Digger laying pipes
Victoria’s water grid works like our road network: it connects water sources such as dams, reservoirs and the desalination plant to natural elements like rivers via infrastructure including pipes and pumps. Water markets allow users to move water around connected systems to where it is most valued.
Water for Victoria Implementation, 2018
We are maximising the effectiveness of markets across the state by developing a grid oversight function, improving trading rules and increasing information and transparency of markets.

Doing things better with our markets and grid

Since the release of Water for Victoria we have been focusing on developing our systems and ensuring we have up to date information and models to use the grid and markets to their full potential.

We are continuing to develop the grid oversight function in partnership with water corporations. The grid oversight will inform strategic regional and system wide water resource planning and ensure that Victoria’s water grid is managed effectively and efficiently to deliver and share statewide water security benefits.

The enhancement of strategic oversight of open and efficient water markets will enable users to move water in connected systems to where it is most valued. In 2017, the Market Effectiveness Project started by holding a series of workshops with key water sector stakeholders to assess how effectively different segments of Victoria’s water market are operating. The results of the project are helping us develop the south central water market, improve trading rules in northern Victoria and develop other water markets.

Getting value from all sources of water and existing infrastructure

The state’s largest investment in water infrastructure is the Victorian Desalination Plant (VDP) in Wonthaggi. Water from the desalination plant is transferred to Melbourne and regional areas via a new, 84 km underground pipeline enabling Victoria to meet the increasing water demands resulting from population growth and climate change.

In March 2016, the Victorian Government ordered 50 GL of water from the VDP to be delivered during the 2016-17. An incident during the re-energisation of the plant in late 2016 meant the plant began delivering water in mid-March 2017 and delivered 46.14 GL by 30 June 2017.

In 2017-18 the Victorian Government commenced a three year trial of an annual minimum water order of 15 GL from the VDP. The benefits of a minimum water order include improving water security, better plant and pipeline management and more predictable and stable prices for water customers. This trial is providing important input into managing the VDP as an integral element of the water grid. Water customers will not face additional charges on their water bills for the 50 GL water order in 2016-2017 or the subsequent minimum water orders.

Ariel view of the Desalination plant with the ocean in the background
The enhanced connectivity of the grid allows areas outside Melbourne to benefit from the increased water security provided by the VDP. We can share the benefits of this water security and build drought resilience.
Image courtesty, Victorian Desalination Plant

Lance Creek Water Security Project

South Gippsland Water’s northern towns – including Korumburra, Poowong, Loch and Nyora – are facing issues with their current supply due to the increasing demands from local food processors, ageing assets and the need for improvement in water quality. The towns currently experience water restrictions due to isolated and small storage capacity in on-going dry conditions.

We announced $30 million in the 2016-17 Victorian Budget to significantly improve water security for the area. The project will be delivered by South Gippsland Water at a total cost of $43.4 million.

Nyora, Loch, Korumburra and Poowong will be connected to Victoria’s water grid for the first time to significantly reduce the likelihood of future water restrictions and improve drinking water quality. These communities currently rely on water from small, rainfall-dependent local. The project will link the towns to the Lance Creek supply system which provides access to Melbourne’s water supply.

The project will also provide a climate resilient, secure and diverse water supply to industrial and domestic customers in South Gippsland. This will underpin the future of food processing in the region by providing companies such as Burra Foods and GBP Exports – who currently employ 165 and 180 staff in the region respectively – with supply security and the confidence to further invest in their businesses.

The Lance Creek system incorporates existing infrastructure that connects to the Wonthaggi Desalination Plant pipeline, meaning that water can be sent from Melbourne’s Cardinia Reservoir to the Lance Creek water treatment plant via the pipeline.

Contracts have been awarded and work has started on the ground with the project due to be completed by February 2019.

Freshly dug ditch containing pipe

Next Steps

Whilst the grid oversight function will take a state-wide view, initially there will be a focus on south central Victoria because there are greater opportunities to enhance system integration. We will build understanding of the grid through consultation with stakeholders and improved system information and modelling. Consultation with stakeholders will help us define institutional arrangements and governance, and develop a biennial statement that includes a forward view of water security and a portfolio of future grid augmentation options.


As part of improving the effectiveness of water markets we will also assess the current effectiveness of Victoria’s water markets and establish a framework for measuring market effectiveness into the future. The review will identify issues and priorities to focus on as we develop water markets across the state, including in south central Victoria.

The south central market trial is a major new five-year initiative that will investigate opportunities to develop the water market in the region, including the rapidly growing regional centre of Geelong. The development will be staged and collaborative to build understanding and confidence with water users. This work will build on the increased connectivity of the grid over the last decade and include access to water from the VDP. This will provide significant opportunities to trade water and delay or avoid costly additions to the water grid through more augmentations. It may also help to free up water trading within the southern irrigation districts and water for environmental outcomes.