Snowy Hydro's expansion into the Canberra region with a $500 million gas-fired power station will be funded by debt and cash flows amid claims it has to privatise to survive.

Public opposition skittled a previous privatisation attempt in 2006. But energy and infrastructure experts continue pushing a case, saying the power generator can't raise sufficient capital to compete with bigger rivals in Australia's energy market.

As well as maintaining the hydro-electric scheme, Snowy has two gas-fired power stations in Victoria and, despite the new tax on carbon, plans another one at Bannaby, north of Goulburn.

A Snowy spokesman said no date had been set for starting the new peaking plant, which would have about 25 kilometres of pipeline connecting it to the Moomba to Sydney gas pipeline. ''Like all Snowy Hydro's capital expenditure and asset developments, it is likely that it would be financed by a combination of free cash flow and debt,'' he said.

Snowy Hydro is owned by the NSW and Victorian governments and the Commonwealth.

Australian Energy Research Institute director Professor Vassilios Agelidis said public sentiment was an obstacle for privatisation.

''Having said that, there is no evidence that if it was to remain in government hands that there will be investment to modernise and maintain it. The reason is that [the] states and federal government are not able to raise the funds through raising more taxes to pay for the huge investments required in ageing infrastructure.''

The predicament is also spelt out in a DVD produced in 2008 which Snowy distributed widely around the Snowy Mountains community to explain its business model.

Snowy sees itself these days as more of an insurance company than an electricity company.

For years it had an edge in being a fast-start generator, able to generate quickly.

But coal-fired generation has become a competitive fast-start generator and big energy companies are not as reliant on Snowy's hedging facility.

Snowy says for these reasons it is investing in gas-fired plants.

A spokeswoman for NSW Resources and Energy Minister Chris Hartcher said the NSW government had no plans to privatise Snowy Hydro.

NSW Greens energy and treasury spokesman John Kaye said Snowy's management was still flat out trying to achieve privatisation, which would always be a ''twinkle in the eye'' of state government treasurers.

Political fallout was the only thing stopping it.

Dr Kaye said Snowy had almost free peak power, and its incremental costs were much lower than its competitors.

Professor Agelidis said privatising another partially state-owned asset would drive much needed growth and create many new jobs.