Hidden deep in Tasmania's southern forests, a man and his son are realising a dream.

Fourth generation farmer Nigel Tomlin has swapped the paddocks of his Derwent Valley farm for the remote Humboldt River deep in Tasmania's southern forests, where the seeds of a long-held idea are finally taking shape.

"Farming is quite challenging and I do enjoy a challenge. I've tried lots of things during my farming career, but I've always had a passion for water and the power of water and what it can do," he said.

Mr Tomlin has always supplemented the farm's income with another pay check, and has spent 25 years working in the hydro-electricity industry, the whole time thinking about his own projects.

"I've always run the farm while I've been involved in hydropower generation all through my life, so my farm has always been an enjoyable hobby," he said.

"But the risks in farming are quite big and this is just another way of diversifying to maintain a reliable income I suppose."

It took a change of legislation allowing private operators to sell power to the grid and a $700,000 clean technology grant from the former federal government to help turn his idea into a reality.

"It's one of those lifetime goals we want to achieve. I've gained a lot of knowledge over a long time working in this area, I would like to see some good come of that and my knowledge passed on," Mr Tomlin said.

The Tomlin family, who have been working on their Humboldt River hydropower scheme for the past few months, are now laying the last few hundred metres of pipeline alongside the river.

It will carry water diverted from the top of the river down to a turbine to be installed in the small Riverstone power station at the bottom of the hill.

"We're not even going to put in a machine to extract the water from this river, so [it is] a very passive [and] environmentally friendly way of getting renewable energy," Mr Tomlin's son Josh said.

"It's simple physics, you drop something from a height that has energy, we're capturing that."

Once up and running, the scheme will channel 48 per cent of the river's water down the pipe to the turbine each year.

That water will be returned back to the Humboldt River 2.5 kilometres downstream.

Once up and running, the scheme will channel 48 per cent of the river's water down the pipe to the turbine each year. ( Supplied: River Power Tasmania )

"It's not a consumptive use of water, it's not like we're watering a paddock and that water is lost to evaporation, it will be returned downstream once it goes through our pipe," Josh Tomlin said.

By the time the water travels through the pipe and meets the turbine, it has dropped 95 metres downhill and built up a lot of momentum.

"It's delivered to the turbine by jets and the force of that water spins the turbine. It's just like you with a hose cleaning a paint roller, you put force of water on it and it spins the wheel," Mr Tomlin said.

By May, the system should be in full operation, sending two gigawatt hours of electricity annually to the grid which is enough to service much of the local region or about 500 homes.

"At full load, for instance in the winter time, power won't be coming into the valley at all. In fact, the power we generate will go out of the valley which we're very proud of," Nigel said.

Hydro dream had backyard beginnings

Mr Tomlin's journey back into the hydro-electricity industry started just down the road at the family farm in Ellendale, a hamlet at the foothills of the Mount Field National Park.

He had retired to the family farm 10 years ago, but while he worked on the property his mind was elsewhere, formulating plans for future power generation.

"I have a number of cattle, vealer breeding cows and we sell at weaning time. I have a cherry orchard and I've put in some eucalypt plantations and we grow seed crops," Mr Tomlin said.

Farming was not enough financially however, and the family has always had to diversify.

That diversification has included hydro-electric power generation.

Alongside his farm work, Mr Tomlin created the prototype for his Humboldt River scheme at the bottom of his own garden.

It is now pumping out 100 megawatt hours per year which is enough to power the 30 houses of Ellendale.

"It was quite a relief when we did get approval to connect to the grid. The project here was completed in a very short time because I had 30 years to think of how I was going to do it, where I was going to put it, and how I was going to go about it," he said.

It is diverting the water from the top of the Jones River, which runs through the property, with the water travelling through a 500-metre pipe to the small power station below.

"I was heading down the farming track [and] I had a change of direction. This has been successful and we think there is a future in this area. We're going ahead with bigger things like the Humboldt and hopefully others," Mr Tomlin said.

However the family's future in hydro-electricity is uncertain after the clean technology grants were cut and the wholesale price for power dropped.

"The hydropower is making us money at the moment but we're a bit disappointed in the legislation. We went ahead with the Humboldt scheme under legislation and now we have a change of government and that legislation is going to change so that mucks up all our feasibility studies that we've done and we've invested in," Mr Tomlin said.

He mortgaged the farm to help fund the Humboldt project, and unless there are more incentives for renewable energy projects in the future, he is not sure if he will take the risk again.

If not, the farm which has been in the Tomlin family for four generations, might once again get Mr Tomlin's full attention.

"We can lay down our tools but we don't want to do that. We think we have a lot to offer, not only to the country, but to the world and we'd like to keep pursuing what we are doing," he said.

"This is an excellent example of renewable energy. It more or less produces base load power so it's got huge potential whether I do it or whether its done in generations' time. I think this is the future," he said.