The Morrison government says it is too early to tell whether mining magnate Andrew "Twiggy" Forrest's proposed gas and hydrogen-fuelled power plant at Port Kembla will make its planned Kurri Kurri power station redundant.
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Energy Minister Angus Taylor has met with Dr Forrest to discuss the progress of his project, one of 12 shortlisted on the government's Underwriting New Generation Investments program.
The West Australian billionaire's privately owned Squadron Energy plans to run the plant on LNG and hydrogen from an import terminal he is building next door in the Illawarra.
The plant would phase out gas as green hydrogen supplies from Dr Forrest's own Fortescue Metals Group came on line.
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A report in Tuesday's Australian Financial Review revealing the project quoted Dr Forrest as saying the plant would more than replace the power generation lost when the Hunter's Liddell power station closes in 2023.
Scott Morrison announced in September that his government would build a gas-fired power plant at Kurri Kurri if the private sector did not commit funds to replacing Liddell's capacity by the end of April.
On paper, the Port Kembla plant, which Dr Forrest wants to generate up to 1000 megawatts, appears to satisfy Mr Morrison's demands.
A spokesperson for Mr Taylor said the government was in continuing negotiations with Dr Forrest.
But the government says it is sticking by its deadline of April 30 for final investment decisions on new dispatchable power supply, giving Dr Forrest just six weeks to commit.
The government's Snowy Hydro power generation company has secured critical NSW state significant infrastructure status for the proposed Kurri Kurri plant.
Mr Morrison said in September that gas power generation would help lead the nation's economic recovery from the shock of COVID-19 and its transition away from coal.
The government has since pushed hydrogen power to the forefront as well, partly because it can be used as a fuel in gas turbines.
Dr Forrest told the AFR that he was ready to start work on the Port Kembla plant as soon as he won approvals from the state and federal governments.
He has committed to Fortescue becoming carbon neutral by 2030 and reportedly told a Port Kembla town hall meeting last week: "All of us in the resources sector, including our colleagues in the coal industry, know that change is coming.
"You have seen coalfields across the eastern states either announcing closures or bring forward formerly announced closures."
Paterson MP Meryl Swanson called on Snowy Hydro to invest in Hunter job opportunities if the Kurri Kurri plant was not needed.
"The reality is that if the Port Kembla proposal were to be realised, the need for a gas power plant in Kurri would be removed," she said.