A major step has been taken to reduce King Island's dependence on expensive diesel energy in favour of world-leading renewable generation.

The Premier, Lara Giddings, and Deputy Premier, Bryan Green, visited the island today to mark the first major milestone for the King Island Renewable Energy Integration Project.

Ms Giddings and Mr Green joined the Federal Minister for Energy and Resources, Martin Ferguson and representatives of Hydro Tasmania to open the newly installed Diesel Uninterruptable Power Supply units and upgrades to the King Island power station.

"These infrastructure upgrades will make it possible to supply the energy needs of King Island from 100 per cent renewable energy at times of peak wind generation," Ms Giddings said.

"This is a world-leading achievement for an island of this size and is a major milestone for the King Island Renewable Integration Project."

Ms Giddings said the State Government is contributing around $19 million to the $45 million project through Community Service Obligation arrangements with Hydro Tasmania, with the balance provided through the Commonwealth's Renewable Energy Development Program Fund.

"This is an example of the State Government helping to build jobs and opportunities for the people of King Island.

"Historically King Island has had to rely on the expensive importation of diesel to run their generators.

"This project, coupled with the other actions the Government has taken to put downward pressure on energy prices, will have cost benefits for residents and small and medium businesses on King Island."

Ms Giddings said the Government is committed to helping the community confront other challenges, such as the closure of the King Island Abattoir.

"That is why we will be signing a Partnership Agreement with the Council later today to look at economic development opportunities on the Island."

Mr Green said the King Island Renewable Energy Integration project was due for completion by the end of 2013.

"The project includes additional wind turbines on the island, the installation of Australia's largest battery to store power and a transition to biodiesel for the island's generators," Mr Green said.

"What we are doing on King Island is of international significance, particularly in the Asia Pacific region, where millions of people in remote areas rely on diesel fuel stations for their energy.

"The project demonstrates the potential of renewable energy for isolated regional communities and confirms Tasmania's status as a world leader in renewable energy.

"The innovation and vision to develop this technology will keep Tasmania at the forefront of renewable energy development."