The billion-dollar Oven Mountain pumped hydro project is expected to generate 600MW of hydro power during periods of peak demand.

It has been declared as Critical State Significant Infrastructure by the NSW Government.

Energy and Environment Minister Matt Kean said it would be an important replacement for ageing coal-fired power stations.

"What this is about is ensuring that we can get this project ready to be built as soon as possible," he said.

"We know that our coal-fired power stations are coming to the end of their lives, we need to ensure that they're replaced before they close, and we need to replace them with cheap, reliable power.

"That's exactly why we're fast-tracking the build of this pumped hydro storage facility."

Time for change

Mr Kean said in the next 15 years four coal-fired power stations would come to the end of their lives.

"They need to be replaced if we're going to see prices not skyrocket, and the lights stay on," he said.

"We know that in 2028, we have the Vales Point power station due to come to the end of its life, we need to see this project completed well before then."

While the facility's construction is being fast-tracked, the proposal will still have to go through "appropriate environmental assessments".

Community consultation is expected to start soon.

"Part of this fast-tracking of the approval process means that we can get to do the community consultation very thoroughly, and very quickly, so that process will start as soon as possible," he said.

"We want to engage the community in this project, we want to bring them with us to ensure that we get that social licence."

Construction of the project is expected to create 600 jobs, with 30 staff required when the plant is operational.

Roads and communications in the area will likely need to be upgraded.

The proposal is part of the New England Renewable Energy Zone, which also includes wind and solar farms.

"We want to engage the community in this project, we want to bring them with us to ensure that we get that social licence."

Construction of the project is expected to create 600 jobs, with 30 staff required when the plant is operational.

Roads and communications in the area will likely need to be upgraded.

The proposal is part of the New England Renewable Energy Zone, which also includes wind and solar farms.

How does it work?

Mr Kean described the project as "a very big battery".

It is made up of two reservoirs, with water pumped from the top reservoir when wind and solar power is in abundance.

"When we need energy, so when the sun's not shining and the wind's not blowing, we release the water and it turns a turbine, creating electricity," he said.

Replacing coal-fired power with renewable energy is a concept embraced by the Clean Energy Council.

The council's chief executive, Kane Thornton, said the future of energy in Australia would be a mix dominated by renewables, and the Oven Mountain project would be an important part of that.

"This [is an] inevitable part of the future and is a great complement to the wind and solar farms that we're also seeing rolled out around New South Wales," he said

While hydro power systems could raise concerns about river flows and dam creation, Mr Thornton said he had few concerns due to the nature of this project.

"This is really building on infrastructure that's already in place, dams that are in place, and therefore the impact of this project on the river systems and the environment will be all very minimal," he said.

The project will include the construction of two reservoirs, tunnels and a new underground power station which will enable water from the lower reservoir to be pumped into the upper reservoir using excess power from other renewable energy projects.

It will then be released to generate up to 600MW of hydro power during periods of peak demand.

Story By | Kerrin Thomas and Melissa Martin