Hydro Tasmania said it is weighing a potential long-term electricity arrangement with AI infrastructure developer Firmus as Tasmania remains broadly in annual energy balance and faces forecast growth in industrial demand. In a submission to the House of Assembly Government Administration Committee A’s inquiry into AI data centres in Tasmania, Hydro said Firmus had proposed approximately 444MW of future demand across facilities at St Leonards, Bell Bay and Wesley Vale. Hydro said its assessment was ongoing and that it expected to finalise it by the end of 2026.
Tasmania is currently “at, or close to, annual energy balance”, according to Hydro, with around 10,700GWh of on-island generation broadly matching annual electricity consumption. Against that backdrop, Hydro described an additional load of up to 444MW as a “material increase in demand”.
Hydro said its assessment is being guided by a central question: whether the additional demand can be supplied in a way that does not affect reliability for existing customers, provides appropriate commercial value and manages the associated risks. It is considering the availability and timing of new generation, variable hydrological conditions, energy supply and reliability, the amount and mix of new renewable generation, firming requirements and the extent to which Firmus could make its demand flexible.
Hydro is also considering the implications of the proposed load and associated generation for the wider Tasmanian electricity system.
New generation required
Firmus has requested that its demand be matched with 2MW of new renewable generation capacity for every 1MW of demand, according to Hydro’s submission. Meeting that requirement would require additional wind and solar generation to be developed in Tasmania, potentially by third-party private businesses.
Hydro says there are two broad potential contracting models under consideration. Under one, Firmus would contract directly with renewable generators, with Hydro Tasmania providing the firming required when renewable generation was insufficient to meet demand.
Under the other, Firmus would contract directly with Hydro, which would procure the required new renewable generation and manage the interaction between the generation and Firmus’s demand.
Hydro said both approaches would require additional renewable generation, with the choice affecting how power purchase agreement and other market risks were allocated.
Hydro said “no decision has been made” on Firmus’s proposal.
Existing customers
Hydro said the potential benefits of the Firmus load included providing greater certainty around long-term revenue, supporting investment in new renewable generation, broadening Tasmania’s large-customer base and spreading fixed electricity system costs across a larger customer base. It added that those benefits needed to be considered against the “energy supply, commercial, delivery and counterparty risks” associated with a load of that scale.
Hydro’s assessment assumes Tasmania’s existing major industrial customers remain in the state and continue to require electricity under their existing arrangements. It said it “would not enter into a new agreement that adversely affects energy availability to existing Tasmanian customers.”
The submission said that major industrial customers currently account for just under half of Tasmania’s electricity consumption, following the cessation of operations at Liberty Bell Bay.
In its separate submission, TasNetworks takes a more positive view of the potential benefits of large new loads. The network operator says adding large-scale demand can spread fixed transmission costs across a broader customer base and put “direct downward pressure on electricity prices for all Tasmanians”. It also says data centres and AI factories can provide high-utilisation and flexible demand that can support network operation, particularly when located near generation.
Firmus financial risk
Hydro’s assessment goes beyond whether the electricity system can physically accommodate the proposed load. The company said it is considering “customer and counterparty risk”, including Firmus’s financial capacity, the durability of the proposed demand and appropriate credit and contractual protections.
It is also assessing expected revenues, costs, risks and opportunities, as well as the overall risk-adjusted value to Hydro Tasmania. Hydro added that any arrangement would need to be commercially sustainable and appropriately reflect the costs and risks associated with contracting a load of this scale.
Firmus deal only one part of development
Hydro also stressed that an electricity agreement would not by itself allow the proposed projects to proceed. Firmus would still need to progress the projects through Tasmania’s Resource Management and Planning System and negotiate connection arrangements with TasNetworks, alongside obtaining other required approvals and commercial arrangements.
Hydro said its assessment is expected to be completed by the end of 2026, although a contract with Hydro Tasmania is not a prerequisite for Firmus’s wider growth plans. The company could potentially use a third-party financial hedge and generation arrangement instead, which is the approach Firmus has taken with Gunvor Group in South Australia. Hydro said that in such a case, certain risk-sharing clauses it is exploring in relation to energy system implications are unlikely to be included.
Hydro said Tasmania’s first 750MW stage of Marinus Link is due for completion in 2030, and that additional interconnection would support energy security, new industrial development and renewable generation investment. It said the assessment of Firmus’s proposed load was particularly important in the period before Marinus Link’s first stage is commissioned.