Mr Morrison said gas and coal remained critical to meeting the nation’s growing energy demands and supporting economic recovery, in a speech delivered in New South Wales's Newcastle region.
“To ensure affordable, reliable power we need the market to deliver 1,000 megawatts of new dispatchable capacity,” he said.
“If the energy companies choose to step up and make these investments to create that capacity – great. We will step back. If not my government will step up and we will fill the gap.”
But the government’s focus on gas has drawn the ire of environmentalists, desperate to see a shift away from fossil fuels and instead calling for a green-recovery to the crisis.
"We must fight Scott Morrison's plans for gas-fuelled climate collapse," Australian Greens leader Adam Bandt said.
The government asserts the extra power is needed to replace that will be lost from the Liddell power station when it closes down in 2023.
The prime minister is giving power giants seven months to come up with a plan to meet the demand before the government steps in.
This includes promising to build a gas power plant in the NSW Hunter Valley if the private sector does not step in.
The three-step plan outlined by Mr Morrison includes firstly driving down energy prices, getting “more gas, more often and more reliable” into the energy system and increasing the nation’s sovereign fuel reserves.
The government’s plan focuses on dispatchable power - electricity generation that can be turned off and on when necessary.
“You cannot talk about electricity generation and ignore coal,” he said.
“Coal will continue to play an important part of our economy for decades to come.”
He also wants to fast-track interconnectors and build more gas pipelines to ensure electricity can be moved around the east coast.
“That means efficiently connecting major sources of gas supply with customer hubs where there is significant demand,” he said.
Mr Morrison also said the government remained committed to investing in renewable energy.
“Cheaper renewables not only helps us to get our emissions reduction targets by 2030, which we remain committed to ... but they also hold a promise of further declines in energy costs,” he said.
The prime minister said he is confident the government would meet its ambition to reduce emissions by at least 26 per cent by 2030 on 2005 levels in a “canter”.
Labor's energy spokesman Mark Butler has raised scepticism about 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."
The government’s COVID committee - advising on the nation’s recovery to the pandemic – asked the government to consider underwriting new investment in gas pipelines as one of its recommendations.
Mr Morrison said the long-term goal of the government’s plan was the creation of a “transparent and competitive Australian gas hub on the east coast.”
With additional reporting from AAP