The federal government has announced funding to investigate and plan for a $230 million project aimed at delivering desalinated water to support renewable industries in South Australia.

If feasible, the Northern Water Supply project will see the construction of a 260 megalitre per day seawater desalination plant in the Spencer Gulf and 600 km of pipeline to the state’s far north.

The project is designed to provide a climate-independent water source and reduce pressure on far north groundwater sources and the Murray River.

Treasurer Jim Chalmers made the announcement of $65 million in federal funds in SA last Friday, saying Northern Water is part of the Future Made in Australia initiative announced in the federal budget.

Mr Chalmers said analysis indicates the Northern Water project could unlock $5 billion in investment and lift South Australia’s gross domestic product by $150 billion over its 30-year lifetime.

The government’s $65 million will go towards a $230 million package jointly funded by at least $85 million from the South Australian Government and the remainder from industrial offtakers, including companies likely to use the water.

The funding will go towards technical pre-construction activities including finalising industrial offtake agreements and water allocations, geotechnical investigations, refining design and cost estimates, design work, and community engagement.

If the the project is found to be feasible and goes ahead, the desal plant and pipeline will deliver water required to process critical minerals and produce renewable green hydrogen, acting South Australian Premier Susan Close said.

“Northern Water is intended to be a large desalination plant that will help fuel new green industry, both in the form of critical minerals but also production of hydrogen,” she told a media conference.

“It’s also a recognition that we can’t keep expecting to get water from the River Murray, nor from the Great Artesian Basin …we know that we need to get off our dependence on climate-dependent water.

“If we’re going to industrialise in this new carbon, zero carbon future, we’re going to have to do it by using green energy and desalinated water where there isn’t sufficient supply.”

Environment and Water Minister Tanya Plibersek said the project could be transformative for the environment and local industry, including industry based on green hydrogen.

“We knowthat green hydrogen is a very thirsty energy source,” she said.

“It requires reliable abundant water. We want to see copper development in this area as well, again, something that will require reliable water resources.”

The final decision to proceed with construction of the Northern Water project will rely on gaining required project approvals and commercial agreements for project delivery and water purchase.

It’s hoped a business case will be ready by 2022-23 with a final project decision expected in 2025, and operations to begin in 2028.