AGL and Idemitsu Australia Resources are nearing the compilation of a two-year preliminary feasibility study for the project that would utilise a mining void on the Muswellbrook Coal site adjacent to Bells Mountain.

"The Bells Mountain project offers us the opportunity to use an existing reservoir from the open cut coal mine that we can repurpose," AGL senior manager, power development Brenton Farr told the Newcastle Herald.

"So far the findings are positive and we are assessing the results that we have got. We expect the full preliminary feasibility study to be completed in the next month."

The mining void can hold six gigalitres of water (by comparison Grahamstown Dam holds 182 gigalitres). Water would be pumped 2000metres to the top of Bells Mountain where it would be stored in a 1.9 gigalitre reservoir that would be created on the top of the mountain. It would flow using gravity through pipes to drive a turbine at the base of the mountain.

The generator, capable of producing 250 megawatts with 8hrs storage (2000 megawatt hours total), would feed electricity into existing high voltage power lines nearby.

If the project proceeds, sandstone excavated from the top reservoir would be recycled during the construction process.

AGL, which is due to close the 2000 megawatt Liddell power station in 2023, and Idemitsu would use water licenses that will be surplus to need following the closure of the mine and power station to fill the bottom void with water from the Hunter River over an 18 month period.

" [The site has] great design dynamics with a lot of head and short horizontal distance between the upper and lower reservoir," Mr Farr said.

[There is] access to a skilled workforce and machinery here and an area that is comfortable with large infrastructure projects and we have a connection point into the 330 kilovolt substation as well."

The state's only existing pumped hydro generator is a 240 megawatt plant operated by Origin Energy in the state's Southern Highlands.

Australia's largest pumped hydro project is a 500 megawatt generator at Wivenhoe, Queensland.

Pumped hydro projects will increasingly take over the state's baseload power capacity as four out of NSW's five coal-fired power plants are phased out over the next 15 years.

Last year's state budget included $50 million for the development of pumped hydro projects as part of the NSW electricity infrastructure roadmap package.

"We are providing money to make sure that we get two gigawatts of pumped hydro storage. That means that we are not only getting cheap electricity, we are also getting reliable electricity," Energy Minister Matt Kean said late last year.

Muswellbrook Coal, now owned by Idemitsu Australia Resources, began operating in 1907.

Open-cut mining began on the site, which will close next year, in 1944.

AGL chief operating officer, Markus Brokhof said the project could play a potentially significant role in Australia's energy transition.

"As we transition to more renewable energy sources, pumped hydro provides a reliable on-demand generation source," Mr Brokhof said.

"We have worked closely with Muswellbrook Shire Council throughout this study and I'd like to thank them for their role in identifying the option.

"AGL is proud to be part of this Upper Hunter community and is committed to investing in the region through projects like pumped hydro which will contribute to jobs and region's future in energy generation.

"Through both thermal and renewable generation, our regional communities play an instrumental role in enabling AGL to deliver reliable and affordable energy right across Australia.

"This study is part of our commitment to deliver a mix of technologies to the energy system and aligns with our Climate Statement and target of net-zero emissions by 2050."

AGL chief executive Brett Redman recently described the Bells Mountain project as a 10 year journey.

"..all the indications are good," he said.

"What I expect to see there is quite a methodical process of assessment, engineering design, environmental consideration and community engagement on the journey to getting a commercial project up and running there."

Idemitsu Australia Resources chief commercial officer, Chris Walsh said the business was investigating further renewable energy development and export opportunities through its subsidiary Idemitsu Renewable Development Australia (IRDA).

"We have established IRDA which will leverage our global expertise from our parent company Idemitsu Kosan to ensure we can continue to contribute to regional communities like Muswellbrook where mining commenced some 113 years ago," Mr Walsh said.

"Innovative rehabilitation solutions such as the reuse of mine voids as proposed with the Bells Mountain pumped hydro project ensure that sites like Muswellbrook can continue to generate investment and long-term employment."

AGL is also in the final stages of planning waste to energy and solar thermal pilot projects in the Upper Hunter as part of a vision to create one of the world's most versatile renewable energy hubs.

The company expects to announce its international partner for the projects, to be located at its Macquarie site (home of Liddell and Bayswater power stations), in the next month.

"I think the good news for the Hunter ... is that you will see a sharpened focus on new energy in that region particularly anchored in an energy hub at Macquarie where we are starting to show some of the vision about where we can invest in all sorts of energy-based projects that build into the longer term future," Mr Redman said following last months investor briefing.

"What we are starting to do is repurpose the grid connections that we have got as well as the land and the other infrastructure."

The two technologies will be scaled up if the pilot projects prove to be successful.

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The projects will be part of PrimeCo, one of two business that will emerge from a split of the company announced last month.

The move to split the company follows an influx of renewable energy into the grid in recent times, causing wholesale power prices to crash to multi-year lows.

The second business, New AGL, will include the company's retailing division.

PrimeCo, will hold the company's biggest generation assets, such as Liddell and Bayswater coal-fired power stations, its gas-fired power stations and wind generators.

Energy hubs, such as Macquarie, will help to facilitate an ongoing transition to renewables as the energy market evolves.

Mr Redman said plans to build a 500 megawatt battery on the Macquarie site were also proceeding, however, a final investment decision was yet to be made.

"We are thinking about these projects in light of the NSW energy plan. We are going to have to see the detail of the energy plan before we can finalise an investment decision," Mr Redman said.

"I'm confident we will be building batteries there. It's a question of how soon, not if."

The company' final investment decision on whether to proceed with a proposed a $400 million gas peaking plant at Tomago is also dependent on the NSW energy plan.

"What we need to see first is the rules of engagement for the NSW energy plan. Once we see that we will be able to make a proper assessment, Mr Redman said.

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