A second electricity interconnector between Tasmania and Victoria has been given a big tick by a business case study but it remains unclear how the $3.5 billion project will be funded.
State energy provider TasNetworks on Thursday released a report into the feasibility of the Marinus Link project.
It found the undersea power cable would deliver huge economic benefits to both states and keep mainland power prices down.
The proposed 350km, 1500-megawatt cable was technically feasible, commercially viable and could deliver between $600 million and $3.1 billion in net benefits to the national energy market, the report said.
"These benefits mean the cost of electricity supply in the NEM (National Energy Market) would be relatively lower with Marinus Link in service," it said.
"In a competitive energy market, this should translate to relatively lower electricity prices for customers."
The project would create 2800 jobs across both states at the peak of construction between 2025 and 2027, when the cable is slated to come online.
However, it is unclear how the infrastructure will be paid for, with Tasmania Energy Minister Guy Barnett saying discussions with the federal government about funding were ongoing.
Mr Barnett said Tasmania would pay no more than its "fair share", but wouldn't specify a figure.
The national Energy Security Board has been commissioned to look at a pricing allocation model for the interconnector and further discussions between federal and state governments would be held at COAG next year, Mr Barnett said.
Tasmania transfers electricity to Victoria through the existing Basslink cable but about 400MW of available energy cannot be delivered to the mainland due to constraints on Basslink, which began operating commercially in 2006.
The Commonwealth has invested $56 million into fast-tracking the Marinus Link project.
The business case assessment was jointly funded by TasNetworks and the federal government through the Australian Renewable Energy Agency.
Australian Associated Press