MELBOURNE, Dec 12 (Reuters) - The board of Australian state-owned power generator Snowy Hydro on Wednesday approved a roughly A$4 billion ($2.9 billion) expansion project, though it still needs approval from the federal government.
The expansion will shore up Australia's power supply as ageing coal-fired plants are shut. The plan was pushed last year by then-prime minister Malcolm Turnbull, who touted it as Australia's biggest renewable energy project since the Snowy Hydro system was first built.
The expansion will add 2,000 megawatts (MW) of power generation through so-called pumped hydro, which acts like a huge battery, pumping water uphill between two dams when there is cheap wind and solar power on the grid, and releasing that energy when the wind eases and the sun goes down.
The system will be able to generate electricity for 175 hours, or enough to power three million homes for a week, Snowy said on its web site.
"After almost two years of rigorous due diligence on every aspect of the project, including detailed financial analysis and ongoing geotechnical drilling, the Board is confident Snowy 2.0 is a strong investment for the company," the company said in a statement.
A study last year estimated the project would cost between A$3.8 billion and A$4.5 billion. declined to comment on the final cost estimate on Wednesday, saying details would be released once the government gives approval.
Energy Minister Angus Taylor on Wednesday said the government will consider the project on its merits, but gave no time frame for a final decision.
"As we've always said, the Snowy 2.0 needs to stack up," he said in emailed comments.
First output from the expansion, which will increase Snowy's capacity by 50 percent, is expected in late 2024, the company said on its web site.
Snowy, which already has 4,100 MW of capacity, last year said the expansion was justified as it would cost half as much as building the batteries and natural gas-fired power stations that would be needed to prevent blackouts in the mid-2020s following the closure of some coal-fired plants.
Snowy is fully owned by the federal government, which earlier this year bought out the company shares owned by the states of New South Wales and Victoria for A$6.2 billion to help smooth the way for the expansion. = 1.3893 Australian dollars)