The Morrison government is investing a further $75 million in the Marinus Link project, an electricity interconnector from Tasmania's so-called "Battery of the Nation" to the mainland.
The Marinus Link will export reliable hydro-electricity from Tasmania into the other regions of the National Electricity Market, delivering an expected $4.6 billion in benefits across the market.
The additional funding comes on top of a previous $66 million already invested to progress the Marinus Link through to the next stages of planning, design and approvals.
The government is also providing $65 million to fund upgrade works on the Tarraleah hydro power scheme redevelopment in Tasmania's Central Highlands.
Prime Minister Scott Morrison said ensuring Australians had access to affordable reliable energy was part of the government's plan for a stronger future, and addressing cost of living pressures.
"Marinus Link and Battery of the Nation are true nation-building projects," he said in a statement on Sunday.
"This will have enormous benefits for Tasmanians and Victorians, strengthening the economy, creating thousands of jobs, driving down power bills and easing cost of living pressures. More energy in the market means lower prices for everyone."
Premier Peter Gutwein said it was a significant agreement for a "clean energy highway".
He says it will help reduce emissions, deliver reliable and affordable energy for consumers, and strengthen Tasmania's economy through new jobs and investment.
"Tasmania is already a world leader in renewable energy," Mr Gutwein said in the joint statement.
"We can already generate 100 per cent of our energy from renewables with a target to double that by 2040."
