Veritone Energy

Arbitrage System

OVERVIEW

The energy arbitrage system helps you provide energy when it’s most valuable. This
patented, AI-powered system integrates with your wholesale market operations and
automatically optimizes dispatch decisions around dynamic
energy pricing.

The system, which is a series of containerized AI engines running within aiWARE, is an automated
arbitrage solution based on short, medium and long-term risk forecasting and optimized dispatch
decision making. The system utilizes near real-time dynamic optimization based on power demand and
risk forecasting. The forecasting output is fed into the arbitrage dispatch engine where an optimizer
generates feasible dispatch directives to the power sources in the network under arbitrage.

Copyright © 2020 Veritone, Inc. All rights reserved. 1

VERITONE APPROACH
Veritone’s dispatch engine employs models that evaluate
short term revenue and volatility forecast based on the
acceleration of load demand and other states of the
power grid. In contrast to other power arbitrage systems,
the Veritone approach generates arbitrage dispatch
based on a predictive generated state.
What’s more, the system produces forecasts over
different time horizons independently, then fuses results
together to compute an aggregated, optimized forecast.
Once the forecast is generated, it is fed into a dispatch
control engine, together with the risk parameters, load,
and weather conditions, to generate a global optimized
arbitrage dispatch decision for each site in the portfolio.
The following is a technical summary of Veritone’s
approach to real-time dispatch arbitrage of Distributed
Energy Resources (DER) and battery sources.
Figure 1 shows the architecture of the overall system.
It has three main components, each operating as a
containerized engine within the aiWARE platform:
The Price Forecaster, the Controller and the
Dispatch Controller (Order Execution Engine).
Controller (Order Execution Engine).

All the while, an execution routine ensures the system

satisfies NERC, EPRI, utility and network physical
constraints power rules.

FIGURE 1:
VERITONE’S AUTOMATED ARBITRAGE SYSTEM

Copyright © 2020 Veritone, Inc. All rights reserved. 2

PRICE AND RISK FORECASTER
The Price and Risk Forecaster is the key element of the
Veritone energy arbitrage system. It is designed using
the Riemann-Finsler dynamic model. In particular, it
generates forecasts on both the value and risks of
predicted power demand based on a second-order
derivative of the demand itself.
The Forecaster is constructed by fusing different models
as well as the stitching of forecasts from different time
horizons together.
MULTI-RISK FORECASTER
ARCHITECTURE IMPLEMENTATION
RISK FORECASTER: HIGHLIGHTS
• Dynamics Model: Non-Linear Stochastic, Hybrid
Differential Equation (PDP) of the Price process. The
driving terms are Volume, Market and uncertainty
processes. The coefficients of the equation are Piecewise
constant.
• Output: Real-time, Price Forecast time series of selected
equities in the interval ahead of real-time clock
• Implementation Model: Hybrid Model fusing Repair and
Nominal Dynamics with Parameter
Adaptation Dynamic
Copyright © 2020 Veritone, Inc. All rights reserved.
Additionally, the Forecaster includes several unique
features to further improve accuracy. The Forecaster
has a repair engine that compares its forecast with
the realized result in real-time. The engine uses the
discrepancy as an input to adjust any new forecasts.
The parameter adaption feature allows the model to
always calibrate its parameters based on the most
recent data. Last but not least, to achieve superior speed,
the forecast uses metadata on top of the underlying
price information.
• Real time operation: Generates forecast segments
as a function finite past history in a sliding window
configuration
- Initial Training: Use sufficient long period for the initial
generation of model parameters
- Price Forecast: a price estimate trajectory in the interval
- Risk Forecast: an estimate trajectory of the Hessian of
the probability conditional density of the price process
in the interval
3
DISPATCH CONTROLLER
It takes inputs from the Risk and Price Forecaster,
the behavior constraints, and network data. It makes
arbitrage decisions based on a real-time optimization
algorithm based on Sharpe ratio optimization.
The Controller is customizable in terms of both the
goals and the constraints of the sources in the arbitrage
system. It can implement combinations of different
optimization strategies using a proprietary algorithm
called Chattering.
A wide range of different goals such as maximum profit,
minimum loss or highest Sharpe ratio could be easily
implemented, and more sophisticated ones are also
allowed.
FIGURE 2:
THE CONTROLLER ARCHITECTURE
Copyright © 2020 Veritone, Inc. All rights reserved.
Another factor that makes the Veritone energy arbitrage
system stand apart is the dynamic optimization process
the Controller employs. In particular, as the predicted
price volatility and liquidity of the security varies, the
model is able to adjust the arbitrage dispatch order it
sends out in real-time to match the pre-set risk level or
source constraints.
This is especially important in an environment when
market conditions change abruptly and unpredictably.
As shown in the Controller Architecture in Figure 2,
the Controller’s reliability is further enhanced by the
implementation of a Slippage Parameter Generator
which is becoming increasingly a difficult issue to deal
with in the field of HFT.
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 CHATTERING
Chattering is used in the Controller as a means to pursue
a combination of single-purpose, customer-defined
trading strategies.
A customer can have several trading strategies, each
optimizing for a single criterion, such as maximizing
profit, minimizing risk, or minimizing volatility.
Instead of taking an arbitrary combination of these
strategies in a combined criterion (such as a weighted
average) as is typically done, Veritone optimizes each
user strategy independently and relies on chattering
theory to determine the combined control
action constructed from the action associated with each
user strategy.
DISPATCH EXECUTION ENGINE
The Dispatch Execution Engine as shown in Figure 3,
implements strategies that satisfy behavior and network
constraints.
It ensures that the optimal solution computed by
the dispatch optimizer satisfies the constraints and
operational rules.

FIGURE 3:
DISPATCH

Copyright © 2020 Veritone, Inc. All rights reserved. 5

 CONTACT US TODAY
INFO@VERITONE.COM

About Veritone
Veritone (Nasdaq: VERI) is a leading provider of artificial intelligence (AI) technology and solutions. The company’s proprietary
operating system, aiWARE™, orchestrates an expanding ecosystem of machine learning models to transform audio, video and
other data sources into actionable intelligence. aiWARE can be deployed in a number of environments and configurations to meet
customers’ needs. Its open architecture enables customers in the media and entertainment, legal and compliance, and government
sectors to easily deploy applications that leverage the power of AI to dramatically improve operational efficiency and effectiveness.
Veritone is headquartered in Costa Mesa, California with over 300 employees, and has offices in Denver, London, New York, San
Diego, and Seattle. To learn more, visit Veritone.com.

© 2020 Veritone, Inc.

No portion of this material may be reproduced, reused, or otherwise distributed in any form without prior written consent. Content reproduced or redistributed with Veritone,
Inc. permission must display Veritone, Inc. legal notices and attributions of authorship. The information contained herein is from sources considered reliable, but its accuracy
and completeness are not warranted, nor are the opinions and analyses that are based upon it, and to the extent permitted by law, Veritone, Inc. shall not be liable for any
errors or omissions or any loss, damage, or expense incurred by reliance on information or any statement contained herein. In particular, please note that no representation or
warranty is given as to the achievement or reasonableness of, and no reliance should be placed on, any projections, forecasts, estimates, or assumptions, and, due to various
risks and uncertainties, actual events and results may differ materially from forecasts and statements of belief noted herein. This material is not to be construed as legal or
financial advice, and use of or reliance on any information in this publication is entirely at user’s own risk. Veritone and the Veritone logo are trademarks of Veritone, Inc. All
other trademarks and trade names are the property of their respective owners.
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