An industry group says renewable energy operators in Queensland have been sidelined again amid a Federal Government push for new coal projects.

Key points: An industry group says the potential of renewable energy generation in Queensland is not being met due to a lack of government support

An industry group says the potential of renewable energy generation in Queensland is not being met due to a lack of government support The Australian Sugar Milling Council's comments come amid a Federal push to explore new coal options in the state

The Australian Sugar Milling Council's comments come amid a Federal push to explore new coal options in the state A Katter's Australian Party MP says biofuel projects are important to his community, but have been ignored by the Federal Government

Former resources minister Matt Canavan described the renewable sector as "dole-bludging" this week, and would like to see a taxpayer-funded feasibility study into a new power station at Collinsville, south of Townsville.

The Australian Sugar Milling Council (ASMC), a peak body whose members run 17 mills that co-produce sugar and 27 per cent of the state's renewable power, has rejected the senator's comments.

"I think we've all heard [renewable sources are] no good when the sun's not shining and the wind's not blowing," ASMC policy director David Rynne said.

Matt Canavan's comments have disappointed the renewable sector. ( ABC News: Lily Nothling )

"That's kind of what we now learn to be the narrative about renewables, but with the Australian sugar industry, through biomass energy we create, that doesn't hold.

Mr Rynne said "bagasse" was an example — a biodegradable fibre that remained after sugar-cane stalks were crushed for juice.

He described it as a "big battery".

"We can store it and we can generate renewable energy on demand anytime of the year — it's 100 per cent renewable."

Mr Rynne said the biomass sector, using by-products from the sugar milling process presently generated 1.2 million megawatt hours, with half exported to the national grid.

"We've worked out that if bagasse was burnt more efficiently, we could go to almost 3.5 million megawatt hours," he said.

"That could power around 550,000 houses, that potential is there."

Bagasse is the remaining fibre of sugarcane after it's milled to make sugar, which is then burnt to generate power for both the grid and to run the factory.

'Dole-bludgers' claim ignorant

State MP Shane Knuth, who represents the rural communities of Innisfail, Tully and the Atherton Tableland in north Queensland, has backed power development in his electorate.

He said the comments from Senator Canavan showed a disappointing attitude to north Queensland's proposed and existing renewable energy projects.

"I just feel that's nonsense," Mr Knuth said.

"These clean energy projects, biofuel projects are very important to us."

The Hill MP said the Tully Millstream project, designed to expand the current hydroelectric station on the Tully River south of Cairns, had been ignored by governments since it was first proposed in 1988.

Presently the Kareeya and Koombooloomba power stations generate a combined 95 megawatts of renewable energy to the grid.

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A technical study was completed by the Snowy Mountains Engineering Corporation that assessed building two smaller new dams to add capability to the existing Koombooloomba Dam on the river, which could produce an additional 600 megawatts of power.

"A tunnel had already been constructed, it had the potential of generating power for over 100,000 homes," Mr Knuth said.

The Katter's Australian Party MP said the Federal Government had promised an updated study into modernising the hydro scheme plans which it abruptly abandoned.

"The Federal Government had committed [in 2018] to come to Tully and announce funding and they just disappeared, they didn't turn up," he said.

"We haven't heard anything since, it's quite disappointing because this is a great opportunity."

The Tully Millstream Hydro-electricity Scheme was planned in the 1980s, and a tunnel was partly constructed between Koombooloomba Dam and the Tully River. ( Supplied: Industry Queensland )

Renewable target needed

The ASMC has repeated its calls for urgent action to renew the Government's commitment to renewable energy targets.

"What it will do for the Australian sugar industry is important, it will generate an alternative revenue source," Mr Rynne said.

"When we get those inevitable dips in the sugar prices those alternative sources, such as co-generated power, can be extremely important."

The ASMC said investment in biomass generation by sugar mills has slumped as a result of policy inaction.

Three years ago Thai-owned sugar miller MSF Sugar built an $80 million plant on the Atherton Tablelands, an endeavour Mr Rynne said would be unviable if planned today.

"That's the last project we'll probably see in a little while without some significant policy shift," he said.

"That plant was predicated on the proponent locking in some pretty good large-scale generation certificate (LGC) prices."

David Rynne says MSF Sugar's $80 million Tablelands renewable energy generator will be the last investment of its kind for a while unless policy changes are made. ( Supplied: MSF Sugar )

The LGC spot price fell from $71.90 in October 2018 to $39 in February 2019, and now trades at $34.

"Without a Renewable Energy Target (RET) in place and the LGC price or some other fiscal incentive and some policy certainty, I don't think you'll see too many co-gen feasibility studies completed," Mr Rynne said.

Mr Knuth said his party would commit to policies that would guarantee renewable energy generation's viability.

"It's like the chicken and the egg, if you don't have that support you're not going to get investment in green power, biofuel — it's all clean green," he said.