A meeting of the Coalition party room has agreed to ditch the Clean Energy Target (CET).

Key points: The party room agreed to ditch the CET and instead adopt a National Energy Guarantee

The party room agreed to ditch the CET and instead adopt a National Energy Guarantee That NEG would require electricity retailers to have a minimum amount of power constantly available

That NEG would require electricity retailers to have a minimum amount of power constantly available The Energy Security Board says this could deliver an average saving of between $110 and $115 a year for a decade from 2020

MPs today signed off on a new plan that Prime Minister Malcolm Turnbull argues will make power bills cheaper and more reliable while still cutting carbon emissions.

That plan replaces the CET with a National Energy Guarantee (NEG), which requires retailers to use a percentage of electricity from so-called dispatchable sources such as coal and gas, batteries or pumped hydro.

That would ensure they meet their obligation to deliver reliable power.

The decision came after the Cabinet last night agreed to dump the CET recommended by Chief Scientist Alan Finkel.

The CET would have seen electricity companies forced to provide a set percentage of their power from low-emissions technology such as renewables and efficient gas.

The increased costs of sourcing energy from these types of providers would have been passed on to consumers.

The new scheme does not provide subsidies for renewable energy, but does include an energy intensity calculation.

This calculation would mean retailers will have to buy power that is efficient enough to ensure Australia is on track to meet its Paris target.

Compliance rules for companies that fall short of their obligations have not yet been set, but it is likely they would be able to make up a shortfall the following year.

The head of the Government's Energy Security Board, Kerry Schott, explained how this would help in terms of reducing emissions.

"The obligation to have a reliable power system is now intimately linked with an emissions reduction target," Dr Schott said.

"And if you don't have those two things linked together, you have a danger of an increase in intermittent renewables without having a reliable and dispatchable power to go with it.

"And it's very important that you always have dispatchable power where you have intermittent resources."

Questions over how much NEG would save consumers

In a video shared to the Prime Minister's public Facebook page, he pitched it as a plan that would deliver "cheaper, more reliable electricity for Australian families and businesses".

Unveiling the new policy alongside Mr Turnbull, Energy Minister Josh Frydenberg said: "This is a credible, pro-market policy that delivers lower electricity prices. It means no subsidies, no taxes, no trading systems."

The Government said its Energy Security Board estimated a typical household could save between $110 and $115 on average each year for a decade from 2020.

The average figure over a decade leaves open the possibility it would be much lower in the early years.

A National Energy Guarantee is central to Malcolm Turnbull's new policy. ( ABC News: Matt Roberts )

Dr Finkel called today's plan "a credible mechanism" and said he was optimistic that power bills would go down as a result.

While the Government has not adopted his exact recommendation of a Clean Energy Target, he said there were multiple ways to achieve the same outcome.

"What we are looking at is logical," he said.

He told reporters that the exact implementation had changed, but not the intent.

Abbott claims win after CET dumped

During this morning's party room meeting to discuss the new energy plan, 30 members of the Coalition spoke, including two who expressed opposition to the policy.

One backbencher was pleased about the CET being dropped, but still had concerns about prices. They called for the Government to build its own coal-fired power station.

The other, a Nationals MP, expressed concern about the plan maintaining the Paris emissions reduction commitments.

Coalition backbenchers including Mr Abbott and Craig Kelly had been publicly critical of the CET before this morning's meeting.

A party room source told the ABC that Mr Abbott pushed for a "political debate" after the "policy debate", but was met with silence.

The former PM took to Twitter shortly after the meeting to claim "progress" in the energy debate.

Loading

States weigh in on new plan

The new plan would need the support of states and territories before it could come into effect.

South Australian Premier Jay Weatherill denounced the plan as a "complete victory for the coal industry".

Mr Weatherill accused the Prime Minister of being unable to act in the public interest.

The Premier said it was a capitulation to former prime minister Mr Abbott, who supports a new coal-fired power station being built.

He said he expected the Federal Government would set the new mechanism at a level that would be too low to be effective and would ensure the only benefit would go to existing coal-fired power stations.

Queensland's Energy Minister Mark Bailey demanded the Federal Government explain how this plan would affect his State Government's renewable energy target of 50 per cent by 2030.

"Queensland remains committed to our 50 per cent renewable target," Mr Bailey said.

Meanwhile, John Grimes from the Australian Solar Council is threatening to run a multi-million-dollar campaign against the Turnbull Government over the plan.

"I will go back and talk to our industry but I think you will find there may well be an appetite to run a very pointed political campaign against this disastrous policy that finishes the job that Tony Abbott set out to achieve," Mr Grimes said.

He said ending the subsidies for renewables could cost more than 10,000 jobs in the sector.