A Tasmanian energy producer has scrapped plans for the southern hemisphere's largest wind farm.

The $2 billion, 600 megawatt King Island project proposed by Hydro Tasmania was to capture the Roaring Forties winds in 200 turbines and feed into the national electricity market via high-voltage underwater cable across Bass Strait.

But Hydro boss Steve Davy released a statement on Monday saying the plan – TasWind – was no longer financially viable, regardless of possible changes to the Renewable Energy Target.

“Our investigations eventually found that TasWind was not viable even if the RET was maintained at the existing level,” Mr Davy said of initial outcomes from a partially-complete feasibility study.

Among the factors directing Hydro’s decision were “changing economic conditions” including a high Australian dollar, that had increased capital costs by some $150 million since the project was first proposed in 2012.

Revenue projections had also taken a blow from declining demand on the national grid, Mr Davy said.

“We have exhausted all avenues by which this concept could progress,” he added.

Tasmanian Energy Minister Matthew Groom described as disappointing the decision but thanked the company for its honesty.

“Hydro has done the right thing by making this announcement now to provide certainty,” he said in a statement.

But state Labor squarely blamed federal RET uncertainly for the project’s demise.

“The collapse of a $2 billion investment opportunity highlights the need for more renewable energy incentives, not fewer,” Labor spokesman David Llewellyn said.

In its construction phase the project was to have created hundreds of jobs and brought millions of dollars to the small Bass Strait island, northwest of Tasmania, which has a population of about 1800.

TasWind had sparked Federal Court action when the No TasWind Farm Group argued Hydro had no “social licence” for the farm.

Despite the legal tussle, the company continued with its feasibility study based on a poll showing majority support among King Island residents.

The federal government wants to adjust the RET to a “real 20 per cent” of energy production by 2020, in effect slashing it from 41,000 gigawatt hours to about 27,000 gigawatt hours.


By Andrew Drummond