FRAN KELLY: As we've been discussing this morning, the Federal Government has another major climate and energy pitch today, giving the green light to the massive Snowy 2.0 pumped hydro scheme. Taxpayers will invest $1.4 billion in the project after the Government satisfied itself that the renewable power scheme is financially viable, and will deliver reliable and affordable electricity. Once it's up and running, an extra 2,000 megawatts of power will be generated, with a 175 hours of energy storage. That's enough, the Government says, to keep the lights on in half a million homes during times of peak demand. The Snowy announcement follows yesterday's $2 billion dollar top up for the emissions reduction fund as the Coalition seeks to neutralise climate change as an issue - a potent issue - ahead of the coming election. I spoke with the Energy Minister, Angus Taylor, earlier. Minister, welcome back to Breakfast.

ANGUS TAYLOR: Thanks for having me, Fran.

FRAN KELLY: Minister, the Government is promising cheaper and more reliable electricity from Snowy 2.0. How soon will it be built and when will consumers see the benefit?

ANGUS TAYLOR: We'll begin construction as soon as possible, immediately Fran, and it will be completed in 2024-25 and we'll see the benefits immediately. We know that it will put downward pressure on wholesale electricity prices - our modelling suggests that as much as 10 per cent reduction. We know that it will add a lot of- an enormous amount of storage to the system at a tiny fraction of the cost of lithium batteries and at a time when we desperately need more storage. It's a big battery and it will add dispatchable capacity, and we need a balance between the enormous amount of renewable energy that's coming into the system that's intermittent but we need that balance with reliable power and, of course, Snowy gives us that balance.

FRAN KELLY: Okay.

ANGUS TAYLOR: It's an enormously important contribution to the system and it will put downward pressure on prices as a result.

FRAN KELLY: The Prime Minister says the Government's now signed off on the project because the business case stacks up. Not everyone agrees with that, including some of your own colleagues. But will you release the business case so we can all see for ourselves?

ANGUS TAYLOR: Well Fran, we'll obviously release details on the modelling and so on as we proceed. What the modelling is telling us is that we will get a good return on this investment. We already have a significant investment in pump hydro, in Snowy, and we get to see what sort of returns we can get. So we're very confident of the economic case.

FRAN KELLY: It is expensive, isn't it? I mean, when it was first embraced by Malcolm Turnbull, the price tag was put around $2 billion, that's blown out to around $4.5 billion, I think, because the geology was so much more difficult. Barnaby Joyce - who prefers the Government spend the money on coal-fired power stations - says the total cost will end up closer to $6.5 billion. Is he right?

ANGUS TAYLOR: No, the costs are in line with the feasibility study, and whilst we won't release at this point the full costings, we need to invest as a federal government $1.38 billion and those costs are in line with the feasibility study that was done a little while back. So there's no change to those numbers. But the economics of this are very clear, Fran, and we have looked at them very, very closely. Ultimately, Snowy does two things for us. It gives us an extra 2000 megawatts of dispatchable capacity at a time when we need reliable power in the system. Secondly, it is a big battery and a very low cost battery. The cost of storage from Snowy is less than a fiftieth of the cost of equivalent lithium batteries. That's what makes the economics compelling because we desperately need storage and dispatchable capacity in the system because we have record-levels of investment in variable renewable energy, solar and wind. We're seeing absolutely unprecedented investments coming in in solar and wind right now, and if we don't back it up and store it, we will have a very serious problem. We're starting to see the early signs of the problems that we'll have if we don't do this.

FRAN KELLY: Okay.

ANGUS TAYLOR: This allows us to not only keep the lights on, which of course is absolutely imperative, but to put downward pressure on prices as that's happening.

FRAN KELLY: As you know, Barnaby Joyce is sceptical. He says pumped hydro schemes require about twice more electricity to pump the water uphill than is generated when the same amount of water flows back downhill. It's a net energy user, according to him, it doesn't create energy is the quote. Is he right?

ANGUS TAYLOR: Well, pump hydro works-

FRAN KELLY: But it does use more electricity than it generates?

ANGUS TAYLOR: Well, well no, ultimately, it puts more energy into the system than we would otherwise have.

FRAN KELLY: No, no, that is not my question. Is it a net energy user?

ANGUS TAYLOR: At the end of the day it adds to energy in the system, and the reason is simple, Fran - there are times of a day and night where we have more power than we need, and at those times, if we don't have storage it gets wasted. It gets wasted. That problem is becoming more significant, because, as I say, unprecedented investments in solar and wind. So we need to be able to store it. What we also need to be able to do is put downward pressure on prices when those prices go up. That's exactly what Snowy can do. Now we already have pump hydro in our system. Most countries in the world have some pump hydro in their systems and we know, we know it puts downward pressure on prices. We know it improves reliability and security, and we know it's economically extremely strong. That's why this investment stacks up, we have poured over it to make sure it does stack up. As I say, as storage goes and as capacity goes, this is a tiny fraction of the cost of what lithium batteries would cost.

FRAN KELLY: You are listening to RN Breakfast. Our guest is the federal Energy Minister, Angus Taylor. Minister, you're also planning to push ahead with underwriting new power generation projects. You told us previously you had 66 submissions. Will any agreements, in principle agreements be reached or contract signed before the May election?

