Water Grid and Markets

Progress

Action 9.1 & 9.2 – Develop grid oversight function and Planning for future grid augmentations

This action has progressed from the research and planning phase into the implementation phase with activities including:

• Establishment of a grid oversight function, known as the Water Grid Partnership, in November 2018. The Partnership comprises representatives from DELWP, water corporations, CMAs and the VEWH and an agreed workplan is being delivered.
• Referred to in Water for Victoria as a ‘Biennial Statement’, a state-wide picture of water security pressures and priority grid augmentation projects was prepared and published in late 2018 and a second is scheduled to be published before the end of 2020.
• A water grid stress-test was undertaken in late-2019 and a report delivered that assesses the vulnerability of the southern grid to significant climate shocks.
• Delivery of a forward view of water availability showcased as an interactive dashboard.
• Improved planning for grid augmentations.

Action 9.3 – Improving the effectiveness of water markets

• Final report on first state-wide review of the effectiveness of Victoria’s water markets published on the Victorian Water Register Website on the 19th of April 2018, accompanied by a DELWP Findings and Actions document summarising next steps.
• In addition to this first review of the effectiveness of Victoria’s water markets, two additional reports were published on the history and development of water markets in Victoria. These are reports on Early Trends in Groundwater Trade in Victoria and The Evolution of Water Markets.
• Completed and published Victoria’s annual water trade reports for 2016-17, 2017-18 and 2018-19. The 2019-20 annual trade report will be published in late 2020.
• Public summary reports on the outcomes of annual broker audits have been published on the Water Register website for 2016-17, 2017-18 and 2018-19.
• Supported the Australian Competition and Consumer Commission (ACCC)’s Murray-Darling Basin (MDB) water markets inquiry through the provision of data, analysis and insights into the operation of Victorian water markets.
• Developed automated online trading for all water allocation trades subject to the Barmah Choke trade restriction in a joint initiative between the Victorian government and the Murray-Darling Basin Authority (MDBA). This has meant faster, more efficient transactions and more up-to-date information for people trading allocation, with all allocation trades submitted online in Victoria are now being automatically processed.
• Developed and implemented new software to support more innovative and timely monitoring and reporting of water market activity. This software will be used to develop new reports to monitor the water market in northern Victoria for any anti-competitive or distortionary behaviour.

Action 9.4 – Increasing water market transparency and information sharing

• This project has continued to fund DELWP’s contribution to the successful ongoing operation on the Victorian Water Register, which records the ownership of water entitlements worth more than $9 billion and provides for a water market with more than $300 million worth of water traded annually.
• As a result of this action, new and more accessible information is now available on the Victorian Water Register website on:
  • All water share and allocation trades in Victoria back to 2009/10, including data on all approved and refused trades and characteristics of the sellers and buyers including whether the trade is commercial, non-commercial or environmental.
  • Current data on the volumes of water allocated, used, traded and currently held by private water holders, environmental water holders or water corporations. This data is supported by interactive dashboards on allocation trade, available water and trade opportunities.
  • A real-time schematic of “Where can I trade?” in northern Victoria has been released displaying trade limit information and historical trade limit data to help water users in northern Victoria to understand how the trade rules work. It is accompanied by an explanatory video.
  • A Water Market mobile app has been developed delivering notifications covering market prices, seasonal determinations, trade limits and spill declarations.
  • An updated report on Water Market Trends in northern Victoria, along with five fact sheets. This was supported by a stakeholder engagement roadshow with all Lower Murray Water (LMW) and Goulburn-Murray Water (GMW) customer committees, Murray Dairy sessions, and briefings to other key stakeholders.
  • Fact sheets on future water availability and delivery risks in northern Victoria along with two sequential independent reports on water supply and demand in the southern Murray-Darling Basin to help water users to understand their risks and to help them manage their businesses.
  • The availability of this new information improves public access and analysis of market information and helps market participants gain further insights into market trends and behaviours.
• New functionality has been launched in the Victorian Water Register’s online allocation trading portals that will capture more information on the reasons that water is traded. These changes will provide greater information and transparency about the types of trade occurring and the prices being paid for different water products, and when agreement was made on each trade. This information will help improve water market information in the future and assist people make informed water market decisions.
• Community and industry engagement on water market transparency has included the following activities:
  • Conducted state-wide community consultation on an options paper that explored full water market transparency, what information people needed to have confidence in the market, and ways to get better price and market depth information.
  • Conducted online community consultation on the balance of privacy and transparency to ensure government action is aligned with community expectations and values
  • Facilitated podcast series ‘water unplugged’ to provide additional water market information to a wider audience
  • Helped to develop and release a series of 8 videos on water markets and carryover with Murray Dairy, a key stakeholder body, and GMW.
  • Explored options to improve transparency of foreign water ownership and set up data sharing with the Commonwealth government.

