Hydro chief executive Steve Davy said the upgrade ensured that the company could boost the efficiency and reliability of existing assets before turning its attention to bigger projects.

He said Tasmania only provided about 5 per cent of Australia’s energy load, but this could increase as coal-fired plants around the country closed.

Mr Davy said pumped hydro projects could double Hydro Tasmania’s current renewable capacity.

“By increasing Tasmania’s interconnection, boosting our hydropower system, and further developing the state’s world-class wind power, we could grow that contribution significantly,” Mr Davy said.

Energy Minister Matthew Groom said Hydro’s work on a $28.5 million upgrade Cluny Power Station was “critical to making Tasmania the battery of the nation”.

“Tasmania is one of the few places on Earth that is almost entirely powered by renewable baseload energy,” he said.

“We do it better than anyone else, anywhere else.”

On other energy matters, Mr Davy said negotiations over a new gas supply contract between Hydro Tasmania and the Tasmanian Gas Pipeline were ongoing and contracts with major industrial customers had been extended until the end of the year.

Mr Groom said the government would produce the Tasmanian Energy Security Taskforce report in the next few weeks after it had been reviewed by cabinet.

The taskforce was established to examine ways to avoid catastrophes like last year’s energy crisis into the future.