Crews have been dispatched to two homes on Lawrence Hargrave Drive and 19 homes on Mountain Road in an effort to restore power, Endeavour Energy said.

4:21pm: More than 500 people have lost power as thunderstorms move over Illawarra.

Endeavour Energy says "lightning and heavy rain associated with the storm" has caused "outages" in the Illawarra, Sydney's west and north west.

Emergency crews are working to restore power, which is out in:

The power company advised everyone to stay clear of fallen powerlines.

4.21pm: Large hailstones as wide as 50¢ pieces could lash the Illawarra on Friday afternoon and into the evening, as the region braces for severe storms.

Strong damaging wind gusts up to 100km/h are forecast as the storm front hits this afternoon, Weatherzone meteorologist Joel Pippard said.

Locations which may be affected include Wollongong, Bowral, Newcastle, Gosford, Sydney, Orange, Mudgee, Bathurst and Katoomba. 

By early afternoon Penrith had already seen hail and strong winds as a cool change swept east over the Blue Mountains.

Penrith dropped almost 10 degrees in half an hour, from 36.5 at 1pm to 27 degrees at 1.30pm.

The storms could dump hailstones up to three centimetres in diameter in some areas, Mr Pippard said.

Gusty winds will also threaten houses and suburban areas.

"Trees coming down is the big worry - large tree branches coming down and blocking the roads," Mr Pippard said.

"It's possible telephone poles could come down. Stay away from power lines that have fallen down."

For more information see www.bom.gov.au