The plan by businessman Andrew Forrest to build the $1.3 billion project at Port Kembla will still need environmental approval, but will not be subject to third party appeal rights after it was declared "critical state significant infrastructure".

The project is in an area marked as a potential hydrogen gas hub.

The proposed power station has committed to using up to five per cent cent green hydrogen.

The project has raised further questions about the need for the federal government to build the controversial $600 million plant at Kurri Kurri.

A total of 261 submissions, including 221 from members of the public, were received during the recent public exhibition period for the project.

Many of the submissions argued that the 1000 megawatt generator was not needed.

They also raised objections to the use of fossil fuel rather than renewable energy and the project's greenhouse gas emissions.

Despite that, the NSW Department of Planning, is likely to approve the project, in coming months.

NSW Deputy Premier John Barilaro said the Illawarra plant was a step towards safeguarding the state's energy needs while providing jobs.

"The Port Kembla power station will be a game changer, not just for NSW but Australia," Mr Barilaro said in a statement.

"It will provide the energy capacity our state needs as existing coal-fired power stations reach their end of life, and household power bills will be the big winner as the project maintains downward pressure on prices."

The coal-powered Liddell Power Station near Muswellbrook is due to come offline in 2023.

Planning Minister Rob Stokes said the proposed power station would produce up to 635 megawatts of electricity on demand and create 700 construction jobs.

"The Port Kembla power station will be a critical part of the NSW energy mix as we move to cleaner, greener renewables," Mr Stokes said on Friday.

The power station would sit adjacent to the import terminal the Forest-owned Squadron energy group is already building. It has the capacity to handle both LNG and green hydrogen.

The federal government has previously committed $30 million to support initial works for the Port Kembla power station, and has shortlisted it for future funding support.

The final approval will rest with Mr Stokes.

MORE NEWS

Our journalists work hard to provide local, up-to-date news to the community. This is how you can continue to access our trusted content: