CANBERRA, AAP – More than half a billion in taxpayer money will go towards building a gas-fired power station in NSW, despite a major report calling for an end to investments in fossil fuels.

The Morrison government argues the $600 million project will be necessary to keep power prices down when AGL’s Liddell coal-fired power station closes over the next few years.

Government-owned Snowy Hydro will build the 660 megawatt open cycle gas turbine at Kurri Kurri in the NSW Hunter Valley, on the site of an old aluminium smelter.

Prime Minister Scott Morrison said the Kurri Kurri station, coupled with EnergyAustralia’s Tallawarra gas plant in Wollongong, would fill the gap left by Liddell.

Mr Morrison insists gas is important to help backup renewable power sources.

“Battery development is still at a very early stage,” he told reporters in Melbourne on Wednesday.

Big batteries are already being used in Australia to store renewable power so it can be used later, including South Australia’s Hornsdale power reserve.

Big batteries are also part of the NSW government’s legislated energy plans for the state to achieve net zero emissions by 2050.

Energy Minister Angus Taylor has defended the market intervention.

The minister used Tomago aluminium smelter – Australia’s largest energy user – as a justification for adding a new gas-fired power station, saying it had to partially shut down over the last week because of a lack of power.

Mr Taylor indicated that was due to issues with supply from Liddell.

Labor energy spokesman Chris Bowen said the government’s funding decision looked cynical, pointing to industry experts who have questioned whether such an amount of gas is needed.

Mr Bowen wants to see the business case for the proposal, particularly given taxpayer money is being used.

Former BP president Greg Bourne said the new gas station was unnecessary because of NSW’s existing plans.

Now a Climate Council spokesman, Mr Bourne warned the Kurri Kurri station would end up as a stranded asset.

The government insists Kurri Kurri will create many more jobs than figures outlined in the project’s environmental impact statement.

That document says some 250 jobs will be created during construction, but there will be just 10 ongoing roles.

The power station may be powered by diesel fuel for the first six months because infrastructure connecting it to gas might not be ready for it in 2023.

Snowy Hydro says the plant will eventually be able to use hydrogen,

The project comes as the International Energy Agency said reaching zero net emissions by 2050 would require a massive transformation of the global energy sector.

New investment in fossil fuel projects would have to stop immediately, it said.