Scott Morrison is promising to build a gas power plant in the NSW Hunter Valley if the private sector does not step in.
The prime minister is giving power giants seven months to come up with a plan to replace 1000 megawatts of power, which will need to be replaced once the Liddell coal-fired station closes in 2023.
The government-owned Snowy Hydro would build the NSW gas project.
The prime minister also plans to expand a small gas hub in Queensland, which could link five gas fields.
In a warm-up for the federal budget, he will on Tuesday pledge $53 million to unlock more gas for the domestic market.
Mr Morrison is aiming to drive down energy prices and shore up supply.
He wants to focus on dispatchable power – electricity generation that can be turned off and on when necessary – rather than renewable energy.
Mr Morrison also wants to fast-track interconnectors and build more gas pipelines to ensure electricity can be moved around the east coast.
The singular focus on gas will infuriate environmentalists, who are desperate to see a shift away from fossil fuels.
But Energy Minister Angus Taylor says replacing Liddell with a gas plant will help reduce Australia’s carbon emissions.
“This particular initiative, which is focused on replacing Liddell, will not just bring down emissions in NSW, it will also contain prices and keep the lights on,” he said.
Labor’s energy spokesman Mark Butler said the coalition’s gas plan was heavy on spin and light on substance, arguing it was not ambitious or fast enough.
“It’s hard to see where you get a single job from this announcement in the time frame that we need, in the deepest recession in almost a century,” he said.
“Unless of course you are employed to write a plan or a review or a voluntary, industry-led code of conduct.”
Mr Butler said the role of renewable energies such as batteries and pumped hydro was completely missing from the plan.
“This is the cheapest new energy in the system and it’s continuing to drop in price every single year,” he said.
“New gas power is the most expensive way to build new energy.”
Labor is also facing some scrutiny over its climate policies after a draft policy platform leaked to The Australian made no mention of specific medium-term emissions targets.
Mr Butler said the party’s position on medium-term targets would be made clear before the next election.
“It will be a position that is aligned with our net zero emissions by 2050 commitment and informed by the best available scientific and economic advice,” he said.