Macquarie Generation launched Asia's first cyberspace spot market in mid May by calling for competitive bids on the internet for 50,000 tonnes of coal, or one million gigajoules of energy, for its Bayswater and Liddell power stations in the Hunter Valley. Six major coal producers took part in the bidding process.

Macquarie said the online spot market, launched at its Newcastle headquarters, is designed to create a more efficient and transparent bidding process for the supply of coal. PerfectMarkets Online Managing Director Gavin Solsky said the process potentially cut the time for negotiating the best available spot contract from weeks to hours.

"All of the terms and conditions governing the contract are pre-determined, so there is no need for lengthy negotiations," he said. "Our company facilitates the whole process, establishing the market infrastructure, standardising the contractual arrangements and supervising the bidding to ensure that all suppliers compete on a level playing field.

"There are standard market rules that give the buyer and the supplier confidence that the market will be fair and objective."

Under the reverse auction model employed in the Macquarie Generation online spot market, suppliers lodge their offers over the Internet using a bidding platform developed locally by PerfectMarkets.

The market remains open for a minimum of an hour but if bidding is active in the later stages of this period, there is a rolling extension of time in 15-minute increments to ensure all suppliers’ offers are accommodated. Throughout the process the participants can track all of the bidding but they do not know the identity of the competing suppliers.

Macquarie Generation’s Chief Executive, Grant Every-Burns, said the new online spot market was in line with the company’s strategy of improving efficiency and maximising the supply of competitively priced fuel for its power stations.

"Everyone in our industry is looking for ways to reduce costs to meet the needs of the competitive electricity generation market and online spot trading of coal will accelerate that trend," he said. "The online market created by PerfectMarkets allows us to engage with more suppliers and to achieve more competitive pricing outcomes as well as to save time and paperwork."

Macquarie said that for coal suppliers, the process introduces greater market transparency by allowing them to bid on the basis of a true market price. Because suppliers can lodge multiple bids and monitor progress of the bidding, they can compete more effectively than under the existing paper-based, single-bid system.

Consumption of coal by NSW power stations is forecast to reach 25 million tonnes this year with Macquarie Generation’s fuel requirements alone as much as 12 million tonnes a year. This makes the corporation one of the largest single buyers of Hunter Valley coal. Coal supplies to Bayswater and Liddell power stations are met by a combination of long-term contracts and spot purchases.