Energy Minister Josh Frydenberg insists the government is still considering a clean energy target but any mechanism must consider affordability and reliability.
The Turnbull government insists it's still considering a clean energy target but one that takes into account the reliability and affordability of power.
The clean energy target is the only one of Chief Scientist Alan Finkel's 50 recommendations for the future of the electricity market the government is yet to adopt.
The energy sector is pleading for it to be settled to provide certainty around investing in new generation
Energy Minister Josh Frydenberg on Wednesday dismissed reports the government was walking away from or seriously reshaping the policy to appease renewables-sceptic coalition backbenchers.
The clean energy target was being considered in the context of advice from the Australian Energy Market Operator which has warned of supply shortfalls.
"We have to fully understand the implications for any new mechanism on the reliability of the system and on the affordability of the system," Mr Frydenberg told reporters in Canberra.
Former prime minister Tony Abbott fired a warning shot during a meeting of coalition MPs on Tuesday, telling them: "If we graft the CET on top of the existing (renewable energy target), that will be a difficult position to sustain."
Mr Frydenberg is confident his coalition colleagues understand and support measures the government is taking on energy policy and "will continue to do so into the future".
The planned closure of the AGL-owned Liddell power station in the NSW Hunter Valley in 2022 will create a 1000MW shortfall in the energy market if nothing is built in the meantime to replace it.
The government has used the warning to heavy AGL into keeping the plant open or selling to someone who will.
But the former head of the government's green bank said that approach just introduced even more uncertainty and instability into a market which had been working on replacing Liddell's capacity.
"Even under the Finkel review they're only requiring ... that a coal-fired power station give three years' notice; AGL gave about seven," Oliver Yates told ABC radio.
"That's very difficult if a prime minister walks into the room and basically says, 'Well I know you've been investing on that basis ... but I think I might just decide to legislate in some way and keep these clunkers open'."
Australian Conservatives senator Cory Bernardi said there were so many mixed messages from government it was no wonder the policy space seemed chaotic and frenzied.
"Every problem in the energy market has been caused by government," he told ABC radio.
"I say government should get the heck out of it."