A leading defence strategist has urged the Foreign Investment Review Board (FIRB) to consider national security, not just economics when it considers bids for the nation's largest electricity grid.

The sale of the New South Wales poles and wires, or Transgrid, is estimated to raise $9 billion for the State Government.

The successful bidder would be the biggest player in the national electricity grid and own part of the Federal Government's fibre optic network, as well as control much of the nation's backup electricity supply.

There are several contenders, but one of the leading bidders is the Chinese government-owned State Grid, which is partnering up with Macquarie Infrastructure.

Other bidders include foreign companies from Canada and the Middle East, however the State Grid Corporation's interest is raising concerns in defence circles.

The NSW Government said it expected to announce a successful bidder for Transgrid by the end of the year, but that appropriate approvals would need to be given by the Australian Competition and Consumers Commission and the FIRB.

Former deputy secretary of Strategy for the Defence Department Peter Jennings told the ABC: "What's really at play here is there's a gulf — difference of view that is existing between economists on the one hand and strategists on the other.

"We need the FIRB to somehow bring a balance between these two perspectives in ways which looks after Australia's national interests.

"That is simply not happening now — not when we have such a flood of foreign direct investment coming in to the country, particularly from China."

Mr Jennings described the Chinese government-owned State Grid — which controls of 88 per cent of China's power supply — as "intimately tied to the highest levels of the communist party system in China itself".

"Transgrid services both NSW and the ACT and therefore it covers a large number of defence bases, Parliament House in Canberra and the Defence community." he said.

The Chinese power supplier has been investing in Victoria, Portugal, Malaysia, Italy and Brazil.

It was recently expelled from Philippines over security tensions over its technicians having access to critical infrastructure when the country was in a dispute over the South China Sea.

State Grid's acquisitions 'not as critical' to national infrastructure

In Australia, State Grid has already acquired more than 41 per cent of Electra Net in South Australia and 60 per cent of Jemena electricity in Victoria.

It also owns other gas and electricity infrastructure in Victoria and New South Wales.

Mr Jennings said those acquisitions were "not as critical to national infrastructure" as Transgrid.

"The risks of attacks of cyber hacking and of cyber intrusions becomes very substantial," he said.

"If individuals can have potentially physical access to the systems that we're talking about here — there is a complex overlay of national security checking that would be required to be maintained at an appropriate standard to look after Australia's interests."

The Federal Treasurer's media adviser has not responded to the ABC's request for an interview.

In a statement to the ABC, the NSW Treasurer Gladys Berejiklian said: "Following the transactions, the NSW Government will retain significant influence over the assets as lessor, as licensor, as safety and reliability regulator, through the planning system, through the National Electricity Market rules and through network price regulation.

"As is normal practice, the NSW Government does not speculate on potential participants in any transaction process."

The ABC has requested an interview with State Grid but has not received a reply.