Prime Minister Scott Morrison has delivered an ultimatum to the energy sector, promising to step in if private companies do not replace electricity generation for the soon-to-be-closed Liddell power station.
The Liddell power station is slated to close 2023.
The prime minister has promised to mobilise the government-owned Snowy Hydro to build a gas power plant in its stead, however, emphasised that this was not the preferred course of action.
The move is founded on fears energy prices could spike like what occurred in Victoria following the closure of the Hazlewood coal-fired power station, which sent wholesale prices rising by 30 percent on average.
Morrison's announcement forms one part of the JobMaker plan, which aims to create more jobs post-COVID. Driving down energy prices and creating reliable sources for businesses is designed to encourage business investment.
Energy Minister Angus Taylor says replacing Liddell with a gas plant will also help reduce Australia's carbon emissions.
"This particular initiative, which is focused on replacing Liddell, will not just bring down emissions in New South Wales, it will also contain prices and keep the lights on," he said.
Morrison also pledged $53 million to unlock more gas supply for the domestic market.
The government will focus on dispatchable power—electricity generation that can be turned off and on when necessary—rather than renewable energy to ensure reliability.
Five key gas basins will be unlocked at the cost of $28.3 million, including the Beetaloo Basin and Galilee Basin.
Morrison also wants to fast-track interconnectors and build more gas pipelines to ensure electricity can be moved around the east coast of Australia.
States and territories will be subject to "use–it or lose–it" gas licenses to manage energy usage.
An Australian Gas Hub will also be established in Wallumbilla in Queensland to facilitate a trading system for liquid gas between the states.
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.
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," he added.
Labor is also facing scrutiny over its climate policies after a draft policy platform leaked to The Australian had no specific medium-term emissions targets.