Arthur Sinodinos has warned that the Liberal party should not stand in the way of renewables, suggesting the government should use a changing energy market to bolster its environmental credentials.

Anticipating a fresh internal battle over energy policy after the Liberal-National party’s success in Queensland, the Liberal senator suggested the government should recast itself as the best manager of the grid and “take advantage” of the falling cost of renewables to ensure “greater reliability, lower cost and lower greenhouse gas footprint”.

Despite the Coalition returning with a narrow majority in the 46th parliament, former prime minister Tony Abbott lost the blue-ribbon seat of Warringah and there were swings against the Liberal party in inner-city Melbourne and Sydney seats.

Environmental groups that campaigned against the government including the Wilderness Society and the Australian Conservation Foundation were underwhelmed with the results but insist with the election of climate-conscious independents and a worsening climate crisis the problem is not going away for the Coalition.

Sinodinos, the former industry minister and cabinet secretary, told Sky News the inner-city swings against the government were due to “very intense competition between ourselves, Labor and the Greens”.

“There’s no doubt that climate change issues probably played a factor in some of those seats,” he said.

“But my point is I think with the energy transition under way there is an opportunity for us to reclaim more ground in that environmental space and not make it seem like it’s a binary choice between looking after the environment [and the economy].”

Sinodinos argued the transition is “already under way with record investment in renewables” leaving the government the challenge of “[making] sure the electricity generation system can accommodate that while maintaining reliability”.

Sinodinos said the government “should do more to be seen to be managing that transition because I think we can have a good story to tell on that and it’s a terrific way to reduce our greenhouse gas footprint”.

Government should not stand in the way of renewables because “the cost is falling, but at the same time we need to make sure we have backup and storage”, he said.

“This is a transition which is underway, there’s no turning back. This is about how you take advantage of it as an opportunity, not just see it as a cost.”

Asked if the government should refuse to support coal-fired power stations and leave electricity generation to the free market, Sinodinos argued the national electricity market had already been the subject of “more and more government regulation”.

“So, it’s not as easy as to say we’ll leave it to market forces, we need to probably look at that market structure again,” he said, to accommodate more renewables and more people on micro-grids.

The Coalition started 2019 by trying to bolster its climate credentials with a $2bn cash injection to the emissions reduction fund.

But it angered environmentalists by claiming Labor’s climate policy – based on the national energy guarantee designed by Malcolm Turnbull before he dumped it in a bid to save his leadership – is a Trojan Horse for a carbon tax.

The Australian Conservation Found rated the Coalition a miserable 4% on its scorecard, labelling the renamed Climate Solutions Fund “grossly inadequate” and warning government MPs “actually support burning more coal, making climate change even worse”.

In March, Scott Morrison attempted to mollify rebel Queenslanders by promising to examine whether a new coal-fired plant was needed in north Queensland.

He also signed off on a shortlist for the electricity underwriting scheme that includes “one very small” coal project in New South Wales proposed by coal baron and LNP donor Trevor St Baker.