LEITH FORREST: The future design of the National Electricity Market is critical, we're told, to ensure households, businesses and industries have both affordable and reliable electricity. What does that all mean? The Honourable Angus Taylor MP is the Minister for Energy and Emissions Reduction. He joins me this morning. Minister, thanks so much for your time.

ANGUS TAYLOR: Thanks for having me.

LEITH FORREST: Walk us through the NEM and what you found.

ANGUS TAYLOR: Well, look, this was a piece of work done by the Energy Security Board. It's all about changes happening in our grid that most people are very conscious of that we need to incorporate and ensure drives prices down and re-establishes the reliability needed in our electricity grid. The situation is we've seen incredible investment in household solar in particular and you've got that happening in South Australia. Huge amounts of household solar going on people's roofs. One in four houses in Australia, which is the highest in the world.

As that happens, it means that we've got to have the matching dispatchable capacity to make sure we can keep the lights on when the sun goes down. That means rewarding having capacity in the system that can flick on, can switch on very, very quickly, and ensure that we have that reliable, affordable supply 24/7 for manufacturing, for households and small businesses. These are a series of reforms. It's not just one initiative, but a series of reforms, all designed to make sure, as our grid continues to change in the way we're all seeing it on the roofs of our suburbs, we can keep our electricity system working for us and not against us.

LEITH FORREST: Part of that is that special payments will be needed to keep the ageing coal fire and gas power stations in business - I guess, to prevent any future spikes that we've seen in prices, et cetera, under this plan. Minister, can you walk us through that? Why we have the subsidies for the coal generation if the private sector-

ANGUS TAYLOR: Well, that's just not right. I mean, this is how some are trying to characterise it, and they're completely wrong. This is about making sure that there is appropriate rewards for all forms of dispatchable capacity, whether it's batteries, hydro, gas or coal. When we have an ageing generator closed, it's replaced in a timely way. That didn't happen in South Australia with the closure of Northern, it didn't happen with Hazelwood with the closure there. We have appropriate replacement, and we don't have premature closure without any warning. So that's what it's about and that means you've got to have a market that is rewarding what you need in the market, simple common sense. What we need in our market now is the right balance between the intermittent power we get on our roofs, and from wind farms as well, but particularly solar is the very fast growth sources of energy. A balance between that and this dispatchable capacity that could be turned on and off very, very quickly and that means an evolution in the market. This is not revolutionary at all, by the way. Most countries and most markets in the world, including Western Australia, already have this market design. It is not unusual. We are actually unusual in our national electricity market in not having this kind of design for our system.

LEITH FORREST: How much are you going to have to spend on these coal and gas subsidies?

ANGUS TAYLOR: Well, they're not subsidies. I'm going to pull you up every time you say that, because that's not what they are, right? So let's be very clear about this. This is about the consumers paying for what they need in terms of the system that's going to give them an affordable, reliable outcome. So you know, we already have that in Western Australia, by the way. This is just not even news in Western Australia, They've already got this system in place in the UK, in most of the US. The one exception, by the way, in the US that many of your listeners will be conscious of is Texas, where they don't have this design, and you've seen what's been going on over there in recent months. So you know, it's not about subsidies. It's a very, very important point. It's about paying for what we need, not what we don't need.

LEITH FORREST: Is this a hard issue for the government and for you as the Minister, because you're under pressure, I guess, to cut emissions when it comes to renewables. At the same time, you've got the Nationals. They're wanting protection for the coal and gas industry. Is it difficult?

ANGUS TAYLOR: Well, I'll tell you what's not difficult, focussing on affordable, reliable energy for all Australians, as we naturally bring down our emissions at a phenomenal rate. When emissions' down 5 per cent in our electricity grid, even taking into account what's happened with COVID in the last year or so, and that is an extremely rapid reduction in emissions. So the challenge is, as we put more and more solar in our roofs, to make sure we've got that balance. Everyone wants that. I mean, that's what we need. You know, I don't think it's ever hard to focus on the right things. The right thing here is affordable, reliable energy as we continue to bring down our missions.

LEITH FORREST: Do you think you're out on your own a little bit though? Private sector, the banks, international lenders, et cetera, they are sort of moving away from coal.

