Prime Minister Tony Abbott wants Australia to be an affordable energy superpower and says a review into the renewable energy target (RET) will look at the pressure it's placing on domestic prices.
Mr Abbott on Wednesday announced a taskforce into the manufacturing sector which would, among other things, examine ways to significantly drive down power prices to ease the cost of production.
The federal government will next year review the bipartisan RET that aims to ensure 20 per cent of Australia's electricity comes from renewable sources by 2020.
There is strong evidence the target will be well exceeded and critics, including some within the government, warn the RET will unnecessarily drive up retail power bills.
Mr Abbott said the government supported the "sensible use" of renewable energy, but times had changed since the former Howard government helped establish the RET.
"We've got to accept though that in the changed circumstances of today the renewable energy target is causing pretty significant price pressure in the system," he told reporters in Canberra on Wednesday.
He said Australia should be an "affordable energy superpower", with a small domestic market and comparatively cheap and abundant energy supply.
But "almost everything" in the past few years, starting with the carbon tax, had conspired to drive up local prices, he added.
Industry Minister Ian Macfarlane said it made no sense that coal-fired power companies were producing energy at costs cheaper than five years ago, but manufacturers were still paying double.
Australia was facing an enormous challenge in terms of generating excess supply of electricity, he added.
"To be adding large quantities of generation into that situation has to be questioned," he said.
"The (RET) review process will go through those things."
