Energy Procurement Project

Background

In 2016, the Victorian Government required government organisations to set renewable energy and carbon neutrality targets.

In response, IWN began investigating alternatives to fixed-price contracts for electricity supply to manage water corporations’ escalating energy costs, while curbing greenhouse emissions.

New options include purchasing competitively priced electricity and GreenPower directly from the wholesale market. This allows corporations to tailor their purchases to match their demand - e.g. reflecting on-site renewable generation or daily and seasonal fluctuations in usage. However, financial or physical insurance products are needed to smooth out price spikes in the wholesale energy market.

Description of trial

In 2016, 2017 and 2018, Goulburn Valley Water, North East Water, Western Water and Yarra Valley Water are trialling the direct purchase of electricity on the spot market through an intermediary.

Next steps

The results of this trial will be used to develop a wholesale procurement guide for all Victorian water authorities, detailing the risks and benefits of various direct purchase and insurance options, including:

•             Price caps – the customer pays no more than an agreed maximum rate

•             Block (Hedge) pricing – a fixed price is agreed for a specified volume of peak and off-peak electricity per month, quarter or year

•             Average rate – the customer pays no more than the forecast average price, and pays the actual price when lower than the forecast

•             Demand response – the customer sheds non-essential load during price spikes and / or runs back-up generation

•             The ability to incorporate alternative purchasing arrangements such as:

- Power Purchase Agreements (PPA) – competitive, fixed-price, renewable electricity supply over 10 to 25 years              

- Shared Generation Agreement – between several authorities, sourcing electricity from on- and off-site renewable facilities, with surplus              generation sold to the grid, and shortfalls purchased from the grid

Current Status of Trial

The project team are finalising work on a risk assessment policy for spot pricing and the lessons learnt component of the project for wider distribution to IWN members. A training program is being presented by WSAA and the next steps are being discussed.