The NSW and federal governments announced on Tuesday that they would provide $83 million to assist in the establishment of Energy-Australia's Tallawarra B project.

However, the $400 million, 300 megawatt "fast start" plant will not be enough to offset the 1000 megawatts that will be lost from the closure of Liddell power station in 2023.

A six-month window that the Federal Government set the energy sector to prove that it can replace the dispatchable power to be lost from the closure of Liddell power station ended last Friday.

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The Newcastle Herald understands the government will make an announcement about the proposed Kurri project later this week.

If it proceeds, the $500 million project, which would have a capacity of greater than 600 megawatts, would be built by Snowy Hydro 2.0.

The Tallawarra B project will deliver enough electricity to power around 150,000 homes at times of peak demand. It is expected to deliver a $300 million boost to the economy and support about 250 jobs during construction.

Like the proposed Kurri plant, Tallawarra B will be capable of blending hydrogen and conventional gas fuels.

"This project (Tallawarra B) sets a new benchmark for how gas generators can be consistent with NSW's plan to be net zero by 2050 by using green hydrogen," NSW Energy Minister Matt Kean said.

Treasurer Dominic Perrottet said investing in the cutting-edge technology would help secure power generation and put the state in a prime position to capitalise on an export industry that is predicted to be worth $1.7 billion annually by 2030.

"As we recover from the pandemic, embracing emerging industries will help recharge our economy by creating new jobs and opening up new opportunities that will secure our economic prosperity well into the future," Mr Perrottet said.

Under the funding agreement, Energy Australia will offer to buy enough green hydrogen equivalent to over five per cent of the plant's fuel use from 2025 and will offset direct carbon emissions from the project over its operational life.

EnergyAustralia will also invest in engineering studies on the potential to upgrade Tallawarra B so it can use more green hydrogen in its fuel mix in the future.

The Tallawarra B project is the latest in a series of steps the NSW Government has taken to ensure reliable electricity supply following the closure of Liddell, including jointly underwriting the Queensland-NSW transmission interconnector upgrade, the $75 million Emerging Energy Program which provides capital grants for new dispatchable generation. It is also seeking offers for new dispatchable plant to power the state's schools and hospitals as part of the NSW Government's electricity contract.

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EnergyAustralia Managing Director, Catherine Tanna, said the project will help deliver on the company's ambition to lead the transition to a cleaner energy future.

"Customers expect affordable, reliable and cleaner sources of energy from providers and Tallawarra B delivers this to households and businesses in the Illawarra region and NSW," Ms Tanna said.

Green hydrogen is a cheap, reliable type of energy that is made using 100% renewable sources.

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