Greens leader Adam Bandt has hit out at the proposed new capacity mechanism, which would offer payments to coal-fired power plants among other energy sources.
Power plants using a range of technologies including coal, gas and renewables would be paid to guarantee energy output under the plan prepared for federal Energy Minister Chris Bowen and his state and territory counterparts.
But Mr Bandt says coal and gas power generation are the causes of the energy crisis.
"Coal and gas are the causes of not only the climate crisis but the problem that we're finding ourselves at the moment," he told the ABC on Monday.
"Paying them to stay in the system for longer is only going to prolong the problems and also prolong the transition to renewables."
Nationals leader David Littleproud has backed the plan, saying the government needs to ramp up investment in coal and gas.
"You actually need to make sure you have baseload power and the only way to do that is with coal and gas," he told Sky News.
"If we want to reduce emissions, that's okay, but if you can (use) existing technology that doesn't mean you have to spend billions of dollars investing in a new form of technology or transmission, then why would you do that?"
Mr Littleproud says the government should look into nuclear energy - something the energy minister has already ruled out - and install technology to capture carbon from coal-fired power plants.
"All the investment signals that have been sent by this government is it's just a race to renewables," he said.
"When you don't even have the technology to store that, then the problem you've got is not just being able to put the heaters on tonight, it's also those men and women that are in the manufacturing sector whose jobs are now highly at risk."
But the Greens leader says the necessary storage technology, backed by hydro, already exists to help alleviate pressure on the grid.
"We can provide the storage and the firming capacity now," Mr Bandt said.
"The idea of paying coal and gas to stay in the system for longer isn't just going to make the climate crisis worse, but it's rewarding those big coal and gas corporations that have been holding us to ransom."
The fact that some companies felt compelled to withhold power because it was uneconomical to sell it constituted a failure of the energy market, Mr Bandt says.
"Even in a country like ours, where there's in fact a surplus of all the kinds of energy that we need, we're still finding some power generators saying they may not even turn on because it's not in their economic interest to do so," he said.
"It was designed in an era where the coal and gas corporations held sway, they got to write the rules in their favour.
"It's time now for a rewrite, not for a propping up of this broken system that hurts people and businesses."
Energy ministers will meet on Friday to discuss the capacity mechanism plan.
