The federal Labor opposition says private investors will not touch “with a barge pole” the Morrison government’s plan to support a coal-fired power plant in Queensland.

The government says it will spend up to $6m in grants for two new Queensland electricity generation projects, including a coal-fired power plant, as part of a bid to lower power prices.

About $2m has been set aside for a pre-feasibility study on a 1.5GW hydro-electric plant to be developed as part of the planned Urannah water scheme, while up to $4m will support a feasibility study for a 1GW “high efficiency, low emissions” coal plant at Collinsville.

“We are supporting two promising new generation projects to deliver the reliable, affordable power that the north Queensland economy needs to grow and thrive,” the deputy prime minister, Michael McCormack, said.

The energy minister, Angus Taylor, said the projects were important to meet the power needs of people in central and north Queensland.

“Our plan to unlock investment in new reliable generation capacity will increase competition, keep the lights on and lower prices to better support our commercial and industrial sector so they can employ more Australians and remain internationally competitive,” he said.

But Labor’s climate change and energy spokesman, Mark Butler, said private investors would not touch a new coal-fired power station “with a barge pole”.

“The government still has no energy policy – just ideological flights of fantasy,” he said in Adelaide on Saturday. The private investment sector had made it very clear it had no appetite for building expensive coal-fired power stations, he said.

“If the industry itself won’t touch this project, why should taxpayers foot the bill?”