ANGUS TAYLOR: Well we got a much bigger response to this than we expected, Fran - 66 submissions came in to the process. We're working our way through those.

FRAN KELLY: Is that a no?

ANGUS TAYLOR: Well no, I'm not saying that. What I am saying is we're working through them as quickly as possible. These are big projects. For the most part, any big project takes time to bring to fruition. However, as I've said we'll move down to a shortlist as quickly as possible, I've said that many times. We'll work our way through the shortlist of projects. And what this process is doing is giving us projects that we can choose from, from a range of different technologies, as recommended by the ACCC to be technology neutral, and it will put downward pressure on prices while we keep the lights on. So we're working through it as quickly as we can, we will get as far through the process as we can before the election, and if we win the election, we'll continue on with it. Labor needs to decide whether they care about lower prices and keeping the lights on as much as we do, and as much as the Australian public do.

FRAN KELLY: You mentioned the ACCC. The ACCC Chairman, Rod Sims, I'll be speaking to later in the program. He went before a Senate committee last week. He said he'd spoken to you to express concern that the expressions of interest for this underwriting scheme were much wider than he'd intended. He'd wanted a scheme to exclude the three big energy players, AGL, Origin and Energy Australia. Will you rule out those major players getting government support through this process?

ANGUS TAYLOR: Well we are following ACCC recommendations.

FRAN KELLY: Well that's his recommendation, so you're following that?

ANGUS TAYLOR: Let me finish - he made no recommendation about how the expression of interest should work, what he made is a recommendation about what the final project should look like, and we completely understand his view.

FRAN KELLY: So Rod Sims said he wanted a scheme that would exclude the three big energy players, AGL, Origin and Energy Australia. Will you rule out those three major players getting government support?

ANGUS TAYLOR: We have very strong sympathy with the ACCC's recommendations that we should focus on new competition in the system. We received far more submissions than we expected, the vast majority of them from small and new players. So our focus will be on bringing new competition into the market. We allowed the bigger players to come into this process initially because to varying degrees they have different market shares in each state, but we want new entrants coming into this process and we certainly have no shortage of submissions, with new entrants or small players expanding their position in each market.

FRAN KELLY: Minister, last night the Prime Minister said yet again the Federal Government would meet its Paris reduction targets in a canter, but would you go anywhere near that 26 to 28 per cent reduction if you weren't relying on around 370 million tonnes of carry over credits from overshooting our Kyoto commitments? Isn't this a little more than an accounting slight of hand to reach the target?

ANGUS TAYLOR: No it's not. Australia has exceeded its targets for Kyoto, 367 million tonnes as you rightly said. We are one of the few countries in the world that has exceeded our targets.

FRAN KELLY: Yeah, there's no argument about that.

ANGUS TAYLOR: Well, and the question then is should we be given credit for that, and under Kyoto we were and under Paris, we should be.

FRAN KELLY: So is that the same as meeting our Paris reduction targets in a canter because of actions you've taken, or simply because these left over Kyoto carryovers?

ANGUS TAYLOR: We have brought down the Paris obligation from 10 years ago, from over 3.4 billion tonnes - 3.4 billions tonnes, Fran - to a little over 300 million tonnes now. So it is 10 per cent of what it was 10 years ago through the hard work that has been done largely by Australian businesses and households, who are finding energy efficiencies and who are doing things to bring down emissions. Now that's an extraordinary track record. It's an absolutely extraordinary track record. We have 367 million over and above the targets, and we have 328 million left to go. Of course what we announced yesterday was a suite of initiatives that will get that last piece, the last piece of the puzzle. A range of initiatives, from electric vehicles to energy efficiency initiatives to extension of a very successful initiative to reduce emissions which was the emissions reduction fund. That suite puts us in a position where we will achieve what are internationally strong targets. 50 per cent reduction per capita and a two thirds reduction in the emissions intensity in the economy by 2030.

FRAN KELLY: The Liberal candidate in Wentworth, Dave Sharma, sees it a bit differently. He said in a public address that the Coalition should be doing more to tackle climate change: "I think we can certainly be more credible. It's a bit hard for us to convince other countries to stay the course if we flip flop around and we have been for the past 12 years". He went on to say Australia should invest greater effort into ensuring other countries meet their commitments under the Paris Accord. Do you share his ambition for Australia to lead other countries to do more under Paris?

ANGUS TAYLOR: Well, you know, our targets are strong, and as I said, 50 per cent reduction per capita, two thirds reduction in emissions intensity. Of course we want other countries to step up and do their bit as well. We're doing our bit, they should do their bit. There's never been any doubt about that. We've had clear targets for a number of years now, strong targets have been in place for a number of years, and we've improved our position on achieving those targets. Yesterday, we announced the last piece of the puzzle to meet those targets, 12 years ahead of time. We know from history, we keep improving our position year on year. I do know that Mr Sharma also has said that it's a credible package that we should be able to get behind, and I completely agree with his position on that.

FRAN KELLY: Angus Taylor, thank you very much for joining us.

ANGUS TAYLOR: Thanks, Fran.