Water authorisations for pumped hydro energy storage
Industry guidance on water considerations and regulatory authorisations for pumped hydro energy storage schemes.
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This page provides information on the frameworks that prescribe the ways we manage our water resources in Victoria. It also includes some specific considerations for regulatory approvals relating to water and pumped hydro energy storage (PHES) schemes.
Victorian legislation
Water Act
As the delegated decision maker for licence applications, water corporations will consider the matters outlined in section 40 and section 68 of the Victorian Water Act 1989 when considering a water-related application. Proponents looking to develop a PHES scheme should consider the principles in these sections of the Water Act. The key project considerations listed on Introduction to pumped hydro energy storage can guide a proponent through some of these principles when developing a project.
CaLP Act
Victoria’s framework for the integrated management of catchments is established under the Catchment and Land Protection Act 1994 (the CaLP Act). The CaLP Act imposes safeguards to protect water quality, such as special water supply catchment areas, which would have implications for potential water quality impacts from PHES schemes.
Water and waterways are essential to our liveability, sustainability and prosperity. To transition away from a reliance on river water to meet our water needs, the Victorian government encourages a greater reliance on manufactured water. Strategies such as the Central and Gippsland Region Sustainable Water Strategy 2022 describe the move to manufactured water. Using recycled water safely discusses oversight and regulation relating to the use of recycled water and includes an interactive map to find information about where recycled water may be available.
Water entitlement framework
Victoria's water entitlement and allocation framework defines how water is shared, held, used, and traded to support environmental, cultural, agricultural, commercial, and urban water needs. It ensures planning processes are in place so future water needs can be met. A key element of the entitlement framework is to provide certainty and flexibility for water managers and water users.
The Minister for Water, or the Minister's delegate, issues water entitlements under the Water Act. These include:
Bulk water entitlements (typically held by water corporations)
Environmental water entitlements (held by the Victorian Environmental Water Holder)
Water shares (held by irrigators and other water holders in declared systems)
Licences to take and use water (a fixed-term entitlement held by irrigators and other water holders who use groundwater or surface water from non-declared systems)
A water corporation can issue a water Supply by Agreement under the Water Act from its works. This could include manufactured water such as recycled water, desalinated water or stormwater.
Water access for PHES
Water used for PHES schemes may come from a variety of sources including manufactured water, surface water and groundwater. In addition to needing an entitlement or licence for the initial fill, a PHES scheme may require ongoing water access for water losses incurred during its lifespan.
The type of water entitlement or licence required for a PHES project will depend on where the water is proposed to be taken from and the volume of water required.
For example, understanding if your project is located within a declared or non-declared water system will provide clarity about the type of entitlement available, and also the potential water management actions that might be imposed on the entitlement during dry conditions.
How is water managed? on the Victorian Water Accounts website is a great resource that describes different types of water entitlements in Victoria, how declared or non-declared systems influence how water can be accessed, and explains concepts such as seasonal allocations, urban water restrictions, and caps on extraction of water from supply systems.
Rather than an entitlement, proponents can enter into an agreement with a water corporation to secure manufactured water, such as recycled water, or access surface water through an urban water corporation’s reticulated network.
The relevant water corporation, as licensing authority, makes decisions about entitlement applications and trade. For water corporation details see Introduction to pumped hydro energy storage.
All but a few river systems and groundwater systems in Victoria are already fully allocated. This means the total volume of water entitlements already on issue in those systems is the maximum volume that can be diverted from that system before negatively impacting the environment or other uses and values. Generally, in those systems new water users must buy water from an existing user.
Water products that may be traded in Victoria include water shares (permanent water entitlements), allocations (water that is actually available to use or trade in any given year, including new allocations and carryover) and take and use licences (a maximum term of 15 years for most purposes and 40 years for hydro-electric power stations). Trading rules aim to enable trade where it can occur between hydrologically connected users or systems without unacceptable impacts on other users and the environment.
Declared systems
In a declared system, water shares provide a permanent entitlement to water, allocations are made which control how much of that entitlement is actually available to use, and separate authorisations are needed to take and to use the water.
The trading rules for declared systems are via a consolidated instrument. See the Water Register website for Trading rules.
Non-declared systems
In a non-declared system, take and use licences provide the right to take water for up to 15 years for most purposes, but up to 40 years for hydro-electric power stations. The take and use licence also authorises the use of water and contains any conditions for how the water can be used.
The trading rules for non-declared systems are outlined in the management plan for that region, usually a Statutory Management Plan or Local Management Plan, informed by the Ministerial Policies for Managing Take and Use Licences.
Trade within the Victorian Murray-Darling Basin area is managed by the Victorian Government under state legislation, however there are additional legislative requirements under the Basin Plan water trading rules.
In Victoria, there are examples of agreements between energy proponents and water corporations that govern the operation of conventional hydroelectric schemes at water corporation assets.
In some cases, the energy proponent may not require an entitlement to water, as the conventional hydropower scheme is located at the outlet structure of the dam and opportunistically utilises releases of water to generate electricity. Their operation may create negligible losses and may not negatively impact storage operations or the downstream waterway.
PHES schemes use water differently to conventional hydroelectricity and may create significant additional evaporative losses by requiring water to cycle between storages. The water used may also be taken in and out of the water supply system on a temporal cycle – with the potential to negatively impact the water access of existing entitlement holders. As such, arrangements in place for conventional hydropower schemes are unlikely to be suitable for a PHES scheme.
Types of authorisations
Like any major infrastructure project, for a PHES project proposal to progress in Victoria a range of regulatory approvals must be acquired under relevant legislation. Water-related approvals will generally be required for the:
Construction and operation of private dams
Construction and operation of other works on waterways
Take of water from a particular source to be used for a particular purpose.
A works licence may be required for construction, alteration, operation, removal or decommissioning of a dam.
A licence to take and use water should be obtained before building a new dam, as licence conditions may require the new dam to include particular works to be incorporated into the dam’s construction.
Along with private dams, all other works on waterways need to be licensed where those works are associated with the take, use, conveyance or storage of water. This includes the construction and operation of pumps and bores.
Damming a waterway will alter its hydrologic regime which can impact social, cultural, environmental and consumptive values and uses, such as recreation, fish passage, and other aquatic species, if not managed appropriately.
A licensing authority must refer applications for a dam on a waterway to a number of relevant agencies, including the local catchment management authority who will provide advice about potential impacts to the local environment. Any advice provided must be considered as part of the licensing authority’s assessment.
The authority may not approve the application or may impose conditions on any works licence it issues, such as the provision of fish passage, to protect the environment and other water users. The dam may also need to include a bypass mechanism to prevent taking water outside of specified take periods and to ensure minimum passing flow rates are met during take periods.
In declared systems, in addition to authorisations to take water, proponents will need to secure authorisation to use their water. A water-use registration authorises the use of water for purposes other than irrigation. Water-use registrations are tied to the land described in the licence.
More information on place of take approvals can be found here Water Register website at Water-use licences.
Application process
The most suitable application pathway to water access will vary depending on the location, type (for example greenfield or bluefield) and size of the PHES scheme.
The relevant water corporation typically makes decisions about water access and trade applications. For water corporation details see Introduction to pumped hydro energy storage.
Water corporations must consider the matters outlined in the Water Act in considering a works licence application. They must also provide a copy of the application to the stakeholders listed under section 67A of the Water Act, who can provide advice or comments on the application. A works licence must be approved and issued prior to starting any construction work.
A bluefield PHES scheme proposing to use an existing storage will typically require an agreement with that storage owner.
