The Western Victoria Transmission Network Project, which aims to build 200 kilometres of high voltage lines from Sydenham to Bulgana near Ararat, will be subject to an environmental effects statement.
State Planning Minister Richard Wynne confirmed the project will be "fully and transparently assessed" in a media release on Thursday.
According to the media release, the "EES process is a rigorous environmental assessment framework for projects with the potential for significant environmental impacts. The process will enable transparent consideration of the project and provide several avenues for public feedback".
"The EES will be completed by the proponent and will assess the comparative effects of different feasible routes, alignments, design and operational alternatives for the project - as well as the effectiveness of proposed measures to avoid, minimise and offset any environmental impacts.
"Draft EES scoping requirements will be exhibited for public comment in the coming months. After public comments are considered, the Minister for Planning will finalise these requirements."
Environmental factors include the physical, biological, heritage, cultural, social, health, safety and economic aspects of the environment, and the wider ecological and physical systems in which people live.
Mr Wynne said in a statement the EES will assess the proposed area - while no exact route has been determined for the powerlines yet, a large area of interest is being examined.
"While this project is important to the future of Victoria's power system, it's critical we assess its environmental effects to avoid or minimise impacts on the community or the environment," he said.
"The Victorian Government supports an efficient, modern, sustainable and affordable energy system - the EES process will tell us exactly where we stand and how we can move forward, it's important to get this right."
The announcement was welcomed by AusNet Services, whose commercial arm has been contracted to build the project, as well as councils and farmers who fear the project will affect their land.
AusNet's project director Francisco Vizcaino said in a statement an EES is the most robust environmental impact assessment process a project can undergo in Victoria and provides important opportunities for community input and the consideration of a range of potential environmental impacts.
"AusNet Services is committed to delivering a sensitively designed and located overhead transmission line that minimises impacts to communities and the environment," he said.
"We welcome the opportunity the EES provides for the analysis of potential effects on the environment and how we are proposing to avoid, minimise and manage any adverse impacts.
Moorabool Shire Council chief executive Derek Madden said in a statement council "fully supports" an EES.
"It is our expectation that this will provide a thorough comparative analysis of all possible options, including underground," he said.
"AusNet Services has a lot of areas in which they need to improve with regards to community consultation and engagement, including increased transparency.
"Council will provide a thorough response to the draft EES scoping requirements once they are released for comment. We will continue to actively advocate on behalf of the community for a fair and transparent process."
Hepburn Shire Council chief executive Evan King said in a statement the EES was important for the community as well as council.
"Hepburn Shire Council have been advocating for a detailed environmental effects statement to be carried out and believe this is an important step in the project," he said.
"The 200-kilometres of new transmission lines across western Victoria is a critical infrastructure project to facilitate access to more renewable energy for the state."
The City of Ballarat also welcomed the announcement.
"Along with our neighbouring Councils, we have been advocating strongly for a full and detailed EES," a spokesperson said.
"We encourage our community to take the opportunity to provide feedback on the scoping requirements for the EES, to ensure concerns are adequately addressed."
The Clarkes Hill and District Power Alliance Group, one of several community groups which formed to oppose the project, said the EES process will give affected communities a voice and "a valuable level of oversight".
"There is already a high level of stress and concern within many communities, with landowners already fearing that the environments in which they live, and their lives and livelihoods, may be devastated by the proposed project and at least now they can play a part in the planning process," a spokesperson said in a statement.
"One of our first actions when we first formed less than six weeks ago was to write to over 30 federal and state politicians with electorates affected by the 'area of interest' for this project to request that they make representation on our behalf for the Minister to make this very determination. Many politicians took up our request, and those of many other community groups and their members who also lobbied them, and we are grateful that they did so."
An Environment Protection and Biodiversity Conservation (EPBC) referral for the project has also been lodged to consider impacts to Matters of National Environmental Significance. Once published, the public will have an opportunity to provide comment on the referral, which will be made available online.
AusNet is continuing to encourage residents to mark an interactive online map of the area of interest with their concerns and feedback to help determine the route.
It's not known when the route will be finalised.
More information about the project, including the interactive map, can be found online.