The declaration of two major pumped hydro projects as Critical State Significant Infrastructure has brought renewed focus to the role of water assets in supporting energy storage, and how water infrastructure is governed as part of the clean energy transition.
While the projects are framed as energy investments, both are proposed on WaterNSW land, placing water security, operational risk and long-term asset stewardship at the centre of the assessment process.
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Water assets at the centre of pumped hydro
The two projects declared critical are the proposed Western Sydney Pumped Hydro Project at Lake Burragorang and the Yarrabin pumped hydro project near Mudgee in Central West NSW.
Together, the projects represent more than $7 billion in proposed investment and would use existing water storages and surrounding land to provide long-duration energy storage during peak demand periods.
Lake Burragorang, which supplies drinking water to Greater Sydney, is already one of the most strategically significant water assets in the state. Any additional use of this asset for pumped hydro storage introduces new layers of operational complexity, even where projects are designed to be largely closed-loop.
Why water governance matters
Pumped hydro relies on moving large volumes of water between upper and lower reservoirs to store and release energy. While the technology does not consume water in the same way as irrigation or urban supply, it can affect storage operations, evaporation profiles, water quality risk management and dam safety oversight.
For water utilities and regulators, this places a premium on clear governance arrangements, ongoing monitoring and robust separation between energy operations and core water supply obligations.
Minister for Water Rose Jackson said WaterNSW has already undertaken preliminary assessments to ensure the projects do not compromise water security or quality.
“Water is vital to our everyday lives and these projects could further harness it to power more than a million homes,” Jackson said.
“Importantly WaterNSW has already conducted a number of initial assessments to make sure these projects won’t impact water security or quality and we will continue to do analysis regularly.”
Planning status and scrutiny
Both pumped hydro proposals remain in the early planning stages. Their declaration as Critical State Significant Infrastructure does not pre-approve the projects, but instead triggers a more coordinated assessment pathway.
Each project will still undergo detailed environmental, technical and water impact assessments, including public exhibition and the opportunity for submissions from affected communities and stakeholders.
For the water sector, this process will be closely watched as it tests how multi-use infrastructure proposals are evaluated on operational reservoirs and strategic catchments.
The broader shift toward dual-use infrastructure
Across Australia, water assets are increasingly being examined for their potential role in energy storage, flood mitigation and climate adaptation.
Long-duration storage technologies such as pumped hydro are being positioned as essential to grid stability, particularly as coal-fired generation exits the system. For water authorities, this trend raises important questions about asset prioritisation, risk allocation and long-term operational responsibility.
Minister for Energy Penny Sharpe said pumped hydro plays a critical role in stabilising the grid during peak demand, while emphasising the need for careful planning.
From a water industry perspective, the challenge lies in ensuring that energy system benefits do not erode the primary purpose of water infrastructure, particularly where assets underpin drinking water supply and environmental flows.
A test case for future projects
With more than 50 renewable and storage projects currently under assessment in NSW, and hundreds more in the planning pipeline, the Burragorang and Yarrabin proposals may set important precedents.
How water security, quality and operational integrity are protected through these assessments will inform future decisions about the role of water infrastructure in Australia’s evolving energy system.