Hunter River Salinity Trading Scheme 2024: credit auction report
200 credits were auctioned on 24 April, raising more than $2.5 million. The money covers the costs of managing the Hunter River Salinity Trading Scheme.
How the credit auctions are held and run
The 2024 auction was run using a web-based auction program developed by the University of Melbourne, Centre for Market Design. This program has been used since 2014.
The 2024 auction program was hosted by First Focus IT Pty Ltd and ran for nine hours from 9 am until 6 pm. Bids were lodged online. Only registered bidders had access to the auction using unique usernames and passwords.
The 2024 auction was conducted in accordance with the rules detailed in the Hunter River Salinity Trading Scheme Credit – Auction Information (PDF ). It is a Vickrey or sealed-bid auction. Each registered bidder submits one ‘bid schedule’, comprising a group of credits with a specific bid price per credit: for example, a bidder seeking 17 credits could submit a bid schedule consisting of 3 credits valued at $13,980 each, sev7 n credits valued at the $13,523 each, 3 credits valued at $6,460 each, and 4 credits valued at $2,925 each. This indicates that the bidder was willing to pay $167,690 for 17 credits.
When the auction ends, the auction program ranks each bid from the highest to the lowest bid price. The highest 200 bids are the successful bidders. To determine the maximum payable bid price, the program identifies the ‘highest losing bid’, which is the value of the 201st credit. Consequently, successful bidders may pay less than their submitted bid schedule.
The credit auction seeks to only raise money to cover the scheme’s operating costs. The Vickrey auction process has been adopted to safeguard against anti-competitive behaviour. It prevents bidders from acting as they can in conventional auctions, namely withholding serious bids until the very end of the auction.
Who took part in the credit auction?
The credit auction details were advertised via the EPA’s social media channels (FaceBook and Instagram) and on the EPA’s website (registration form) for 4 weeks prior to the auction date. Any interested party can register, and it is an opportunity for new participants to enter the scheme.
In 2024, 10 organisational representatives from mining and power generation facilities registered for the credit auction. All bidders were current scheme participants. There were no potential new entrants or non-industry representatives.
Result
Of the 10 registered bidders, only 2 bidders did not obtain any credits. One of these registered bidders did not place any bids in the auction.
All 200 credits were allocated between 8 companies. The credit allocations and cost to each bidder is shown in the table below.
The auction raised $2,502,883 (including GST) – 7% more than the 2022 auction ($2,343,984 incl. GST).
The highest price (therefore the highest losing bid) paid for a credit was $15,000, the average was $12,514 and the lowest was $4,525. Bidders were willing to pay between $4,525 and $65,638 per credit.
A total of 346 credits was sought by both successful and unsuccessful bidders.
|
Bidder |
Credits allocated |
Total cost |
|---|---|---|
|
Wambo Coal Pty Ltd |
20 |
$250,000 |
|
Bengalla Mining Company Pty Ltd |
3 |
$45,000 |
|
Liddell Coal Operations Pty Ltd |
25 |
$318,714 |
|
Mount Thorley Operations Pty Ltd |
51 |
$619,589 |
|
MACH Energy Australia Pty Ltd |
19 |
$232,954 |
|
Hunter Valley Energy Coal Pty Ltd |
27 |
$342,428 |
|
Hunter Valley Operations Pty Ltd |
35 |
$436,698 |
|
AGL Macquarie Pty Ltd |
20 |
$257,500 |
|
TOTAL |
200 |
$2,502,883 |
Where the credit auction money goes
Money from the 2024 auction ($2,502,883 incl. GST) will be used to offset the scheme’s operating costs in the 2024–25 and 2025–26 financial years.