EnergyAustralia managing director Catherine Tanna said the work involved replacing the majority of the internal components of the plant's two 700 MW-capacity turbines.

The project will be completed by 2022, allowing each unit to provide 30MW of additional power without having to burn more coal.

"Last year the community celebrated 25 years of Mt Piper providing reliable power to homes and businesses across NSW," she said.

"Now we're investing $80 million to help make sure the plant is around for another quarter century and it's as efficient as it can possibly be.

"The upgrade means Mt Piper will be able to power an additional 55,000 homes without burning a single, additional lump of coal."

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Ms Tanna said that all stakeholders agreed that it was important to have a cleaner energy future that would benefit all Australians.

"We have to make sure the system is reliable and secure while delivering lower prices. It is critical to make sure existing assets are stronger for longer, so at Mt Piper it is scheduled to be around until 2042, so we have to think long term," she said.

Mt Piper's nameplate generation capacity of 1400 MW is enough to supply 15 per cent of NSW electricity demand. It also supports system stability and complements intermittent forms of electricity like wind and solar as these new sources of power are integrated into a modern energy system.

"This is an incredibly important energy asset for NSW and the local Lithgow community so we are doing everything in our power to ensure it continues to operate in the most efficient and environmentally friendly way," Ms Tanna said.

NSW Minister for Energy and Environment Matt Kean was excited to be in "beautiful" Lithgow for the announcement.

"Today is an exciting day, it is a win for Mt Piper, a win for the region and a win for the people of NSW, as Mt Piper will continue to power one million homes across NSW," he said.

Mr Kean said Mt Piper was a key part of NSW's energy future.

"People expect three things from the NSW government and their energy companies; to keep the lights on, that prices won't increase but will continue to fall and they expect responsible action when it comes to tackling climate change," he said.

"This upgrade will ensure we use coal more efficiently and won't be discharging waste into rivers and creeks and won't be costing the tax payer a single dollar."

The turbine upgrades will open up job opportunities for locals around the region during the upgrade process.

As it will take 60 days to upgrade one turbine, which is set to take place in October 2020. The second turbine will not be upgraded until October 2021.

Lithgow City Council mayor Cr Ray Thompson said it was exciting for the community of Lithgow.

"We were disheartened when Wallerawang [power station] closed and Angus Place Colliery, we lost quite a few hundred jobs," he said.

"We are not a huge community and when we lose a few hundred jobs it's devastating, so it is great to get announcements like this to get Lithgow back on track again.

"It is exciting to see two turbines being upgraded, it just gives a real lift to our community."

With the closure of the Liddell Power Station expected in 2022, this was one of many investments that would be needed to replace it, according to Ms Tanna.

"For EnergyAustralia and other companies, competing to replace Liddell is a big opportunity, one we are looking forward to. We think the answer lies in a mix of renewable energy, gas, coal and transmission upgrades," she said.

"A modern energy system, with a diversity of supply will strengthen the energy security, while providing clean and affordable power to NSW."

Toshiba International Corporation, the Australian subsidiary of Toshiba Energy Systems and Solutions Corporation has been selected to carry out the upgrade works.