An extra $1 billion is being pumped into a publicly-funded "green bank" to invest in pumped hydro, batteries and gas energy projects.
The taxpayer cash will flow into power generation, storage and transmission projects, but new coal projects will be off limits.
It’s the first batch of new money for the Clean Energy Finance Corporation since it was created with $10 billion in its pockets in 2013.
Former prime minister Malcolm Turnbull congratulated the government for putting more money into the green bank.
“Worth recalling that it was the Abbott government’s policy to abolish it and that one of my first decisions in 2015 was to retain it. Good progress,” Mr Turnbull tweeted.
He said the key factors for success would be getting to “zero emissions electricity” – through more renewables and pumped hydro systems – as well as electrification of transport and improvements in power transmission.
Finance Minister Mathias Cormann expects the $1 billion to generate a return.
“It is carried as both a $1 billion asset within CEFC and a $1 billion liability on the Commonwealth balance sheet,” he told AAP.
Legislation underpinning the green bank will be changed to allow for the proposed investments.
The money covers the government’s underwriting new generation investments program, which was announced ahead of the May election.
One of the 12 shortlisted projects is an upgrade to an existing coal-fired power station in NSW’s Lake Macquarie.
However, it’s to support to upgrade turbine blades and other equipment to produce the same amount of power with lower emissions.
The new money ties in with an investment mandate given to the green bank late last year, to focus on grid stabilising technology.
Energy Minister Angus Taylor said it would help to balance the influx of renewable energy projects.
“It is no secret that the National Electricity Market is under pressure – this fund is designed to tackle that,” he said.
The other shortlisted projects are six pumped hydro power stations and five gas.
Labor leader Anthony Albanese said the coalition, having initially wanted to abolish the CEFC, had come to realise its value.
“(But) you can’t really reduce energy prices unless you have an energy policy that is comprehensive,” he told reporters in Perth.
“That’s why the government should reintroduce the National Energy Guarantee and we’ll work constructively with the government.”
Investor Group on Climate Change policy director Erwin Jackson said the CEFC decision would help modernise the electricity system.
“It’s a positive step toward unlocking private sector investment in new infrastructure that can support a zero emissions, reliable and low cost electricity system,” he told AAP.
The Morrison government announced the underwriting plan ahead of the May election, without knowing how it would work.
Correspondence on the project obtained by AAP through Freedom of Information shows the CEFC was contacted after the election for advice on how to deal with “program design issues”.