The University of Newcastle has welcomed today's Australian Government announcement of a $100 million Smart Grid, Smart City demonstration project for Newcastle.

The University is part of the winning consortium, which is led by EnergyAustralia and includes the State Government, CSIRO, Newcastle City Council, IBM Australia, AGL, TransGrid and GE Energy.

The ground-breaking project has the potential to improve the efficiency of Australia's energy sector and transform the way households and businesses use energy.

Vice-Chancellor Professor Nick Saunders said the project would provide extensive research opportunities for the University and enhance the existing $5 million, five-year partnership with EnergyAustralia that includes the EnergyAustralia Centre for Intelligent Electricity Networks.

"The University is recognised for its expertise in energy technology and the Smart Grid, Smart City project will help build the skills needed to meet future energy needs," he said.

The Interim Director of the EnergyAustralia Centre for Intelligent Electricity Networks, Associate Professor Steve Weller, said Smart Grid, Smart City would enable researchers to work at the cutting edge of modern electricity grid technology.

"Smart grid technology has enormous potential to improve the efficiency with which we use electricity, and to enable the integration of renewable energy sources into the grid," he said.

"A smart grid works by overlaying the existing electricity network with advanced sensing and communication technology, enabling digital technology to control electrical appliances."

Smart grids enable consumers to manage their energy use by giving them information about usage and cost.

Households can also use energy efficient 'smart appliances' that can be set to run on off-peak power.