The funds, provided through the Clean Energy Finance Corporation, will help renewable energy company Neoen design and construct the lithium-ion battery, to be installed near the regional city of Geelong.

Using Tesla equipment, it will have a power capacity of 300 megawatts and a storage capacity of 450 megawatt-hours, making it twice the size of the battery at Hornsdale in SA, which was the biggest in the world when it began operating in 2017.

About 250 megawatts from the battery will be reserved for increasing the capability of the Victoria to NSW Interconnector and responding to unexpected network outages.

The company said the battery is on track to be operational before next summer.

The project is expected to create 80 jobs during construction and six full-time ongoing positions.

"After the challenges of COVID-19, this is more important now than ever to support jobs, families and businesses in Victoria," federal Energy Minister Angus Taylor said in a statement on Thursday.

"We are working to ensure electricity prices do not hold Victorian industry back and this project is crucial to that objective."

The Victorian government earlier committed $84 million to the project over 11 years.

Australian Associated Press