A business case for the $3.5 billion Marinus Link has found the project stacks up technically and commercially, and "should proceed through the design and approvals phase".
But Australia's energy pricing framework "needs to change" to ensure Tasmanian electricity users do not end up paying higher prices once Marinus Link comes online to the benefit of mainland customers.
The Marinus Link business case will be released today, detailing the best-case scenario of completing the first of two 750 megawatt interconnectors in 2028, and the second in 2030, potentially adding $5.7 billion to the Tasmanian economy through subsequent renewable energy development.
For the $3.5 billion project to be ready by this time, renewable energy uptake would need to be "accelerated", with the project timeline set for between 2030 and 2032 under current government policy.
It could be shovel-ready from 2023, the business case found.
The underlying conclusion from the business case was that Marinus Link was essential as Australia transitions away from coal.
"Work undertaken by AEMO and TasNetworks makes it clear that Marinus Link will play a role in the future National Energy Market, and that the project should proceed through the design and approvals phase," it states.
"By 2035, at least 12,000 MW of coal generation is expected to reach its end-of-life and retire.
"Modelling shows that the NEM will need 40,000 MW of variable renewables, such as wind and solar generation, and at least 8,000 MW of dispatchable generation, such as hydroelectric and gas generation, together with deep storage capacity from pumped hydro resources."
Each of the 750 MW components would have optical fibre cables added to improve telecommunications capacity.
Further detail on the favoured transmission route would be released in early 2020 following landowner engagement.
The business case appeared to favour a regulated services model to retain appropriate "checks and balances" for better customer outcomes, and so investors could expect greater certainty.
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TasNetworks would retain ownership of the Tasmanian infrastructure supporting Marinus Link.
Concerns remained about the current pricing framework, which could see Tasmanians and Victorians pay more for electricity as a result of Marinus Link, while customers in other states benefited from cheaper electricity.
The issue was discussed with the Council of Australian Governments in November, and a new model could be developed to factor in interconnectors. TasNetworks has prepared a submission raising the issues.
"Under the current NEM pricing framework, once Marinus Link becomes a regulated service, the ongoing costs would be recovered from electricity customers in Victoria and Tasmania but the benefits would be enjoyed by mainland NEM customers," the business case stated.
"An appropriate customer pricing outcome is required for the project to proceed."
The construction phase was predicted to create 1400 jobs in Tasmania and 1400 jobs in Victoria. The interconnectors would be 350 kilometres between Burnie and the Latrobe Valley.
The Tasmanian and Australian governments will continue to discuss funding options and ownership models for Marinus Link.
Marinus Link 'technically feasible and commercially viable'
TasNetworks believed the Marinus Link business case proved that the project was "technically feasible and commercially viable", as well as essential to Australia's future energy needs.
Chief executive officer Lance Balcombe said TasNetworks looked forward to the project moving to the next stage and discussions continue.
"I'm pleased to announce that the business case is very positive, and shows that a 1500 MW Marinus Link and supporting transmission are technically feasible and commercially viable, providing substantially greater benefits than costs under all scenarios modelled and a commercial rate of return to owners as a regulated service," he said.
Stakeholder engagement will continue, including preliminary route options, environmental and cultural considerations, pricing frameworks, and economic benefits and cost.
Minister for Energy Guy Barnett said the business case demonstrated that Marinus Link was an attractive option for investors.
"The Project Marinus business case provides assurance to investors that the project is viable, which should, in turn, drive further investment in Tasmanian renewable wind, green hydrogen and hydroelectric energy projects across the state, creating jobs, particularly in regional areas," he said.
"Utilising our state's natural advantages in renewable energy production will produce surplus energy, putting downward pressure on power prices, while allowing us to sell extra electricity to the mainland Australia with the jobs and other net benefits flowing for Tasmania."