Trade Manager

Introduction

 Water property rights in the Murray Darling Basin (MDB) involve a system of “entitlements” (perpetual rights to a share of water from a particular source/location) that receive annual water “allocations” (volumes of water available for use within the current year). These entitlements and allocations are “unbundled” in the sense that each is separately tradeable. The trade of annual water allocations between the water entitlement holders is known as Temporary Trade (MDBA, 2022). The water trade has become an effective water management tool for the entitlement holders to manage their water resources and reduce risk (MDBA, 2024).

 The Trade Manager (TM) functionality in Source replaces a plugin built by the MDBA. The purpose of Trade Manager in core Source is to improve and standardise the functionality of defining how trade happens in Source. The incorporation into the core source provides additional features and recorder options. The trade manager incorporates the conceptualisation of economic demand and supply concepts into how trades occur between water users.

The TM functionality allows  policy makers and modellers (MDBA, 2024) to:

• Understand and predict the impacts of water trade and associated changing patterns of usage on conveyance losses and delivery risks.

• Continuous improvement of water user’s behavioural assumptions and

• Strengthen the capability to forecast and incorporate trends in crop mixes and climate-change scenarios.

Trade Manager concept

The total available water balance calculated in the Resource Assessment is passed to the water users, and the expected use is calculated based on the antecedent use (sum of previous 10 days use) or by user-defined values (for example, time series, constant value or functions). Subsequently, total tradeable water is calculated for each water user, group and system based on available water and the value of water. The tradeable water represents the portion of the total available water balance permitted for trade based on the regulation of the relevant jurisdiction or the defined limitations.

At each timestep, water availability and deficit are derived for each water user and trade group participating in trade. Water is traded from a user having surplus water to that having a deficit. However, trade can also happen even when there is no surplus water if there is a deficit for a water user with a higher value of water. The higher the value of water for a water user, the higher the priority it gets in trade. The water traded out from a group is equally traded by its water users, whereas water within a group is traded based on the proportion of surplus water held by its water users. This is evident in the example model given in the last section of this user guide.

A group of water users can be combined to form a water group. This could be based on the geographical proximity of those water users or on jurisdictions. These trade groups are bound by trade rules which can be set by the user. For example, there are rules pertaining to group water trade participation, and the maximum water that could be traded in and out from a group.

Trade Manager functionality in Source

The objective of the Trade Manager (TM) is to implement and enhance the water trade functionality available in the Plugin, thereby making water trade modelling available to all users. The Trade Manager (TM) functionality can be viewed and selected from the Edit menu in the toolbar, as shown in Figure 1.

When the TM is selected, a separate window with various options appears (Figure 1). From that window, TM options can be enabled by ticking the ‘Enabled’ check box. Also, users can indicate the start of water year in the Trade Manager.  

As in other functionalities in Source, there are certain parameters associated with TM and they are:

• Group definitions – a group of water users  

• Which water user is in which group

• Whether a water is trading

• The method by which an expected use is determined for each water user

• The value or importance of expected use for each water user

• Whether a group is trading

• The annual trade in and trade out limits for each group

All the above parameters are incorporated into the TM using two main options which are ‘Trade Groups’ and ‘Trade Rules’.

Trade Groups

Trade Groups represent a collection of water users that can be defined by the user to reflect geographic or administrative regions. Within each group, water users are allowed to trade freely.

New groups can be added to the trade groups by right clicking on the ‘Trade Groups’ (Figure 2) and the newly created group name can be renamed as well.

In Figure 2, there are three groups added to the Trade Manager named TG1, TG2 and TG3. When a particular group is selected (TG1 in this case), the following screen is displayed as in Figure 3.

Water users belonging to each trade group can be selected from the drop-down menu of ‘Available Unassigned Water users’ and assigned using ‘Assign Water User’. Each water user can only be assigned to one group. 

Once the water users are assigned to a particular trade group, there are options to indicate whether a water user is trading or not, expected water use method, expected use expression method and value of water. The option ‘Is Trading’ is used to indicate whether a water user is participating in trade or not. This can be indicated using ‘Value’, ‘Data Source’ or ‘Function Editor’ as shown in Figure 5. Permissible values are 0 and 1. A value of ‘0’ indicates not trading and ‘1’ indicates trading. Similarly, time series values using ‘Data Sources’ and functions using ‘Function Editor’ can be used to denote whether a water user is trading or not.

The ‘Expected Use Method’ is used to indicate the method by which the expected use (forecast) of water for each water user is calculated.  There are two ways by which the expected use can be determined, either by ‘Antecedent Values’ or ‘Expression Value’ as in Figure 6.

