The Federal Government has committed funding and approved the Snowy 2.0 project as a measure in its renewable energy pitch — the former prime minister Malcolm Turnbull's pet project.

Key points: The project is estimated to cost between $3.8 billion and $4.5 billion

The project is estimated to cost between $3.8 billion and $4.5 billion It would multiply generating capacity by 150 per cent and could power 500,000 homes during peak demand

It would multiply generating capacity by 150 per cent and could power 500,000 homes during peak demand The Government said it would create 2,400 jobs

It represents a significant step forward and financial commitment towards the progress of the long-term engineering project that aims to put a new underground power station in a remote corner of the Snowy Mountains.

The Government has given the company responsible, Snowy Hydro, shareholder approval to proceed to the "early works stage" after reviewing its business case, concluding it is "satisfied that it stacks up".

Prime Minister Scott Morrison will on Tuesday be on site in New South Wales to commit "up to $1.38 billion in an equity investment for Snowy 2.0".

"It's absolutely fair dinkum power, it doesn't get more fair dinkum than this," he said.

"We have been on this job for two years to get to this point. That's a lot of homework that has been done to go into the estimates upon which we have made our investment decision today."

Former prime minister Malcolm Turnbull announced the project during his time in office, and took to social media to say he was pleased it was given the green light.

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The plan revives the Snowy Hydro Scheme in the Great Dividing Range.

The Snowy 2.0 project will link the Talbingo and Tantangara reservoirs in Kosciuszko National Park.

The rest of the project will be funded by Snowy Hydro.

In recent reports, the company estimated it would cost somewhere between $3.8 billion and $4.5 billion and multiply Snowy Hydro's generating capacity by 150 per cent.

The Snowy 2.0 project would create 2,400 jobs, the Government said. ( ABC News: Greg Nelson )

Early work to begin as soon as Friday

Snowy Hydro CEO Paul Broad said work was due to begin on the 'enormously complex' project this Friday, and would take at least five years to complete.

An underground network of tunnels stretching almost 50 kilometres will be dug to allow the project to deliver energy to the grid.

Mr Broad argued Snowy Hydro 2.0 was viable, despite drought conditions becoming more frequent across the country.

"The water in the storage is released, that storage is released downstream, it gets recycled in the storages, so that gives it a fair bit of drought protection, in a sense," he told the ABC's AM program.

"When the droughts come now, we pump like mad."

Snowy 2.0 will help cut energy costs, Prime Minister Scott Morrison said. ( ABC News: Natalie Whiting )

The Federal Opposition is demanding the business case for the project be released.

"Today's announcement takes the spend on Snowy to about $7.5 billion," Shadow Energy Minister Mark Butler told AM, arguing that figure took into account the purchase of the project from the New South Wales and Victorian governments.

"So, certainly we're supportive in principle, but we do want to be able to kick the tyres on this thing."

The Government said the project will provide 175 hours of energy storage, enough to power 500,000 homes during peak demands.

It said the project would create 2,400 jobs and 5,000 direct and indirect jobs across the region.

The project was repeatedly spruiked by former prime minister Mr Turnbull, who had said the critical thing was "engineering and economics".

The plan comes as part of the Government's new pre-election climate change policy, where it pledged $2 billion for projects to bring down emissions.

The policy, or Climate Solutions Fund, is an extension of former prime minister Tony Abbott's Emissions Reduction Fund (ERF).