Federal Government argues the economics of Kurri Kurri gas plant are strong

The six month window that it set the energy sector to prove that it can replace the 1000 megawatts of dispatchable power to be lost from the closure of Liddell power station ended on Friday.

The government's apparent determination to build the project comes despite a growing chorus of experts and environmentalists arguing that it is not necessary.

"The government's response will be shaped by the extent of industry action to deliver on the target," a spokesman for Energy Minister Angus Tayor said.

"Initial, early-stage assessments of the economics of the new gas generator at Kurri Kurri are very strong, with a larger generator expected to deliver a higher rate of return than a smaller generator.

"The Morrison Government is taking action to protect NSW households and businesses from high energy prices if Liddell is closed without adequate replacement."

The $500 million, 750 megawatt plant, to be built by Snowy Hydro 2.0, has already secured state significant infrastructure status.

The generator would be capable of blending hydrogen fuel with natural gas as the clean energy economy evolves.

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Shortland MP Pat Conroy said while gas played an important role in the firming up renewable energy and helping to meet peak demand, the Kurri plant would drive up energy prices.

"The government has had 23 energy policies in recent years and this one was made on the run," he said.

"They've known about the Liddell closure for six years yet have not put forward any meaningful proposals that will lower power prices and support workers in our region.

"What's being proposed at Kurri will only create a handful of long term jobs, whereas we know investing in renewables will create thousands of opportunities."

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Mr Taylor said on Friday that the government was considering changing how the energy system worked to ensure dispatchable power stations are paid for being available.

"We only pay for energy, we don't pay for availability - dispatchability - being a generator that can flick on as soon as it's needed," he said.

"But we have to strengthen those signals to the market, to investors, that we want this dispatchable generation to balance the solar and wind going in."

It's about giving the industry certainty so they keep power stations open and invest in new ones.

"It's very important we see retention of our dispatchable generation where it makes sense to do so, including coal," the minister said.

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