A "landmark" agreement between the Morrison and Berejiklian governments that will see more than $2 billion invested into a new gas-fuelled energy deal has been slammed as "climate criminality" by the Greens.

Key points: Gas production in NSW will more than double in the "landmark" deal between NSW and the Federal Government

Gas production in NSW will more than double in the "landmark" deal between NSW and the Federal Government Prime Minister Scott Morrison says gas is an important "transitional fuel" as Australia moves towards renewables



Prime Minister Scott Morrison says gas is an important "transitional fuel" as Australia moves towards renewables But the Greens say the gas uptake puts Australia's climate targets on a "certain path to failure"

The bilateral deal aims to lower energy bills, strengthen the grid and reduce emissions throughout the state, through the "critical" supply of an additional 70 petajoules of gas into the east coast market.

Just one petajoule is enough gas to fuel a large regional centre like Wollongong, and NSW uses about 120 petajoules a year.

Prime Minister Scott Morrison said the deal would secure energy supply as Australia moves towards renewable power sources.

"There is no credible plan to lower emissions and keep electricity prices down that does not involve the greater use of gas as an important transition fuel," he said.

"This plan is about getting greater access to that gas, as a vital accompaniment to our record investment in renewables."

But the Greens have rejected Mr Morrison's statements, arguing reliance on "toxic methane gas" puts Australia's "weak climate targets on a certain path to failure".

"NSW is doing a climate deal with the devil, locking in pollution that will blow Australia's emissions targets and put us on a path to climate catastrophe," Greens MP Adam Bandt said.

"As a global warming gas, methane is up to 86 times more powerful than carbon dioxide.

"The Prime Minister is trying to hoodwink people with his supposed climate action, but today's announcement amounts to little more than climate criminality."

The terms of the deal

NSW will receive $960 million in federal funding to upgrade the energy grid and invest in emissions reductions initiatives.

The state and federal governments will jointly underwrite the grid upgrades in the HumeLink interconnector from Snowy Hydro to southern NSW, as well as the Queensland-NSW interconnector.

Coal supply to the Mount Piper Power Station, which supplies around 15 per cent of the state's energy, will also be secured.

The station has been in "coal conservation mode" since September due to the low coal supplies at nearby Springvale mine, the station's sole source of power.

The Mount Piper Power Station near Lithgow, which supplies about 15 per cent of NSW electricity. ( Supplied: EnergyAustralia )

The plan also promises financial support for a new pilot renewable energy zone in the Central West to help large-scale renewable generators pump energy into the grid.

NSW Premier Gladys Berejiklian called the combination of traditional energy sources and renewable energy investment the "diversification" the state energy sector needs.

"NSW already has a pipeline of around $26 billion of large-scale renewable and non-renewable energy projects and the NSW Government has introduced a range of rebates to help keep prices down as well as a five-year, $1.4 billion Climate Change Fund," Ms Berejiklian said.

The plan does not yet specify the reduction in emissions it aims to deliver.

NSW Opposition leader Jodi McKay said the Independent Planning Commission was currently reviewing the project and it was "of great concern" that the deal came ahead of its decision.

"This is extraordinary in that I believe [the Premier] is pre-empting the approval of that project.

"I think that this is opening the door to unconventional gas in NSW."

Narrabri gas project 'central to deal'

Chris Gambian from the Nature Conservation Council said it was good that action was being taken but "gas is not a realistic or viable transition fuel" in the long term.

"We seem to have taken a step towards a serious plan, rather than the rhetoric and bluster that we've seen in the past," he said.

"So, I hope that what we see today is a plan that'll take us forward for the next 10 or 20 years, and that we can just get on with the job of addressing climate change."

Lock The Gate's Georgina Woods slammed "money that locks us deeper into fossil fuel dependence". ( ABC News: Simon Beardsell )

Georgina Woods from Lock The Gate said the Commonwealth's commitment to supply 70 PJ of gas suggested Santos's "water-hungry" Narrabri coal seam gas field would be central to the deal.

The project, which is awaiting approval from the Independent Planning Commission, has received fierce criticism due to the risk to water and land resources it is said to pose.

"Rural communities should not be forced to sacrifice land, water and their economic security in the name of quick and dirty resource exploitation," she said.

"Coal seam gas is a heavily polluting industry that leaks vast amounts of methane and won't do anything to bring down carbon emissions.

"As much as Prime Minister Morrison wants it to be so, it is not a transition fuel."

NSW Greens senator Mehreen Faruqi agreed, citing the Narrabri project's opposition from "local communities, farmers and ecologists alike".

"It threatens the Great Artesian Basin, farmer's livelihoods, food security and the mighty biodiverse Pilliga Forest," she said.

"It's clear that the federal and NSW governments have already made a political decision to allow this project to go ahead."

But Ms Berejiklian said the NSW energy deal did not make approval of the contentious Santos gas mine a foregone conclusion.

"We have two or three options before us including terminals, import terminals at Port Kembla and potentially Newcastle in addition to the Narrabri project … one of those three things will satisfy our arrangements," she said.

The deal is the first of many Mr Morrison hopes to sign with state and territory governments across Australia.