Malcolm Turnbull has announced a proposal to increase Tasmania's hydro power capabilities through water reuse, potentially doubling its output.
During a visit to Tasmania, Turnbull said that the program, if fully rolled out, would cost more than $3 billion and add 2500 megawatts of storage capacity to the national grid, which is roughly enough power to run 500,000 homes.
"What we're seeing here in Tasmania is the opportunity in this state to provide even more renewable energy, wind and hydro, than it does today," Mr Turnbull said.
"There's the opportunity here in Tasmania to double the capacity of Hydro Tasmania with new investment and with pump storage, and of course it has the best wind assets in Australia — the Roaring Forties."
Turnbull's stance is a strong counterweight to voices in the Liberal party which are calling for a re-opening og Hazelwood, or the construction of new 'clean-coal' plants.
"The energy market is progressing, the evolution of it is very rapid, so I think the sooner we can see the opportunities here in Tasmania, the better," Turnbull said.
Opposition energy and climate spokesman Mark Butler said Labor welcomed the announcement in principle, but said that a feasibility study was not a solution to the "immediate energy crisis".
He feels that without a plan to build a new interconnector, the Tasmanian study would amount to nothing. "This won't solve the policy vacuum that is undermining new generation as old coal plants retire," Mr Butler said.
The Australian Renewable Energy Agency will spend $2.5 million investigating with Hydro Tasmania the feasibility of expanding the existing Tarraleah and Gordon power stations and building 13 pumped hydro projects.