South Australia gets power from Victoria even though we have a coal fuelled power station.
Also co-gen and gas fired stations.
In very rough terms one sixth of SA electricity comes from the coal-fired plants at Port Augusta, about half comes from gas-fired plants in the Adelaide metro area and the rest is from wind and solar.
SA used to be heavily reliant on power from Vic, at one point it was supplying close to a third of the average load, but these days there's far less net transfer between Vic and SA.
Its all about base-load power and a mix of Green solutions that don't yet deliver base load power
The King Island wind farm will have a load factor of about 45%. That is, a 600MW peak capacity and an average output of 270MW which makes it one of the most productive wind farms anywhere. This is possible simply due to the relatively consistent (compared to elsewhere) wind in Bass Strait.
In contrast, most wind farms achieve a load factor in the order of 30%. For other wind farms operated by Hydro Tas, it's about 35% for Woolnorth (NW Tas) and 38% for Musselroe (NE Tas).
The King Island project is purely a business venture as such, noting that it doesn't even connect to the Tasmanian electricity grid at all. It goes straight to Victoria only.
But a logical second stage is to add a Tas - King Island cable thus forming a second HVDC link across Bass Strait. With that in place, plus further wind development either on KI or in Tasmania as such and operated in an integrated manner with the existing hydro system, Hydro Tas could indeed supply firm baseload energy to Victoria.
Hydro Tas has no pumped storage schemes at present. It has conventional storage hydro-electric schemes although some of these do include pumped diversions (ie water is pumped from one place to another, but never comes back the other way - it goes through a power station with a different discharge point instead and is a net source of baseload energy). But you could certainly build pumped storage in Tasmania if the need arose, and you could do that largely by reworking existing schemes. It doesn't make financial sense at present, but technically it is certainly viable. There is also the possibility of rebuilding parts of the system to transfer it from baseload production to peak load if it became worthwhile and in one case the required infrastructure (except the actual turbines and alternators) is already in place.
Tasmania is somewhat unique at present, being predominantly powered by renewable electricity and for having a complex, integrated hydro scheme that produces base load energy (as distinct from most hydro schemes which are intended primarily for peaking operation).
Hydro Tas would also benefit in other ways from the wind farm without needing to directly connect it to the Tasmanian system since there is already a Tas - Vic power link. In general terms, when the wind farm is producing at high output this would lower Victorian electricity prices somewhat, sending them back up when the wind isn't blowing. Hydro could simply buy some of this cheaper energy from Vic, thus conserving water in storage, and then sell back to Vic at a higher price at other times. It already does this as such, power flows in both directions across Bass Strait, but the wind farm would alter the Vic prices a little bit and there is an opportunity to take advantage of this.
Hydro isn't in a position to fund the project, it doesn't have a spare $2 billion sitting around that's for sure, so its' role is likely to be that of a developer and operator with someone else owning it. As part of such a deal, Hydro would presumably ensure that engineering design work is directed to Entura, a reasonably large engineering consultancy 100% owned by Hydro.
Hydro currently operates (but does not own) two wind farms in Tasmania. It also owns and operates an integrated hydro-electric system comprising 53 large dams (and about 150 smaller structures - weirs etc) and 28 principal power stations (and one minor one) in Tasmania. It also has recently acquired the only gas-fired plant in Tas as well as dispatch rights to a small gas-fired plant in Victoria and the associated gas supply contracts. It also owns Momentum Energy, a Victorian-based retailer which sells electricity (and which will soon start selling gas) to the public and business however Momentum is prevented by state law from operating in Tasmania except on the Bass Strait islands where it is the only electricity retailer. Other Hydro assets include a diesel power system on Flinders Island, and a wind/diesel/solar power system and "smart grid" on King Island. The existing Bass Strait cable, Basslink, is privately owned.
Politically it's simply a case of playing the game and adapting to changing circumstances. It would suit Hydro quite nicely to retain the carbon tax but that isn't the way it's going. So they're just pursuing alternative opportunities instead and playing politics where necessary.