Port Kembla power station is 'critical', says government

Through his Squadron Energy company, Mr Forrest is constructing a gas terminal in the port.

Now his subsidiary Australian Industrial Power has plans for a $1.3 billion hydrogen-gas turbine power station, also to be located in the port.

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The state government has declared that project to be Critical State Significant Infrastructure (CSSI), which means it will go through a separate assessment pathway, with final approval resting with Planning Minister Rob Stokes.

The federal government has also chipped in $30 million for the project.

Mr Stokes said the project was expected to create around 700 construction jobs.

"If approved, the Port Kembla power station will be a critical part of the NSW energy mix as we move to cleaner, greener renewables by firming up supply and keeping energy prices low," Mr Stokes said.

"The NSW Government has a secure plan for the transition to renewables and the Port Kembla proposal should be declared CSSI because it will be vital to achieving a low-carbon emissions based economy."

Energy and Environment Minister Matt Kean said Port Kembla was "the industrial engine room of our economy".

Mr Kean added Australian Industrial Energy had committed to using as much as 30 per cent green hydrogen.

"If approved, the dual hydrogen-gas design of this project will create early demand for the green hydrogen needed to decarbonise the state's heavy industries and set them up to succeed in a low carbon global economy," Mr Kean said.

Australian Industrial Power will need to prepare an Environmental Impact Statement, which will include community consultation.

If approved, the new power station could be completed by 2024.

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