Water trading strategy 2021-22
Our water trading strategy 2021-22 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).
Environmental water availability is expected to be highly variable across the state in 2021-22, based on June 2021 climatic outlooks and carryover. Generally, average to wet conditions and associated inflows to storages will be required to increase water availability to moderate to high levels in the western and northern regions, as well as some catchments within the central region such as the Maribyrnong and Werribee. A dry winter-spring 2021 will likely see low to moderate supplies in these regions. If dry conditions persist in the western region there will only be enough supply to support critical environmental needs in the Wimmera and Glenelg systems. For Gippsland and most of the central region, a relatively wet 2020-21 means supply will be high and carryover can offset the impact of a dry 2021-22.
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 Wimmera-Glenelg system and across northern Victoria to increase supply may also be investigated, particularly if dry conditions occur in 2021-22.
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 2021-22 onwards and be more likely following an average to wet winter-spring. The VEWH can also sell water to invest in complementary works, measures, technical studies or other priorities, where these projects optimise environmental watering outcomes for enduring benefit.
In 2021-22, the VEWH intends to implement a range of administrative transfers to facilitate the delivery of environmental water across Victoria and for carryover purposes. These transfers may include water held by other environmental water holders and other entities who may choose to partner with the environmental watering program for delivery of water. Administrative transfers will also be undertaken to transfer allocation available for use in the Snowy River.
Download a copy of the Trade Strategy 2021-22.
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.
- 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)