The nation's largest power generator, AGL Energy, has urged the federal government to exclude coal from its planned clean energy target and said there is no appetite among private investors to fund new coal-fired power plants.

AGL, which sources 77 per cent of its electricity generation from coal, said including the fossil fuel in the target would send the wrong signal for the industry, which should prioritise more low-cost, efficient clean energy alternatives.

"The danger is you convince yourself that you see coal in your future and therefore if it doesn't happen and the markets don't deliver it, the government may step in and do it," AGL Chief Executive Officer Andy Vesey said in an interview on Thursday.

"The industry is not going to invest in things that don't make sense."