* Victoria seeks 40 pct renewable energy by 2025
* Power users, producers warn against state-by-state targets
* State taps solar power for trams (Adds industry comment, solar farm bid winners)
SYDNEY, Aug 23 (Reuters) - Australia's second most populous state has proposed passing laws to lock in a renewable power target of 40 percent by 2025, looking to spur investment in solar and wind farms even as the national government wrangles over energy policy beyond 2020.
Victoria state Premier Daniel Andrews will introduce legislation to the state parliament this week to cement renewable energy targets, including 25 percent by 2020.
The eastern state, with a population of 6.24 million, suffered a sharp jump in wholesale electricity prices earlier this year after one of its largest coal-fired power plants closed.
The 1,600 megawatt Hazelwood plant had provided a quarter of Victoria's power supply, and its closure has raised demand for gas-fired power at a time when east coast gas supply has been strained, fueling rises in gas and power prices.
The federal government, controlled by the Liberal Party, has no renewable energy target beyond 2020 and has said it wants to take a more technology-neutral approach to ensure stable and affordable power supply.
States led by the opposing Labor party have long pushed their own green power targets due to a decade of energy and climate policy uncertainty at the federal level.
Victoria, a Labor-controlled state, will hold renewable energy auctions in which companies will bid to supply the market, the first of which is for 650 megawatts, which the government said it hopes will bring up to A$1.3 billion ($1 billion) worth of investment into the sector.
However, big energy users and major power producers cautioned against a state-by-state approach to setting renewable energy targets, following the Victorian government's announcement.
"We desperately need a coordinated national approach and we are not sure this latest initiative helps achieve that goal," Energy Users Association of Australia Chief Executive Andrew Richards said in a statement on Wednesday.
The Victorian government also announced two firms had won tenders to build solar farms to power Melbourne's tram network.
Foresight Solar Australia, part of the Britain-based private equity fund Foresight Group, will provide 100 megawatts at Bannerton Solar Park.
Privately-owned French renewable energy firm Neoen will produce 38 megawatts at Numurkah Solar Farm. Australia is Neoen's second-biggest market behind France. ($1 = 1.2671 Australian dollars)