The federal government remains committed to the $600 million Kurri Kurri gas peaking plant despite providing $30 million in funding to progress Andrew Forrest's plans for a new power station in the Illawarra.
The money will support early works on Australian Industrial Power's 635-megawatt Port Kembla power station, which will be hydrogen-capable, as it progresses to final investment decision.
Meanwhile, the proponent of the Kurri plant, Snowy Hydro, has reached a final investment decision and has commenced development work.
The 750-megawatt plant will initially run on diesel until it is connected to the Sydney-Newcastle gas pipeline.
It has the capability to use a 15 per cent hydrogen blend. This option is seen as significant in the creation of a future hydrogen hub in the Hunter. The Port Kembla and Kurri projects are designed to fill a gap in dispatchable energy caused by the closure of the Liddell coal-fired power station.
The Australian Energy Market Operator has forecast up to 19,000 megawatts of dispatchable capacity such as gas will be required across the national electricity market to support record growth of renewables.
Energy Minister Angus Taylor said the government would work with Australian Industrial Power to assess the Port Kembla project for support through the Underwriting New Generation Investments program.
The government is seeking a pipeline of such projects as older coal-fired generation winds down.
"New gas supply and generation will help re-establish a strong economy and make energy more affordable for families and businesses, while complementing the world-leading levels of renewables in Australia," Mr Taylor said.
The government has made the Port Kembla grant a disallowable instrument, meaning political parties could overturn in parliament if they can muster the numbers.
It comes as the latest Australian energy statistics show gas consumption rising four per cent in 2019/20.
