The Federal Government could fund the $2 billion expansion of the Snowy Mountains hydro scheme alone if the New South Wales and Victorian state governments did not want to invest.

Key points: Plan involves doubling the size of the scheme, building 27km of tunnel and new power stations

Plan involves doubling the size of the scheme, building 27km of tunnel and new power stations The scheme is co-owned by the NSW, Victorian and Federal governments

The scheme is co-owned by the NSW, Victorian and Federal governments Feasibility work is due to be completed by end of 2017, allowing work to begin in 2018

The Turnbull Government is planning to increase the current 4,000 megawatt output of the scheme by 50 per cent, which would involve building a 27 kilometre tunnel and power stations.

It would be the first major expansion of the Snowy Hydro scheme since construction was completed in 1974.

The Federal Government currently owns 13 per cent of Snowy Hydro (formerly the Snowy Mountains Hydro-Electric Authority established to build and operate the Snowy Scheme). New South Wales owns 58 per cent and Victoria owns 29 per cent.

Prime Minister Malcolm Turnbull said the Commonwealth could increase its stake in order to fund the expansion, describing the proposal as a "game-changing" opportunity.

"This will make money for Snowy Hydro and we would look forward to the other shareholders contributing to it," he said.

"If they don't wish to contribute additional equity and they'd rather the Commonwealth Government do that, then we're very happy … we would stand ready.

"These are big dreams in these mountains, real courage, a belief in the future, a confidence in Australia."

Sorry, this video has expired SA to benefit from 'Snowy Hydro 2.0', PM says

How will expansion work? Utilising existing reservoirs, a new tunnel could link the lower Talbingo Reservoir, with either the upper Tantangara Reservoir, or Lake Eucumbene

Utilising existing reservoirs, a new tunnel could link the lower Talbingo Reservoir, with either the upper Tantangara Reservoir, or Lake Eucumbene Another pump and a large power station would be built, similar to the Tumut 3, which currently has Australia's largest pumped hydro storage capacity

Another pump and a large power station would be built, similar to the Tumut 3, which currently has Australia's largest pumped hydro storage capacity Experts say pumped hydro can reach full power in as little as 30 seconds and is cheaper than the alternatives

Experts say pumped hydro can reach full power in as little as 30 seconds and is cheaper than the alternatives The expansion would cover the shortfall on peak days in summer if wind and solar outputs aren't keeping up with demand

The NSW and Victorian State Governments were informed of the proposed expansion yesterday, despite being majority shareholders.

Mr Turnbull spoke directly with NSW Premier Gladys Berejiklian, who the Prime Minister said was "so excited", while Energy Minister Josh Frydenberg raised the project with Victorian Treasurer Tim Pallas.

Mr Turnbull said he expected feasibility work to be completed by the end of the year, which would allow work to begin next year.

Up to 500 jobs are expected to be created by the project, which will be led by the Australian Renewable Energy Agency.

When asked repeatedly where the funding would be sourced, Mr Frydenberg told the ABC's 7.30 program that "projects like this make money".

"We are right now celebrating the fact that a feasibility study will be underway," he said.

Plans include an increase of 50 per cent of the scheme's output, building a 27km tunnel and new powerstations. ( ABC News )

'More questions than answers'

Opposition Leader Bill Shorten voiced concerns over the plan, but did not rule out supporting the project.

Mr Shorten said the proposal was "interesting and worthy of exploring", but many questions remained.

"Like so many of Mr Turnbull's ideas, it asks more questions than it answers," he said.

Mr Shorten also criticised the Government's approach to energy policy, accusing them of "thought bubbles" in response to a chaotic market.

"In the last month we have seen from this Government talk of coal plants, renewable energy, hydroelectricity, gas, and indeed some Liberals are talking about nuclear power," he said.

"The summary of all these thought bubbles is chaos and chaos delivers higher prices."

Greens leader Richard Di Natale was harsher in his comments, criticising the proposal as a "slow-motion train wreck".

Coalition weighs in on fiery press conference

The announcement came after the South Australian Government said it would spend more than $500 million to build a new gas-fired power plant and Australia's largest battery, as it moves to secure the state's energy supplies.

South Australia's Labor Government and the Commonwealth have been engaged in an ongoing stoush over the state's approach to renewable energy, following a series of blackouts.

Their highly fractious relationship was highlighted in a 20-minute press conference, when Premier Jay Weatherill clashed with Mr Frydenberg.

Mr Weatherill said it was "galling" to be standing beside Mr Frydenberg after the criticism he and his colleagues had directed towards his policies.

Mr Turnbull said the supercharging of the Snowy Hydro would be superior to South Australia's plan, saying the state had been "neglectful" in its energy policies.

"I understand that the Premier's conduct spoke volumes about the Premier's state of mind at the moment," he said.

Sorry, this video has expired 'It is a disgrace'

Speaking separately, Coalition frontbencher Christopher Pyne described Mr Weatherill's behaviour as "quite unbecoming".

Mr Pyne told reporters that as a South Australian, he was "embarrassed".

"The Premier needs to calm himself," he said.

But Mr Shorten backed Mr Weatherill for "defending himself".

"I feel for Jay Weatherill," he said.

"He's got a federal government which plays politics … we've got a chaotic national energy market. This Government has been in charge for four years."