This article is more than 1 year old

This article is more than 1 year old

The energy minister, Angus Taylor, has signalled the Australian government could indemnify new power generation projects against the future risk of a carbon price, and says it could also support the retrofitting of existing coal plants.

In an interview with Guardian Australia, the man dubbed the “minister for getting power prices down” by the prime minister, Scott Morrison, has also committed to keeping current subsidies for households and businesses to install renewable energy technology like solar panels until 2030, and insists Australia’s electricity sector will reduce emissions by 26% on 2005 levels in “the early 2020s”.

Taylor on Tuesday outlined a range of measures the government wants to implement to help lower power prices, including cajoling retailers into offering customers out-of-cycle price cuts so consumers could experience hip-pocket relief by January, ahead of the next election.

He also foreshadowed policy interventions to boost investment in new “reliable” power generation, including providing a floor price, contracts for difference, cap and floor contracts and government loans.

Morrison held out the prospect of government support for new coal-fired power stations “where they meet all the requirements” of the yet-to-be finalised mechanisms to boost investment in new electricity generation.

'Investors are mostly concerned about political risks': energy minister Angus Taylor – full interview Read more

One of the key problems preventing private investment in new coal-fired power generation is proponents have struggled to get finance because they are unable to predict future carbon risk, particularly given Australia’s decade-long partisan standoff over emissions reduction policies.

Taylor told Guardian Australia the government would look to remove the risks stopping investment in new power generation. “I’m saying we will look at whatever risks that can’t be managed by the companies that need to be managed to get investment.

“What we are saying is the risks that government needs to absorb to get investment in reliable generation, we will look at absorbing. We need the investment.”

Asked whether he acknowledged that would expose taxpayers to risk, Taylor said: “We’ll look at the risks and we’ll seek to minimise the risks to the commonwealth.”

The concept of the government underwriting new investments in power generation in order to boost competition in the market was originally recommended by the Australian Competition and Consumer Commission but with tightly defined criteria. The government is pursuing the ACCC’s general principle, but writing its own rules.

The ACCC was focused on encouraging new market participants, but the energy minister said the government could back the retrofitting of existing power plants to extend their operating life.

Asked how retrofitting an existing plant was bringing new generation into the market, he said: “It’s new generation if it would otherwise be gone, that’s the point.

“What we want is additional investment, new investment, that would mean we get capacity we wouldn’t otherwise have.”

Business is extremely wary of the government’s plans to impose price regulation in the energy sector, and about oft-repeated public threats by the government to wield a “big stick” – introducing divestiture powers to break up power companies engaging in price-gouging.

The chief executive of the Business Council of Australia, Jennifer Westacott, warned on Tuesday that “ad hoc intervention in the energy market, such as underwriting generation investment or forced divestment, is sending a signal to the world that investing in Australia comes with considerable risks”.

“In the long term this will only result in less investment in energy generation, less reliable energy and ultimately higher prices,” the BCA chief said.

Taylor told Guardian Australia he was confident the government had the power to legislate to force divestiture, and a toughening of regulatory options was required because of poor market conduct.

Asked whether he expected legal challenges from power companies in the event the government ever used the divestiture power, he said: “I can’t predict what people are going to do.”

Asked what trigger the government planned to use to break up badly behaving power companies, Taylor said it was a lack of competition and deliberate withdrawal of supply.

“The issue is, have we got enough capacity and supply in the market to meet customers’ needs and are companies in the sector thwarting that, are they deliberately taking anti-competitive action to withdraw supply from the market to drive up prices?”

Stakeholders in the energy market are also enormously frustrated with the Coalition’s chopping and changing on energy policy, which culminated in the ditching of the national energy guarantee’s 26% emissions reduction target.

Taylor insists the electricity sector will hit 26% well before 2030. Asked why the government ditched a target it was going to easily exceed, the minister said: “Labor want a higher target. We are not going to facilitate that in any shape or form.

“We are not going to load the gun for Labor to have a much higher target.”

Energy ministers will meet this Friday for the first time since the Morrison government grounded part of the Neg. Taylor wants to sound out his counterparts on whether they will agree to roll out new price regulations in the electricity market, or whether Canberra will force the change by overriding them.

The Victorian energy minister, Lily D’Ambrosio, has warned she has no intention of agreeing to anything on Friday, given the state is days away from entering caretaker mode ahead of the state election.

Lily D'Ambrosio MP (@LilyDAmbrosioMP) COAG energy council is becoming Groundhog Day - here we are three federal energy ministers later, and the Liberals still don’t have a national policy to reduce emissions. (1/2)

Taylor also wants them to agree to preserving the reliability obligation of the Neg – a requirement on energy retailers to supply sufficient quantities of dispatchable power to the market, with a final decision on that required by December.