The private sector is expected to build the 2000 megawatt station, now the Government has cleared the way by granting "concept approval" for either gas or coal.

Planning Minister Tony Kelly said yesterday the state would allow new baseload stations at Bayswater, near Muswellbrook, and at Mount Piper, near Lithgow.

"The [Bayswater B] facility will help secure long-term energy supply in NSW and provide a boost to the Hunter economy," Mr Kelly said.

"Up to 1000 construction jobs and around 160 operational jobs could be created."

The station will be built near the existing Bayswater power station.

Mr Kelly said he expected the private sector to lodge its own specific designs for the power station, including fuel source, before approval for construction.

"Today's concept approval ensures this development can progress if required in the medium to long-term as demand for power generation grows," he said.

"However, ultimately it will be the electricity market and how it is regulated in the future which determines whether the project is implemented and when it may be developed."

The Hunter Business Chamber welcomed the approval, saying it locked the region in a resource hub.

But Greens MLC John Kaye was scathing of the timing of the announcement yesterday.

"The Government is clearly deeply embarrassed, they can't face media with the reality that they are contradicting their own greenhouse gas emission plans," Dr Kaye said.

"They have gone to Lithgow to announce this, on the day of a major federal health announcement."

Dr Kaye said the approval for Bayswater B meant the Hunter's chances for large-scale renewables were being "squandered".

"This will push up the state's green house gas emissions by 15 per cent," he said.

But Hunter Business Chamber chief Peter Shinnick said the Hunter needed more baseload power, and that could not be provided by renewable energy.