The federal government has confirmed it will build a $600 million gas-fired power station at Kurri Kurri in NSW's Hunter Valley as part of its strategy to avoid a spike in power prices following the closure of Liddell Power Station in 2023.
Energy Minister Angus Taylor will announce the 660 megawatt generator, to be built on the site of the former Hydro Kurri aluminium smelter, on Wednesday.
The project, to be built by Snowy Hydro 2.0, will complement EnergyAustralia's recently announced 316 megawatt Tallawarra B open cycle gas plant on the NSW south coast.
"This important project (at Kurri) is good news for NSW as well as the broader National Electricity Market," Mr Taylor said.
"We were very clear - we will not stand by and watch prices go up and the lights go off. This project will deliver flexible gas generation to replace Liddell and maintain reliable power alongside Australia's world-leading investment in renewables."
Wednesday's announcement follows the federal government's $66 million commitment in last week's budget to upgrade Newcastle Airport's runway to international standard.
"These investments continue our focus on creating a stronger and more prosperous Hunter Valley, giving the region's families and businesses more opportunities and the chance to get ahead," Prime Minister Scott Morrison said.
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An environmental Impact statement for the Kurri gas peaker, which is on public exhibition, shows that it will only run on average for about two per cent of the time.
It is estimated the generator's construction phase will create about 250 jobs and 10 ongoing full time jobs. Another 1200 indirect jobs will be created across NSW.
The EIS says the generator will run on diesel for at least six months at the end of 2023 until a permanent connection to the Sydney-Newcastle gas pipeline is complete.
An EIS for the pipeline component of the project, which is expected to create 350 construction jobs, is yet to be released.
Mr Morrison said securing reliable, affordable energy was critical to the government's plan to secure Australia's recovery from the COVID-19 pandemic.
"Without covering this shortfall left by Liddell, households, families and jobs across NSW will be held hostage to higher electricity prices and an unstable grid," he said.
"Last September I made it crystal clear, if the big energy companies did not take action to fill this gap, then the Commonwealth, through Snow Hydro, would take the necessary action.
"We are stepping up to protect consumers and boost jobs while supporting the better integration of renewables into the electricity grid to drive emissions down."
Labor MPs Meryl Swanson and Joel Fitzgibbon, whose seats of Paterson and Hunter have been targeted by the Coalition, have backed the Kurri project.
"There's a capacity problem. We can't always deliver enough gas to the site because the Sydney to Newcastle pipeline becomes full. There is a plan to deliver more capacity to that pipeline but we can't be certain about always delivering gas until we establish a second source and that is via the Hunter gas pipeline," he said.
The 833 kilometre pipeline would connect the gas hub at Wallumbilla (near Roma in Queensland) to Newcastle and Sydney markets.
The project's construction approval was extended in October 2019 for five years.
The federal government also announced a $24.9 million package in last week's budget to support new gas generators to be hydrogen-ready, including a $5 million commitment to Tallawarra B.
The construction of two new gas power plants will create over 2000 direct and indirect jobs.
"Through the 2021-22 Budget, the Morrison government is also providing up to $30 million to support early works on Australian Industrial Power's (AIP) Port Kembla power station project as it progresses to Final Investment Decision. The project will play a crucial role in reducing market volatility risks in NSW by supporting reliable electricity supply and keeping prices low," Mr Taylor said.
"Progressing the AIP power station would also support the development of the Port Kembla import terminal, providing a key source of demand for imported gas."
He said government will continue to work with AIP to fully assess the project and evaluate support