AGL interim CEO Graeme Hunt said the company would use a combination of solar and hydro technology and would help deliver the next generation of energy supply.
"We believe the technology can be just as successful in the Hunter region and a key feature of our plans to transition the Liddell site into an Energy Hub, alongside grid-scale batteries and a waste to energy facility," Hunt said.
"Building on more than 180 years of history, AGL has a proud heritage of investment and innovation and we believe Liddell could have an essential role in the energy transition.
"As we transition to a cleaner energy future and meet our climate statement commitments, we are looking to make reliable long duration storage combined with solar generation a reality by overcoming traditional barriers for variable, renewable energy deployment."
A pre-feasibility study for the Liddell site is underway.
As part of the project, a separate plant at Carwarp Victoria will be able to deliver four megawatts of solar generation and 50 megawatt hours of storage to produce electricity on demand - improving grid stability, as well as supplying reliable, synchronous power.
"AGL is committed to leading the business of transition and developing the future of renewable energy storage at scale, ensuring Australian households and businesses have affordable, sustainable and reliable electricity," Hunt said.
"RayGen's technology has the potential to provide the same capabilities as other long duration storage technologies at lower cost and with fewer geographical constraints.
"The system is powered by a field of smart, rotational mirrors whose concentrated solar energy is combined with the energy stored across two water reservoirs to create a ‘hot and cold' solar hydro solution."
RayGen has also received support from the Australian Renewnable Energy Agency for the Carwarp site.
RayGen CEO Richard Payne said AGL agreed to provide a vital "voice of customer" into the design process for RayGen's storage product.
"AGL provided valuable insights that enhanced our technology offering, and AGL is now supporting deployment with an offtake and investment," he said.
"This innovative collaboration between a ‘home-grown' Australian technology start-up and Australia's premier energy company will help pave the way to a lowest cost, secure and decarbonised grid."
Both companies have worked on the design of the $27 million concentrated solar and thermal storage site since 2019.
AGL has committed $5 million to help fund the construction at Carwarp as well as agreed to offtake the entirety of the plant's production.
Separately, a report by CSIRO claims renewables are still the cheapest form of new-build power in Australia.
Solar photovoltaics and wind continue to be the cheapest sources of new electricity generation capacity in Australia, even when the integration costs of renewables are included, according to the final CSIRO 2020-21 GenCost Report.
Each year CSIRO, and the Australian Energy Market Operator consult with industry stakeholders to estimate the cost to generate electricity for new power plants in Australia through their GenCost report.
This year's report used a fresh approach to analysing the cost of renewables such as solar and wind, to include additional "integration" costs such as storage and additional transmission infrastructure, and still found solar and wind to be the cheapest sources of new-build electricity generation.
CSIRO chief energy economist Paul Graham said an early draft of the report, released to stakeholders in December, had been improved to reflect feedback about the impact of weather variability on driving up these integration costs.
"The final report addresses this feedback: our analysis of renewable integration costs now includes greater recognition of this year-to-year weather variability and the impact it has on electricity demand and supply," he said.
"We took the integration costs from the highest of nine historical weather years."
Stakeholders asked the analysis recognise that batteries were achieving longer lives before they needed to be replaced and costing less, meaning the costs of storage from batteries was lower than previously thought.
Battery costs fell the most in 2020-21 compared to any other generation or storage technology and are projected to continue to fall. Lower battery storage costs underpin the long-term competitiveness of renewables.
Pumped hydro is also important and is more competitive when longer durations of storage - more than eight hours - are required.
The latest approach is a model of the electricity system that optimises the amount of storage needed, and also includes additional transmission expenditure.
Previous reports added arbitrary amounts of storage costs and did not include transmission or other costs.
This report includes hydrogen electrolysers for the first time and finds that hydrogen is following a similar trajectory to more established renewables.
With increased interest in global deployment, and many demonstration projects worldwide, substantial cost reductions in hydrogen technologies are expected over the next decades.