If ‘Antecedent Values’ method is selected, a buffer is maintained to keep a volume in a water users account equal to the last 10 days of water use. If ‘Expression Value’ is selected, the ‘Expected Use Expression’ field can be edited and the user can input the expected water use by means of ‘Value’, ‘Data Source’ or ‘Function Editor’ just like importing climate data using ‘Data Sources’.

The ‘Value Of Water’ indicates the importance given to a particular water user when involved in trade. In an economic term it would be equivalent to the price a water user would be willing to pay. As the Trade Manager is not designed to capture all economic conditions “value of water is used.’ The value of water is sorted in descending order, where a ‘Value of Water’ of 2 will be ranked higher than a ‘Value of Water’ of 1. When there is no surplus water, water will be traded from the lower value to the higher value. The user can define the value of water through a fixed value, a data source or a function. Value of water is required  to be greater than 0 and the default value is 1.

If a water user is to be removed from the list of water users in the trade group, simply select the row that contains the water user and press delete. This will remove the water user from the list.

Trade Rules

The rules pertaining to trade between groups are set by ‘Trade Rules’ in the TM. Using ‘Trade Rules’, a user can define whether a trade group can trade, and set the maximum trade into and out of each trade group. Users can define Trade Rules through a fixed value, a data source, or a function.  The maximum trade in and out is the total trade allowed for a particular trade group throughout a water year and is adjusted daily and reset at the start of each water year.

It has to be noted that the maximum trade in and out are set to 1000 gigalitre (GL) by default if it is defined using a fixed value. An example of configured Trade Rules in the TM window is shown in the figure below.

In the figure above, the maximum trade that could be allowed in (Max Trade In) and out of a group is defined using a function.

Trade Manager and Resource Assessment

Previously, the implementation of Trade Plugin used by MDBA was reliant on the options available in the Resource Assessment System Trigger specification. The implementation of TM functionality in core Source has eliminated the need for trigger specifications in the Resource Assessment (RA). However, the user may need to configure the RA for adding available water for each water user as in Figure 8.

Recorders

As TM is a new functionality in core Source, there are new recorders associated with it and they are shown in the figure below (Figure 9). The main recorder ‘Trade Manager’ is visible under the ‘Miscellaneous’ option.

The recorders and their descriptions are given below.

Trade Manager

• Group Trade Value – The ‘Equilibrium Value’ at which water trade occurs in the group trading process. It indicates the threshold below which trading stops due to the unavailability of additional water for trade.

• Group Trade Volume – Absolute value of total water traded in or out between groups

• Group Trade Volume Water Year To Date -Cumulative group trade volume to date in a water year

• System Trade Volume – Absolute value of total water traded between and within groups 

• System Trade Volume Water Year To Date - Cumulative system trade volume to date in a water year

Trade Groups

• Net Trade – Sum of water volume traded into/out of a trading group. A positive value indicates water traded in, and a negative value indicates  water traded out.

• Net Trade Water Year To Date – Cumulative net trade volume to date in a water year

• Water Traded In –Water volume traded into a group

• Water Traded Out – Water volume traded out from a group

Water Users

• Net Trade – Sum of water volume traded into/out of a water user. Positive is ‘trade in’ and negative is ‘trade out’

• Net Trade Water Year To Date - Cumulative net trade volume to date in a water year

Resource Assessment

In addition to the recorders in the TM, there are two additional TM related recorders under Resources Assessment, and they are:

• Net Trade – Sum of water volume traded into/out of an account host, account type or accounts

• Net Trade Water Year to Date – Cumulative net trade volume of an account host, account type or accounts to date in a water year

These recorders are available under ‘Account Hosts’, ‘Account Types’ and ‘Accounts’ in the Resource Assessment.

It is to be noted that the ‘Account Adjustment’ recorder in Resource Assessment does not include trade. The trade volume values are included in the available resources calculation in the Resource Assessment.

Example Model using TM

To illustrate the use of TM, a simple example model is shown and described briefly below.

Model configuration

In the example model, as in Figure 10, there are nine water users each with a demand of 1 ML/d.  

The Trade Manager (TM) in the model is configured as below. There are three trade groups participating in the trade and they are TG1, TG2, and TG3. Each trade group is assigned three water users; for example, TG1 is assigned Z1P1, Z1P2, and Z1P3, TG2 is assigned Z2P1, Z2P2, and Z2P3, and TG3 is assigned Z3P1, Z3P2, and Z3P3.

As indicated in Figure 11, all the water users of TG1 and other trade groups are participating in the trade (Is Trading = 1). ‘Expression Value’ is selected as the expected use method. The ‘Expected Use Expression’ is defined by functions for all the water users in this case. The ‘Value Of Water’ is also defined using functions. The ‘Value Of Water’ does not have a unit, as it is used to indicate the importance or rank of that water user when involved in trading.

The Trade Rules are defined for each group in TM, as in Table 1.