Australian households struggling to pay their energy bills are a step closer to saving $550 a year after energy ministers reached a compromise on the National Energy Guarantee on Friday.

The policy promises cleaner, cheaper and more reliable power and would see Australia's energy and climate policies brought together for the first time.

It was launched by the Turnbull government in response to rising energy prices and widespread blackouts.

How it will work

Australia's current target is to reduce 2005 level emissions by 26 to 28 per cent by 2030.

The NEG would require retailers to sign contracts agreeing to supply a minimum amount of energy to meet customer and system needs.

QLD and Vic back energy plan for now

The electricity sold to consumers must have average emissions levels that meet Australia's international emissions reduction targets.

These targets would be legislated, reviewed every five years and could be raised by future governments - although states and territories can also have their own more ambitious commitments.

The aim is that a stable policy would encourage new investment in the energy network. This, in turn, would mean new supply coming into the market would drive down wholesale power prices.

Who will benefit?

The policy will cover Queensland, NSW, South Australia, the ACT and Tasmania.

Neither Western Australia or the Northern Territory will be affected by the plan because they are not part of the National Electricity Market under which the guarantee will operate.

AAP

However, their emissions will count toward Australia's overall total.

According to the Energy Security Board, the policy will reduce household energy bills, with $150 of the $550 saving coming directly from the NEG.

What will the energy mix look like?

The plan is technology neutral, meaning there will be no subsidies for renewables or fossil fuels.

Renewables will make up 36 per cent of national energy market generation within 11 years, up from the current 17 per cent.



Who says what on the energy plan

There will be no closure of coal-fired stations, but the share of coal-fired generation will fall to 60 per cent from 75 per cent.

What's next?

Energy ministers have backed the plans for now following a meeting in Sydney on Friday, with the Coalition partyroom set to consider the policy in Canberra next Tuesday.

States and territories will have the final say and, if approved, the plan will go out for public consultation.