Scott Morrison announces $2 billion energy deal to boost gas use

The federal and NSW governments have inked an energy deal to transition towards a lower emissions economy, with a heavy focus on upping gas supply.

Prime Minister Scott Morrison has announced a deal with NSW to unlock more gas supplies. Source: AAP

A significant boost to NSW's gas supply is being touted as a central plank of achieving a lower emissions economy.

Prime Minister Scott Morrison and NSW premier Gladys Berejiklian have inked a $2 billion deal to add another 70 petajoules of gas per year into the national electricity grid.

NSW alone uses about 120 petajoules per year.

The deal involves jointly underwriting interconnectors between the Snowy area and Sydney, along with a link between Queensland and NSW.

Touted as a "transition" deal, it also cements federal funding towards setting up a renewable energy zone in the central west of NSW and underwriting new power generation projects in the state.

Santos's Narrabri gas project is a central part of the deal. Source: AAP

Ms Berejiklian said the gas supply hinges on final approvals for Santos' Narrabri gas project, but options in Port Kembla and Newcastle are also up the government's sleeve.

Investing in 'coal innovation'

The deal puts pressure on the NSW government to remove barriers to coal supply to the Mount Piper Power Station, which is due to operate until about 2042.

Mr Morrison said some of the money would go towards coal innovation to see how power generation and mining can emit less pollution.

"(It's about) ensuring Australians can go about their jobs, the jobs they have today, the jobs they're going to continue to have into the future," he told reporters in Sydney on Friday.

The prime minister again rejected the idea of a carbon tax and repeated his mantra of "meeting and beating" emissions reduction targets.

The federal government plans to ink similar deals with other states rather than develop a national energy plan.

NSW will also consider gas options in Port Kembla. Source: AAP

South Australia appears to be next on the list, with Premier Steven Marshall planning to release a strategy on how the state will achieve zero net emissions by 2050.

It comes as new Clean Energy Council analysis shows investment in large-scale renewable energy projects has significantly slowed.

Investments plummeted from 51 projects worth $10.7 billion in 2018 down to 28 projects worth $4.5 billion last year.