Tasmania is in the midst of its most serious energy crisis on record, and in a search for answers the federal Greens have struck a deal with Labor for a Senate inquiry.

Key points: Failure of the Basslink cable and low rainfall put Tasmania in energy crisis

Failure of the Basslink cable and low rainfall put Tasmania in energy crisis Industrials, which use 60 per cent of Tasmania's power, have cut down usage

Industrials, which use 60 per cent of Tasmania's power, have cut down usage With jobs at risk and hydro dams at record lows, Greens and Labor call for Senate inquiry

Dry conditions mean the dams used to fuel the state's hydro-electric power scheme are at record lows of only 15.5 per cent and are set to continue dropping.

The state's insurance policy, the undersea Basslink cable, which is used to import power from interstate coal-fired power generators, is broken.

The cable broke late last year, and is not expected to be fixed for months.

At the time of breakage, about 30 per cent of the state's power needs were being imported by Basslink, 60 per cent from hydro and 10 per cent from wind farms.

A range of contingencies have been rolled out to grapple with the crisis, including importing 200 expensive diesel generators.

Greens senator Nick McKim is concerned the use of diesel could damage Tasmania's clean, green image.

"In the main, that's a very well deserved reputation and one of clear competitive advantages," he said.

"But I think people will look at Tasmania and think how did we go so badly wrong here."

In the search for answers, the federal Greens have struck a deal with Labor for a Senate inquiry.

Labor senator Carol Brown said her party would back it.

"An inquiry can deliver, I believe, some understanding about how we got to this position, but also I believe some recommendations to make sure we don't end up in this position again," she said.

Hearings could begin within weeks and would be held in Tasmania.

State Energy Minister Matthew Groom said he would have more to say on the issue "very soon".

"We have always said that at an appropriate time [there] needs to be a full and frank inquiry into how this situation developed, including examining the actions of the previous Labor-Green government," he said.

Hydro Tasmania likely to face the inquiry

Labor and the Greens are hoping to call Hydro Tasmania and the State Government to give evidence.

Hydro made big money under the carbon tax, selling its power into the national grid.

Dry conditions have caused water levels at Hydro Tasmania's Great Lake dam to fall to unprecedented levels. ( Supplied: Kaylee Hattinger )

In the weeks leading up to the unforeseen Basslink break in late December, Hydro was exporting its power to the mainland.

Mr McKim also wants to quiz the state-owned power company.

"Hydro's core mandate is to keep the lights on in Tasmania and unfortunately we are now seeing power rationing to the major industrials, contractors told not to come to work," he said.

But Hugh Saddler from the Australian National University's Climate Institute said selling power interstate was a shrewd move.

"Hydro has extremely sophisticated modelling of the probabilities of the runs off and so on," he said. "I think that it was a sound commercial strategy."

In a statement, a spokesman for Hydro Tasmania reaffirmed its long-standing position.

"The record dry in spring 2015 was the worst result for that period for the past 50 years," he said.

"As a result, Hydro Tasmania imported heavily across Basslink from October 2015 until the fault occurred on 20 December.

"Through 2015, we were a net exporter from May to August only, which is normal practice for that time of year when it rains the most and to avoid spill. Inflows during this period were around average. The rest of the year we were a net importer."

Big industrials stretched to the limit

Another main contingency has been working with Tasmania's big industrial users to reduce power usage during the crisis.

A handful of big companies use 60 per cent of the state's power and employ hundreds of people.

The Minerals and Energy Council's Wayne Bould said most had reached the limit they could reduce power use.

"There comes a point when you can't reduce your production any further and you actually have to move into close down mode," he said.

Tasmania's big industrials, like Rio Tinto's aluminium smelter at Bell Bay, have cut back power use. ( ABC News )

"Some of them are nearing that point, they need to know in the next month or two whether they are going to maintain the level that they are at."

There are fears if they companies are asked to cut back further jobs could be on the line. Tasmania has the second highest unemployment rate in the nation.

Mr Bould said job numbers were a consideration in a crisis like this.

"As they cut down through their decisions to reduce their output in order to reduce their input of power, they're also considering the impact on their customer base," he said.

"All of that has the potential to impact other decisions that need to be made about costs in the business, and clearly one of those costs is human load."

He is also warning of the risk of losing investment in the state.

"There will be a tipping point, and when you are talking to boards in Switzerland and you are talking to boards in Australia and Africa, the dollar will go somewhere else," he said.

Household users have been assured there will not be any power rationing.