Action 9.5 – Developing the water market in south central Victoria

• Completed the Market Effectiveness Report (related to Action 9.3) designed to help implement Action 9.5.
• Developed an issues paper identifying challenges and opportunities for water sharing arrangements in south central Victoria.
• Consulted with stakeholders to develop objectives for water sharing and potential water sharing frameworks and designed water sharing framework options to be considered for implementation in south central Victoria.

Action 9.6 – Improving trading rules in northern Victoria

• In 2017-18 a review of the current operation of trading rules and adjustments in northern Victoria was conducted which has been used to define the workplan for improving trading rules in northern Victoria in 2018-19, 2019-20 and beyond.
• A review of the Goulburn to Murray trade and operational limits is currently underway to make sure that water that is traded can be delivered within sustainable environmental thresholds for the lower Goulburn River and without impacts on the entitlements of third parties. This includes working with Goulburn Broken Catchment Management Authority and an expert panel of environmental scientists, as well as river operators at Goulburn-Murray Water and the Murray-Darling Basin Authority.
• As part of this review key interim actions have already been implemented, including:
  • New interim regulations to restrict water use from tagged accounts have been developed and implemented, in legal instruments and the Victorian Water Register, to provide a level playing field in the water market and ensure that all forms of trade are subject to the Victorian trading rules.
  • Interim operating regimes have been implemented for the lower Goulburn River in 2019-20 and 2020-21 to reduce the risk of environmental damage to this waterway as a result of the delivery of traded water. Monitoring of this interim operating regime for 2019-20 has shown that environmental impacts were significantly reduced as a result of this action.
  • Initial community consultation has been conducted on the issues and options for future trading rules. This involved more than 30 consultation face to face and online community and stakeholder forums. A large amount of public information on the Goulburn to Murray trade review has been published on the Victorian Water Register website and Engage Victoria.
• Victoria has also worked closely with other states and the MDBA to develop and implement three-year trials to improve the management of trade adjustments between states in the Murray river. This has meant that trade opportunity between NSW and Victoria is able to remain available more often, providing benefits to buyers and sellers in NSW and Victoria, while better protecting third parties and the environment. This initiative has resulted in over 30 gigalitres of trade into Victoria in the first two months of 2020-21, when trade from New South Wales would previously have been prevented.
• Completed two “fire-drills” to test and prepare Victorian implementation plans in the event of a delivery shortfall in the River Murray. Implementation plans have been developed for DELWP, the Northern Victorian Resource Manager, GMW and LMW.
• Developed and implemented a new process for the Minister for Water to assess and determine applications for works licences that would increase extractions from the Murray river to make sure the cumulative impacts of increased extraction on the environment and other entitlement holders are fully considered. 31 works licence applications have been assessed by the Minister for Water since the new review process was implemented in 2019.

Action 9.7 – Developing trading rules in other water systems

The scope of Action 9.7 has been prioritised to define a responsive policy development program. This considers the context of the western, groundwater and unregulated systems and incorporates stakeholder concerns related to current regulation. Resources are currently focused on delivery of short-term, high value activities that provide a foundation for the next stages of reform. This policy development follows the completion of the Market Effectiveness Report (Action 9.3) which considered markets across Victorian water systems. Key outcomes to date include:

• Development of a detailed report on market effectiveness and community perceptions of seven different groundwater and unregulated surface water markets across Victoria
• Benchmarking of the known challenges in groundwater and unregulated surface water systems
• Analysis of potential locations where trade between groundwater and surface water could sensibly occur in Victoria and analysis of best practice international case studies to understand likely outcomes for Victoria.
• Investigation of the complexities of the western Victorian regulated system and identifying opportunities to develop and improve trade.

Western Water Grid Feasibility Study

This separately funded initiative is enabling development of a strategic business case to consider future grid augmentation options to service the growing population across the Western Water region. Work currently being undertaken includes:

• preparing a Transfer Network Masterplan, including option and solution development.
• the development of a dynamic adaptive pathway plan highlighting when action (and the solutions available to take action) is required to address local water security pressures.