The state government is chipping in $83 million to help build a new power plant on the shores of Lake Illawarra - just five months after approving the project.
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The development - known as Tallawarra B - is an expansion of EnergyAustralia's existing Tallawarra plant.
Capable of running on both natural gas and hydrogen, it has been touted as Australia's first net zero emissions hydrogen and gas-capable power plant, with direct carbon emissions from the project offset over its operational life.
But some critics have suggested this could be little more than "greenwash".
Pumping out more than 300 megawatts the Tallawarra B plant will pick up the deficit left by the impending closure of Liddell power station near Muswellbrook.
"The station will be operating in time for the summer of 2023-24, following the closure of the Liddell power station, and it will help to kick-start the green hydrogen industry," EnergyAustralia managing director Catherine Tanna said.
"We are leading the sector by building the first net zero emissions hydrogen and gas capable power plant in NSW."
The plant will cost at least $300 million to build.
... it will help to kick-start the green hydrogen industry.
- EnergyAustralia managing director Catherine Tanna
The government tagged the development State Significant Infrastructure in 2018 and it was approved by the Department of Planning in December last year.
Under the state government funding agreement, EnergyAustralia will offer to buy 200,000 kilograms of green hydrogen from 2025 to offset the plant's fuel use and will also offset direct carbon emissions from the project over its operational life.
"NSW has an enormous opportunity to lead the world in the production of green hydrogen," said NSW Deputy Premier John Barilaro.
"Fast-tracking new projects like these will ensure we continue to remain at the forefront of developing new technology while supporting our existing industries."
Shellharbour MP Anna Watson supported the project, which would create 250 jobs during construction.
"This is exciting news for the Shellharbour electorate," Ms Watson said.
"Not only will this project generate hundreds of well-paid construction jobs here locally but will inject an estimated $300 million back into the NSW economy."
"It's so great to see our region at the forefront, leading the way in generating cleaner, greener and more affordable energy for consumers."
Wollongong City Greens councillor Mithra Cox said plans were needed to ensure the site ran solely on hydrogen by the end of the decade.
"Unless there is a clear plan to power the Tallawarra B power station from 100 per cent green hydrogen, it is nothing more than greenwash," Cr Cox said.
"Gas is a fossil fuel, and we should not be pouring millions of dollars of public money into fossil fuels."
Independent MP Justin Field called for details of the government "subsidy deal".
"EnergyAustralia will be seeking to make a profit from this predominantly gas-fired power station while the taxpayer is on the hook to the tune of $83 million to reduce its environmental footprint," Mr Field said.