The controversial plan would have seen a waste burning facility built at a West Lithgow site which would incinerate Sydney waste transported over the mountains.

After careful consideration of the project's technical and economic merits, Energy Australia has decided to withdraw from the Joint Venture with Re.Group in pursuing the Energy Recovery project at Mt Piper.

Since 2016, Energy Australia has been working with ReGroup Pty Ltd to jointly assess an Energy Recovery project, which involved converting part of the power station to run on non recyclable household waste as fuel, commonly referred to as "refuse-derived fuel" or RDF.

In light of this, Re.Group is now exploring options to enable a modified version of the project to proceed.

"Energy Australia thanks the Lithgow community and Lithgow City Council for listening to our plans and providing their feedback on the Energy Recovery project," Energy Australia Chief Operating Officer Liz Westcott said.

"We also thank Re.Group as well as the Australian Renewable Energy Agency, the New South Wales Department of Planning, Industry and Environment, and the Environment Protection Authority NSW for their continued support."

Lithgow City Mayor Thompson said he never expected the project to go ahead.

"Let's face it, it was not a waste to energy thing, you know, it's an incinerator to get rid of Sydney's waste, there's no risk in the world that that's the push," he said.

"If they build one in Sydney's backyard and prove that they're okay. Well then, the rural regional areas can have a look at it. But until they do that, it's alright to be spruiking the goods in that they can build them all around the world, and they're in big cities - well, build one in Sydney. Sydney is the one creating the waste.

"As far as I'm concerned, I'm happy that Energy Australia have taken that position and they're going to push ahead with the hydro scheme."

He said the community will continue to fight any future adjustments to the plan.

"We have made representations to the Deputy Premier, the Minister for Environment and senior bureaucrats that this plan not be advanced," he said.

"To date no evidence has been provided of any real positive economic impact from hosting such a facility."

Energy Australia is exploring a pumped hydro energy storage facility at Lake Lyell. Early feasibility studies suggest the facility would be capable of producing 335 megawatts of electricity with around eight hours of storage, enough to power over 150,000 households during peak demand.

If the project goes ahead, Energy Australia said they anticipate hundreds of jobs to be created during construction, with roles also needed to oversee the facility's ongoing operation.

Locals interested in hearing more about the Lake Lyell pumped hydro energy storage project can attend an information session hosted by the Lithgow Community Power Project that will be held at the Wallerawang Bowling Club starting at 6pm on Wednesday, December 8.

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