A gas-fired power station proposed for the former Kurri Kurri aluminum smelter site has been declared as Critical State Significant Infrastructure.
If approved, the power station, announced by Prime Minister Scott Morrison in September, would generate up to 750 megawatts of electricity on demand as well as create an estimated 600 jobs in construction.
"Gas-fired power stations will have a critical role to play in ensuring our energy security as we transition to a low-carbon emissions economy with renewable energy projects such as wind and solar," Planning Minister Rob Stokes said.
"As well, this project could create jobs for up to 600 construction workers and generate around $800 million worth of investment for the local economy."
The power station would be located on the site of the former Kurri Kurri Aluminium Smelter which ceased operations in 2012 and has since been demolished.
A government taskforce established to prepare for the closure of the Liddell power station in April 2023 found that closing the plant without adequate dispatchable replacement capacity risked forcing energy prices up by 30 per cent over two years or $20 per megawatt hour to $80 in 2024 and up to $105 per megawatt hour by 2030.
Despite the federal government's enthusiasm for the Kurri project, there are significant doubts about whether it is needed.
AGL is well advanced in its plans to replace the capacity to be lost through the closure of Liddell with renewable energy projects.
"AGL has led investment in Australia's energy market, including the building of the only new gas generation on the east coast in the last seven years at Barker Inlet, the investment in a 100 megawatt efficiency upgrade at our Bayswater power station and the development of other firming and storage technology," AGL chief executive Brett Redman said in September.
"Only last month we announced our plans to develop 850 megawatts of battery storage capacity across the eastern states by 2024."
Mr Redman said the proposed Newcastle gas-fired power station had strategic, economic, efficiency and environmental benefits for AGL and the national market.
"We've made good progress on this proposed development at Newcastle with the environment approval process underway and a final investment decision expected by early 2021."
"The future of energy requires a combination of technologies and gas is a critical part of that transition, as are renewables and the firming technology that increases their reliability. We will continue to lead investment in line with the market drivers of customer choice, technology and community needs."
Regardless of the Kurri project's Critical State Significant Infrastructure status, Mr Stokes said the project would be subject to extensive community consultation and a thorough environmental assessment.
The proponent, Snowy Hydro, can now request assessment requirements to prepare an Environmental Impact Statement which will then go on public exhibition for community feedback and detailed assessment before a final decision is made.