Professor Andrew Blakers from ANU said pumped hydro storage could be used to help build a secure and cheap grid with 100 per cent renewable energy.

The research paper describes a "looming necessity" to replace ageing coal-fired power stations and says hydro storage can offer the same "ancillary benefits" as fossil fuels by coping with periods of poor solar and wind availability and managing short-term supply fluctuations.

Unlike conventional "on-river" hydro power, the paper says off-river [closed loop] storage requires pairs of hectare-scale reservoirs, "rather like oversized farm dams", located away from rivers in steep country outside national parks.

The reservoirs would require an altitude difference of 300-900 metres, joined by a pipe containing a pump and turbine.

"They consume little water [evaporation minus rainfall] and have a much smaller environmental impact than river-based systems," the paper says.

Professor Blakers said sites in the Canberra region near Cotter Dam and Araluen were potentially suitable.

"There's a good opportunity for pumped hydro here because Canberra has high-voltage powerlines going left, right and centre," he said.

"It means that storage here can be distributed almost anywhere."

Professor Blakers said the economic modelling relied on pumping at off-peak times.

"It makes money buying low and selling high," he said.

"When the power price is low you buy electricity and pump water. When the electricity price is high you let the water back down again and sell the power."

Professor Blakers said demand management was an important tool for reducing network costs.

"If you take a whole-system analysis, pumped hydro plus wind plus solar beats coal and gas in terms of overall cost for running a highly reliable, secure, affordable system," he said.

"It's hundred-year-old technology, there are already three systems in Australia [on river], it's technology on the shelf waiting until it's actually needed.

"In eastern Australia that will be in about six or eight years as PV and wind generation rise. In South Australia it's needed much sooner.

"The purpose of our study is to point out there's an off-the-shelf solution to stability issues.

"Anyone who says renewables can't make stable electricity is simply wrong."

The paper avoids "heroic assumptions" about future technology development and says it's unlikely that nuclear, solar thermal or other systems could become cost-competitive or provide the ancillary benefits that coal currently provides and hydro storage offers.