date Assignee Title
US20020147670A1 (en) * 1999-07-21 2002-10-10 Jeffrey Lange Digital options having demand-based, adjustable returns, and trading exchange therefor
US20010032197A1 (en) * 2000-02-25 2001-10-18 Gautam Chandra System and process for transactional infrastructure for energy distribution
US20040093175A1 (en) * 2000-06-19 2004-05-13 Tan William Henry Forecasting group demand
US20020152111A1 (en) * 2001-02-02 2002-10-17 Wisconsin Alumni Research Foundation Method and system for accurately forecasting prices and other attributes of agricultural commodities
US20030225676A1 (en) * 2002-03-11 2003-12-04 Siemens Power Transmission & Distribution L.L.C. Security constrained transmission and load dispatch for electricity markets
US20040177019A1 (en) * 2003-03-05 2004-09-09 Vlado Slavov Method for pooling commodity purchases
US20050027636A1 (en) * 2003-07-29 2005-02-03 Joel Gilbert Method and apparatus for trading energy commitments
US20050004858A1 (en) * 2004-08-16 2005-01-06 Foster Andre E. Energy advisory and transaction management services for self-serving retail electricity providers

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