SYDNEY, Feb. 26 (Xinhua) -- Official approval has been given for a large scale pumped hydro-electricity project to expand on the existing Snowy Mountains hydro scheme in the Australian state of New South Wales (NSW).

Australian Prime Minister Scott Morrison visited Tumut in Southern NSW on Tuesday to officially announce the new addition, dubbed Snowy 2.0.

"Snowy 2.0 will inject the energy supply and reliability our electricity market needs, helping cut costs to families and businesses and cut Australia's emissions," Morrison said.

The project works by pumping water back uphill into the reservoir during off peak times, where it can be stored until demand increases, with the aim of reducing energy prices and making power more reliable.

After completion, the project is expected to increase energy generation by 2,000 megawatts and provide 175 hours of energy storage, which is enough to power 500,000 homes during peak times.

"As the cost of wind and especially solar becomes less with improved technology, storage is the key to reliability," Morrison said on social media.

"And while batteries are improving rapidly, for large scale storage the best option is Pumped Hydro, like Snowy 2.0," Morrison said.