Pumped hydro and new market mechanisms at heart of state government plan to encourage $32 billion in private spending on renewables

The policy unveiled yesterday plans to use pumped hydro to store and deliver enough solar and wind generated power to replace the Hunter's four coal-fired power stations if they close as expected by 2035.

The Electricity Infrastructure Roadmap aims to encourage $32 billion worth of private spending on renewable technology over 20 years, with incentives for energy businesses to set up in three "renewable energy zones": the Central West, New England and South West NSW.

A 58-page report explaining the policy says that without "cheap, reliable and green energy", industries such as steel, aluminium and ammonia (all made in the Hunter) are "at risk due to global competition and investor pressure to de-carbonise".

Asked why the Hunter was not declared a renewable zone, Energy Minister Matt Kean said the region was "a prime location to investigate for a future renewable energy zone, given its strong renewable resources and transmission links".

"We are happy to work with any community in the state that wants to host a REZ and unlock the roadmap's economic benefits," Mr Kean said.

But energy unions and ALP state politicians criticised the decision to leave the Hunter off the "roadmap", although the Labor opposition says it supports the plan in general.

Opposition energy spokesperson Adam Searle said Labor was "conscious that places such as the Hunter should not be left out".

"We support the policy in principle, but we have concerns over the detail," Mr Searle said.

"We want to make sure the Hunter is not left out of any investment boom, and that a fair share of the resultant jobs and manufacturing must be part of the legislation."

CFMEU mining and energy president Peter Jordan described the plan as "a pipedream" that said nothing about the future of power workers and their communities once the power stations were decommissioned.

"Renewables projects should not be seen as a substitute for jobs provided by coal mining and coal power stations," Mr Jordan said.

"The government claims this roadmap will create 9000 jobs, but most are in construction and only 2800 would be on-going."

Cessnock MP Clayton Barr said much of the high-voltage transmission infrastructure needed for a renewably powered grid was already in Michael Johnsen's National Party electorate of Upper Hunter.

"You do have to wonder how he lost this argument inside his own team," Mr Barr said.

"But overall, it's imperative the government maximise the use of locally made equipment in this process, rather than their usual reliance on offshore products that cost Australian jobs, often fail, and don't save money."

Mr Johnsen, though, said "the Hunter doesn't need a 'zone' to be included in private investment".

"There are many opportunities identified and under planning, including solar and wind projects, battery manufacturing and pumped hydro," Mr Johnsen said.

"Importantly, in the Hunter we recognise the value of diversification of energy sources, our infrastructure recognises this, and industry does as well."

Away from the politics, the report looks at NSW's role in the national power grid, and proposes new electricity market features including the under-writing of long-term energy supply agreements, and payments to rural landholders to host solar or wind farms on their properties.

As well as underwriting the substantial $32-billion investment the report says will be needed to replace the coal-fired generators, it says household power bills will fall by about $130 a year and small business bills by $430 a year between 2023 and 2040.

The report says that while the NSW power system took 30 years to plan and build, most of it needs replacing within 15 years.

Although the plan was welcomed by environmental groups and farmers, it has been questioned by a major peak body of generators and power users, the Australian Energy Council, which says major grid reforms should be co-ordinated nationally rather than state by state.

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