A spokesperson for Transport Minister Chris Steel said the federal government's decision did not amount to final approval of the project, but meant the extension of the light rail to the lake, Stage 2A, could be assessed using preliminary documentation because its effects were localised and predictable.

Under the plan, 1.7 kilometres of wire-free track will be installed running from the Alinga Street station, along the western side of London Circuit and on to Commonwealth Avenue before terminating at Commonwealth Park.

Stage 2B, involving extending the light rail line over the lake and through to Woden via the Parliamentary Triangle, will require a full environmental impact statement because it will pass near areas of national and heritage significance, the spokesperson said.

"This decision from the federal government reinforces our choice to deliver light rail to Woden in two stages," Mr Steel said. "The process of assessment for Stage 2A means we can get on with the job of extending light rail to Woden sooner.

"We always expected that an extensive EIS process would be required for the more complex stage 2B extension through the Parliamentary Triangle under the Commonwealth environmental approval process."

Under the ACT government's plans, the light rail will run on narrower, grassed tracks along Commonwealth Avenue.

To support wire-free operation, light rail vehicles will be fitted with onboard batteries with regenerative braking capabilities.

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"Running wire-free through London Circuit will mean a narrower track built in the middle of the road, taking up less space as light rail will be running in the road median," Mr Steel said.

"As Light Rail Stage 2A turns on to Commonwealth Avenue, wire-free running will also ensure that the heritage vistas along Commonwealth Avenue are maintained."