A leaked report by federal and state bureaucrats said the $300 million would only extend Liddell's operational life until 2026, with owner AGL saying it does not want to spend the money supporting the ageing station, leaving taxpayers to pick up any likely bill.

The Liddell proposal is backed by Energy Minister Angus Taylor, who in August last year did not rule out taxpayers funding coal-fired power despite economists including Ross Garnaut ruling out coal-fired power as an expensive option when renewables and storage are considerably more cost-effective.

Mr Taylor was behind a push to have AGL extend the life of Liddell from its planned closure in 2022 until April, 2023 to help the national grid deal with that year's summer season.

It followed a stand-off between AGL and the Federal Government in 2017, under the then Prime Minister Malcolm Turnbull, in which AGL said Liddell had only operated at roughly half its 2000-megawatt capacity for the previous four years because of its age and condition.

At the time Hunter MP Joel Fitzgibbon rejected extending the power station's life because "it's 45 years old. It's clapped out. It's now the most inefficient and dirtiest power generation in the country".

The leaked report this week showed the Federal Government was willing to spend much more of taxpayers' funds than was needed to keep coal in the energy generation mix when much cheaper renewables and storage options are available, said the Nature Conservation Council.

"Liddell is a dud and should shut by its use-by date in 2023, or even sooner," Nature Conservation Council campaigns director Brad Smith said.

"If the government is going to spend $300 million on energy, it should invest in pumped hydro and batteries, not extending the life of dirty old clunker like Liddell. Keeping the station open would not only be an obscene waste of taxpayers' money."

The leaked report found keeping Liddell open would make the grid more unstable and add significantly to Australia's greenhouse gas emissions.

"There is no reason to spend millions polluting our climate when we have cleaner ways to power our state," Mr Smith said.

"Instead of obsessing about coal, there are 21 storage projects that are ready to roll in NSW that the Federal Government should expedite funding for."

AGL is spending $200 million to upgrade Bayswater power station near Muswellbrook as part of its plan to replace Liddell.

The company provided the government with seven years' notice of the power station's closure.