A region of Central-West Orana in NSW will form the state government's pilot Renewable Energy Zone, which is designed to combine renewable energy generators, storage facilities and high-voltage poles and wires to deliver energy to those that need it.

According to the state government, connecting renewable power sources and storage facilities in one central location will allow homes and businesses to benefit from cheap, reliable and clean energy.

A spokesperson from the Department of Planning, Industry and Environment (DPIE) said the Central-West Orana region was chosen for the pilot location for a variety of reasons.

"It benefits from relatively low transmission build costs, due to its proximity to the existing backbone transmission network, as well as a strong mix of renewable energy resources and significant investor interest," the spokesperson said.

"However at the same time, the area it will cover is quite fluid, so it is difficult to determine right now which areas will benefit the most."

According to the spokesperson, the state government has committed $40 million to the Central-West Orana REZ project, which has also been deemed critical to address cost, security and reliability issues across the entire National Electricity Market.

The DPIE spokesperson said the government was also working with the NSW transmission network planner and operator TransGrid to investigate a potential route for the new REZ Transmission once it is up and running.

"It costs a lot to put transmission cables in large parts of the state, so if we put all transmissions out to one area and from there put in renewable energy generators, it's the best and cheapest way to bring power to these areas, from the rural towns to towns on the east coast," they said.

"For example, if there are any future renewable projects in these areas, such as a solar or wind farm, it means the connection between them and wherever the final transmission line is would be much easier and cheaper."

A representative for the proposed development says that details will be released to the public soon.

The DPIE spokesperson said the final transmission line will be informed by extensive consultation with the local community, local stakeholders and a detailed environmental assessment.

"The final plan is to set up around five REZ in the state, including the pilot zone in Central-West Orana," they said. Construction on this REZ is expected to commence by the end of 2022 and support around 3,900 construction jobs in the Central-West Orana region at its peak.

The projects involved in the REZ are expected to unlock up to 3,000 megawatts of new electricity capacity - enough to power around 1.4 million homes - by the mid-2020s, and to bring up to $5.2 billion in private investment to the Central-West Orana region by 2030.