Water trading strategy 2020-21
Our water trading strategy 2020-21 outlines the types of trading we may undertake across Victoria.
Water allocation trade is one of the tools we use to effectively manage water for the environment. Water trading allows us to move water to the systems where it is most needed, and to smooth out some of the variability in water availability across systems and across years.
This strategy covers commercial water allocation trade (selling and purchasing water allocation), and administrative water transfers ('internal' transfers of Victorian Environmental Water Holder allocation or transfers between water holders).
Availability of water for the environment is expected to be low to moderate across the state in 2020-21. Average to wet conditions and associated inflows to storages will be required to increase water availability to moderate to high levels. A dry winter-spring 2019 will likely see low supplies across most of the state. Some catchments will only have enough supply to support critical environmental needs, while trade or transfer options may be required to meet critical environmental needs in other systems.
Opportunities to purchase allocation may be considered in the Maribyrnong system, depending upon assessment of seasonal conditions and environmental need. Opportunities to trade or transfer in the Latrobe, Werribee and Wimmera-Glenelg systems as well as across northern Victoria to increase supply may also be investigated, particularly if dry conditions continue.
The VEWH may consider selling part of its allocation in northern region systems if foreseeable environmental demands can be met. If this occurs, it would most likely be from summer 2020-21 onwards and be more likely following an average to wet winter-spring.
In 2020-21, the VEWH intends to implement a range of administrative transfers to facilitate the delivery of environmental water across Victoria or for carryover purposes, including water held by other environmental water holders. Similarly, administrative transfers will be undertaken to transfer allocation available for use in the Snowy River.
Download a copy of this trade strategy: water allocation trading strategy 2020-21 PDF
Allocation trade review
In 2019, independent auditors, Marsden Jacobs, undertook an allocation trade review and found the VEWH has not impacted water market prices, transparently signals its trading intentions to market participants, and effectively avoids market distortion and adverse impacts on other parties.
Review findings
- The VEWH’s allocation trades have not impacted on the market.
- The VEWH’s market performance has been good, both with timing of trade and achieving prices either close to, or slightly above, the prevailing market price.
- The VEWH has a clear and open way of signalling its trade intents and activities and gives enough detail to people taking part in the water market.
- The VEWH’s participation in the market does not have a big influence on market prices. These are largely affected by other market forces like climate conditions, water availability, commodity prices and annual cropping choices.
- The VEWH has effective processes to ease potential adverse impacts on other parties and avoid any distortion in the water market. These include only announcing specific trade intents and activities when they will definitely happen and using existing, well-functioning market methods as a silent participant in the market.
- Water market intermediaries engaged by the VEWH have generally performed well.
Download the full report: Allocation trade review - summary report: Victorian Environmental Water Holder - 1,050kb (PDF)
