The plan includes a $660 million commitment from the Commonwealth and $440 million from SA.

It will pursue initiatives that create additional dispatchable generation to help deliver affordable and reliable power, unlock gas supplies and kickstart works on a new electricity interconnector between SA and NSW.

The deal includes a $400 million commitment from the Commonwealth to invest in practical technologies to reduce emissions, including hydrogen and carbon capture and storage.

The federal government has committed $50 million to the electricity interconnector while $110 million will be allocated to concessional finance for energy storage projects including the use of solar thermal technology.

But the deal also sets a gas target of an additional 50 petajoules per annum by the end of 2023 and a stretch target of 80 petajoules per annum by 2030.

"The focus on gas will help South Australia meet its own gas needs and assist efforts to prevent forecast shortfalls in the broader east coast gas market from 2023, as part of our gas-fired recovery," federal Energy Minister Angus Taylor said.

Premier Steven Marshall said the deal would coordinate efforts to deliver a hydrogen export industry in South Australia, deliver carbon capture and storage to reduce emissions, deliver the infrastructure needed for electric cars and generate new revenue for farmers from carbon reductions.

"Put simply, this agreement is going to lower power bills for South Australians and create jobs in the fast-growing renewables industry," he said.

The federal government said the inclusion of gas supply targets and regulatory reform actions in the agreement built on the measures outlined as part of Australia's gas-fired recovery from COVID-19.

Achieving improved and lower-cost gas production in SA's Cooper Basin and a step-change in gas production in the Otway Basin would be a key focus, it said.

Australian Associated Press