854Exchange for Physical

Because energy futures are primarily financial management tools, deliveries are rare. Most futures contracts are liquidated before expiration. However, some contracts do result in delivery. Because futures contracts are standardized as to location and quality, the holders of contracts for delivery usually need to deviate from the terms of the futures contract. To accommodate this, the exchange-for-physical (EFP) has become the preferred method of delivery because it offers more flexibility. It has become an extension of futures and spot market trading.

In an exchange-for-physical, a long futures position held by the buyer of the commodity is transferred to the seller. The firm chooses its trading partner, the product to be delivered, and the timing of the delivery. An EEP allows buyers and sellers to negotiate a cash market price and to adjust the basis, as well as the exact time the physical exchange takes place. Exchanges-for-phys-ical are an important element in the success of the natural gas futures contract because they add greatly to liquidity.

In electricity, a standardized contract has been developed to facilitate electricity trade at locations other than the futures contracts standard delivery locations of the California-Oregon border and the Palo Verde switchyard.

Solar Stirling Engine Basics Explained

Solar Stirling Engine Basics Explained

The solar Stirling engine is progressively becoming a viable alternative to solar panels for its higher efficiency. Stirling engines might be the best way to harvest the power provided by the sun. This is an easy-to-understand explanation of how Stirling engines work, the different types, and why they are more efficient than steam engines.

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