A successful expansion of Tasmania’s huge hydro capacity has the potential to increase the country’s energy storage and support new renewables like wind and solar, the Clean Energy Council said following an announcement by the Prime Minister and Tasmanian Premier.

CEC chief executive Kane Thornton said hydro power could play a key role in the transition of Australia’s energy sector to one that is smarter and cleaner.

“Better interconnection between the different regions of Australia’s electricity system would make it more flexible and resilient, and take advantage of the biggest energy storage system in the country,” Thornton said.

“Hydro power has a long and impressive history of delivering energy to Australia and meeting peak demand, currently delivering about 7% of Australia’s power each year.

A feasibility study of options to expand capacity is important and should include the costs and benefits, the economics and environmental issues, he said.

The Turnbull Government has announced a feasibility study into the potential upgrade and expansion of the hydro power system in Tasmania, including up to 2,500MW of new generation.

Thornton said the role of hydro power is becoming increasingly valuable, particularly as the cost of gas continues to rise and its role in electricity generation diminishes.

Renewable energy is now the lowest-cost form of energy it is possible to build in Australia today, he said.

A balanced approach incorporating hydro, renewable energy such as solar and wind and other forms of grid-scale storage “makes a lot of sense,” he said.

“Collaboration between the state and federal governments is essential to deliver national energy policy and work towards major reform of the electricity market to unlock the technologies and solutions of the future.”