Minister for the Environment and Energy, Josh Frydenberg, told Sky News he was "aware there had been expressions of interest" in Liddell "but it is up to those companies to directly approach AGL".

Doug Jackson, an AGL executive group manager, told Fairfax Media that Lake Liddell - which currently provides cooling for the adjacent power station - is one of two sites in the Hunter now being looked at for possible pumped hydro.

The two plants, still at the pre-feasibility stage, were in the order of 200-250 megawatts of capacity each, compared with the 1680-MW capacity of the coal-fired plant.

Pumped hydro typically requires an upper and lower reservoir. During times of low-cost power - such as during windy days - the operator pumps water to the higher reservoir, to be released to generate hydropower when power prices are high.

Don Harwin, the NSW Minister for Energy, said the state was keen to boost pumped hydro, particularly to support the three renewable energy priority zones announced last week. An Australian National University study last year identified 8600 such sites in NSW, and the Berejiklian government is looking to prioritise development of the most promising pumped storage areas.

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“Pumped hydro is 'nature’s battery' and the world’s most established bulk energy storage technology, making up 97 per cent of global energy storage capacity,” Mr Harwin said.

“We need a mix of generation sources to maintain our security into the future. If we can harness our natural assets we can have an affordable, clean and secure energy future for NSW,” he said.

AGL's Mr Jackson declined to specify the location of the second Hunter site. He added that mine voids could be among the suitable locations.

Either project, though, could turn out to be much cheaper and faster to build than the much bigger Snowy 2.0 pumped hydro plan touted by the Turnbull government.

Current estimates put the cost of that project at more than $2000 per megawatt of storage, or in excess of $4 billion.

"Lake Liddell is a pretty easy one to get going in a few short years," Mr Jackson said, noting the existing access to power transmission among its advantages.