ANGUS TAYLOR: Again, you're mischaracterising what we're doing here. This is not about coal. This is not coal. That's not what it's about. It's about lights on versus lights off. It's about affordability versus not affordability. That's the choice here and everyone who looks at this and wants to sort of have a big fight, they say it's about fuel sources. It's not about fuel sources. It is about affordability and reliability. You know what? All the big players in the energy sector, the Energy Security Board, all know we have to move in this direction and this direction is completely consistent with continuing reduction in emissions, which is happening, as I say, at a very rapid rate.

LEITH FORREST: Have you got a timeframe when you would like renewables to take over?

ANGUS TAYLOR: Renewables are already growing at a very rapid rate. I mean, in South Australia, you've got a high level of renewables.

LEITH FORREST: Can we get to total renewables?

ANGUS TAYLOR: Look, the challenge with total renewables is having the firming, the balancing. This is common sense, right? When the sun goes down, you've got to have an alternative. Now, are those alternatives lower emissions or zero emissions indeed, that's been the hard challenge for us. We've got hydro projects that are zero emissions and we're building Snowy 2, which is very big project to provide that source of power when the sun goes down. We've seen gas playing a bigger role in our system, and a very important role in the South Australian system, and its lower emissions than coal, and that's an important change. We're seeing hydrogen coming into our system, and that's very important. We've got two generators being built now in New South Wales that are capable - will be capable of taking on hydrogen, and that's a big step forward. So those firming technologies, as they're called, are increasingly low carbon. That will take time to continue to bring down emissions, but the good news is those technologies are continuing to improve. We've seen batteries playing a bigger role in the system as well, and that will continue at pace. So all of these technologies are moving us in the right direction. You can't do this overnight, if somebody who would like to flick the switch and put us back into the Stone Age, that's not what we're going to do, and that's not the right answer for South Australia or Australia. 

LEITH FORREST: Minister for Energy and Emissions Angus Taylor is my guest. So you've been given these recommendations, the four reform pathways. Have you got a time frame on that? When can you turn key go?

ANGUS TAYLOR: So there are a whole range of different initiatives within these four different areas and I won't go into them all, obviously, but some can be done very quickly, some will take a lot longer. So each initiative will have different time frames. Some of this will take a few years before we can implement. There's other parts of what we're proposing here that can be done very quickly and part of the job of energy ministers over the coming weeks is to sift through, work out which things we can do very quickly, which things we've got to do more work on before we can implement but what we do all recognise, I think every energy minister across Australia recognises, is the urgency to get on and make sure our system is able to cope with the extraordinary changes that are happening. 

LEITH FORREST: You mentioned the great numbers here in South Australia and the uptake of solar. Is that the message you would like to push too, for the South Australians who are listening, to keep pushing that forward, to be leaders, not only in the country, but in the world with this? 

ANGUS TAYLOR: Well, we already are. So this is extremely important to understand, and it's a big part of what this work has to deal with, is we lead the world in household solar. One in four houses in Australia and rising, excuse me, that is the highest in the world. That is the highest in the world and of course, South Australian is right up there. Now, that's great for emissions reduction. It's been good for taking pressure off people's electricity bills, yeah, all very good. The challenge for us is to make sure we've got that balancing generation in there, that's there when the sun goes down and that's what this is all about. 

LEITH FORREST: One in four, can we get that to four in four or is that unrealistic? 

ANGUS TAYLOR: Look, not everyone's going to necessarily put solar on their roofs for all sorts of reasons but look, it will continue to climb. We've seen, even this year, despite COVID, we've seen extraordinary levels of investment in household solar, it's continuing at pace and good on people for doing that. We've got to make sure our grid can cope with that and that's what this work's all about. 

LEITH FORREST: What would you like? Two in four? Three in four?

ANGUS TAYLOR: Well, you know what I would like? I would like Australians to do what works for them and the good news about what's working for them is it's also bringing down emissions at the same time. My vision for every Australian is their vision for themselves and that's true in energy, just as it is in other parts of their lives. Every person is in a different situation on this but the fantastic news is we are seeing change in the sector. It is driving some very important improvements. It is creating some challenges we're up to and we're conscious of and we've got to manage those and if we don't, the lights will go out and the bills will go up. We're not prepared to stand by and let that happen. 

LEITH FORREST: Appreciate your time this morning, Minister, thanks so much.

ANGUS TAYLOR: Good on you, Leith.

LEITH FORREST: The Honourable Angus Taylor MP, the Minister for Energy and Emissions Reductions.