The Turnbull government's push for taxpayers to finance new coal-fired power stations is facing its first test after an application for support was lodged with the national green bank.

Clean Energy Finance Corporation chief Oliver Yates told a Senate estimates hearing that the agency received an email on Friday from an unidentified company requesting a loan for a proposed $1.2 billion, 900 megawatt coal plant with carbon capture and storage.

It was not immediately clear who was behind the plan, but energy industry experts noted the size and estimated cost were similar to a previous proposal by former mining magnate and MP Clive Palmer for a generator in Queensland's Galilee Basin.

Speaking to Fairfax Media on Monday night, Mr Palmer said he had "retired" and directed questions to Waratah Coal managing director Nui Harris. But he said the company had spent $20 million on a similar plant under the Gillard government and the project was in a "high state of readiness".

The Clean Energy Finance Corporation is banned from financing capture and storage technology, which involves burying the greenhouse gas emitted in burning coal underground. Dropping the ban would require a challenging change in legislation – a step likely to be opposed by Labor and the Greens.

Mr Yates said he believed new coal plants were not commercially viable unless the government was willing to indemnify the owner for the life of the plant.

He said the indemnity would need to cover any future climate change policy - an unquantifiable sum covering decades - and potential delays in construction due to protests.

Mr Yates, a former Macquarie Bank executive director who is stepping down as head of the finance corporation, said he was not aware of any bank that would be willing to lend to a project that may not be viable.

"I don't see that as a sensible risk position for the taxpayer to take," he said.

"If a private sector participant wants to go and build anything – they want to build a theme park, want to build the Eiffel Tower – it may not be economically sensible, but they are entitled to go and do it if they want to."

The price on the bid suggests the party behind it believes coal with carbon capture will be much cheaper than published estimates, or that only a fraction of the carbon dioxide would be captured. A report by the company CO2CRC found it would cost $6.37 million per megawatt - about $5.7 billion for a 900 megawatt plant.

It comes as the government is pushing the case for new coal power generation as baseload power to provide back-up to the growing amount of intermittent wind and solar generation in the national electricity grid, and attacking Labor for its uncosted goal of 50 per cent renewable energy by 2030.

Mr Yates said among the risks facing coal proposals was the falling cost of renewable energy. Coal generators would need to compete to sell the electricity they produced.

An analysis by consultants Bloomberg New Energy Finance recently found new coal plants, with emissions up to 25 per cent lower than Australia's existing plants, would be more expensive than gas, wind or solar power. Adding carbon capture and storage would dramatically further increase the cost.

Asked about the analysis, Mr Yates said financiers would always support the cheaper option, but pointed to other factors that needed to be considered including the cost of storage for renewable energy and, conversely, that coal plants were inflexible and needed to run even when not needed.

The Clean Energy Finance Corporation is effectively barred from lending for new coal plants. Guidelines set by the agency's board mean that it can only consider proposals with emissions 50 per cent lower than the national grid average of 0.82 tonnes of carbon dioxide per megawatt hour generated.

Modern black and brown coal plants would emit about 0.7 and 0.9 tonnes per megawatt hour respectively.

Those guidelines could be changed if Environment and Energy Minister Josh Frydenberg or Finance Minister Mathias Cormann directed the board to change the definition.

The corporation, which delivers taxpayers a return of about 6 per cent on investment, can not consider applications for nuclear or carbon capture and storage technology without a change in legislation.

The Senate estimates hearing was also told a feasibility study into a mooted large-scale solar thermal plant at Port Augusta in South Australia, where the Northern coal plant shut last year, found it was not viable. Alinta Energy had decided not to go ahead with plants after the joint study with the Australian Renewable Energy Agency.

Meanwhile, the Australian Industry Group released a report warning of the impact of electricity and gas price rises. The group said the increases would cost households up to $3.6 billion a year, and businesses $8.7 billion a year.

The report found the main causes of surging prices included rising gas prices driven by the export market, the growing role of gas-fired power generators and the tightening of the electricity market as old coal generators shut down.

Building more renewable energy now would help keep price rises down by increasing competition, but this would not continue indefinitely. Eventually the new clean plants would push more old dirty ones to close.

Solutions would not be easy as gas production costs were rising and all forms of new electricity generation were expensive. But the group said answers could include boosting gas availability, improving business and consumer response in periods of high demand, an ongoing energy efficiency drive and the introduction of a coherent national energy and climate policy.

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