The state government announced yesterday the approval for the Delta Electricity proposal to ‘‘rehabilitate’’ two generating units to operate at 700 megawatts as either coal-fired or coal and gas-fired.

The upgrade will keep the plant running for up to 20 years. Munmorah, on the Central Coast and one of the state’s oldest power stations, was otherwise due for decommissioning in 2014.

A Department of Planning assessment report said the project would increase the state’s greenhouse gas emissions by about 2.5 per cent, or 4.2million tonnes, from 2007 levels if it were coal-fired in a ‘‘worst-case scenario’’, or 1.8 per cent, 3million tonnes, if it ran on 25 per cent coal and 75 per cent gas.

But the department, which also commissioned independent reviews of the project’s environmental assessment, said the upgrade’s impacts should be weighed against the needs to secure the state’s electricity supplies.

‘‘The predicted shortfall in electricity generation cannot be met purely by renewable energy projects,’’ the department report said.

Sixty conditions were placed on the approval, including that the proponent be required to ‘‘clearly demonstrate that it is continually investigating carbon reduction technologies with the intention that these measures be retrofitted to the plant’’.

Under the government’s latest power privatisation plans, the money for the upgrade ‘‘would be the responsibility of a successful bidder,’’ a spokesman for Planning Minister Tony Kelly said yesterday.

Mr Kelly said the upgrade would improve the station’s operating and environmental efficiency.

Greens upper house MP John Kaye said the project was ‘‘throwing good money after bad’’ and the station was unlikely to ever be converted to carbon capture and storage.

‘‘At the end of the process, NSW will still have a dinosaur coal-based technology while the rest of the world is building a jobs-rich clean-energy future.’’