The dramatic move was publicly backed by former resources minister Matt Canavan on Wednesday, who suggested the Coalition should consider taking a partial stake in the plant, but government sources cautioned such a move was unlikely.

Instead, those sources argued a private sector buyer would likely be found, a suggestion backed by energy market experts and Delta Electricity flagging interest in Liddell, while government could assist by helping upgrade the plant to keep it running.

Conservative MPs are now openly discussing the need for a "grand bargain" with moderates in the Coalition that would ensure coal remained a part of Australia's electricity market for as long as possible, in exchange for agreeing to a Clean Energy Target.

The future of coal and the Clean Energy Target were discussed at length during a weekly lunch meeting of conservatives in parliament's so-called "Monkey Pod" room. The government has indicated it hopes to finalise plans for the politically contentious post-2020 Clean Energy Target by year's end.

Mr Turnbull and Energy Minister Josh Frydenberg will meet AGL chief executive Andy Vesey next Monday to discuss the future of the Liddell plant.

That meeting comes after Mr Vesey had on Tuesday dismissed Mr Turnbull's suggestion the company could keep Liddell and insisted the company was getting out of coal; the company backed up the comments in a statement to the Australian Stock Exchange Wednesday.

But Mr Turnbull said keeping Liddell open was "clearly an option" and it was "too early to speculate" on whether the government would give tax or other incentives to a potential buyer of the plant.

Delta Electricity, which has previously purchased an old coal plant at Vales Point, indicated Wednesday it could buy Liddell, subject to the price and the cost of upgrading the station, as it was a good fit for their portfolio of electricity assets; company secretary Steve Gurney said Delta was prepared to undertake the due diligence required.

Mr Turnbull has said his preference is for the private sector to own generators but has not ruled out more dramatic intervention.

"Our responsibility is to look after the Australian people. What they need is to have affordable and reliable electricity and so we look at all options," he said.

Senator Canavan said buying a partial stake in the Liddell power plant, in partnership with a private entity, was something government should look at.

"There is a role for government to ensure those settings [in the electricity market] are predictable, certain and provide investment certainty."

Mr Turnbull said a new coal plant would take a long time to build and involve large capital costs. Keeping Liddell open would avoid a 1000 megawatt energy shortfall in 2022 forecast by the Australian Energy Market Operator in the short term.

He rejected suggestions the Australian Energy Market Operator believed building new coal-fired power plants was not economically viable.

Energy Council chief executive Matthew Warren said it was possible to extend the life of an old coal plant like Liddell, but his organisation's members, Australia's largest generators, would not invest in a new coal plant because of the risk associated with a 50 year, high polluting asset.

"You aren't going to fix the grid by running Liddell five years longer, you are going to fix it by having a clear, durable plan which we can invest against," he said.

ACIL Allen chief executive Paul Hyslop, an expert on energy policy, told Fairfax Media it could cost as much as $500 million to extend the Liddell plant's life if a buyer could be found.

"It might well be, in some views of the world, a very profitable plant in future if you extended its life ... if a clean energy target was implemented you might be able to justify extending the life of the power station, for example," he said.

AEMO chief executive Audrey Zibelman on Wednesday told Fairfax Media that building a coal-fired power plants was "very difficult … in a market environment".

"What we are seeing throughout the world is a tendency for investors to be looking at units that are faster to build and are less capital-intensive," she said.

Labor's energy spokesman Mark Butler said it was important to ensure reliable, affordable power supply of electricity across the system as ageing power plants closed, including a Clean Energy Target to encourage new investment.

"Yet the Prime Minister continues to sit on his hands and pretend that the solution is building new coal-fired power stations, or an extension of the Snowy Hydro scheme, that won't come on train, if at all, before the mid-2020s," he said.