SABRA LANE: The Federal Government's pushing ahead with building a new gas fired power plant in the New South Wales Hunter Valley to replace some of the capacity lost when the Liddell coal power station closes in two years. The new gas turbine plant will be built at Kurri Kurri by the government-owned Snowy Hydro Ltd. It'll cost $600 million and generate 660 megawatts of power. Critics say it's not needed, and coincidentally, it's being announced just days away from a crucial state by-election in that area. The new plant is separate from Energy Australia's new 316 megawatt gas plant being built to shore up the reliability and affordability of power in time for the summer of 2023-24 when the Liddell plant closes. The Federal Energy Minister is Angus Taylor. Angus Taylor, good morning. Why should taxpayers cop stumping up $600 million to build a gas fired power station when the private sector couldn't see the value in doing it?

ANGUS TAYLOR: Well, Energy Australia is building a gas generator, but this investment will create jobs, it’ll drive down energy prices, it'll keep the lights on, and it will help to reduce emissions. It will deliver a return on investment through Snowy, and as a project, it's critical to get it into place because we're going to see Liddell closing in 2023, and that will leave a big gap if it's not filled. Now, we gave the private sector the opportunity to fill that gap. Energy Australia stepped up with part of what was required, and this is the remaining piece. And those two generators combined will ensure that we can keep the lights on, drive prices down and drive down emissions at the same time in 2023 when Liddell closes.

SABRA LANE: Earlier this month, the chair of the Australian Energy Security Board, Kerry Schott, said that a taxpayer funded gas-fired power plant made little commercial sense given the abundance of cheaper alternatives now flooding the market. That seems to indicate that this decision is a waste of precious taxpayer dollars.

ANGUS TAYLOR: Well, Energy Australia is building a gas generator, and so are we. We both think that it's commercially viable, it's needed in the market. And look, we've seen the need even in the last week-

SABRA LANE: Sorry, Minister, just to pick you up on that. You say that it's commercially viable. If it was commercially viable, the private sector would be building it.

ANGUS TAYLOR: Well, there’s reasons why the private sector mightn’t build it. We have seen a failure to build dispatchable capacity in New South Wales for 10 years. We're seeing Energy Australia now stepping up, which is good news. But we also need an additional amount of capacity to get to 1,000 megawatts. Now, we know it will deliver a return, we've done that work, we're confident of that. We also know it's needed in the market. And to give you a sense of how much it is needed in the market, in the last week, Sabra, we have seen the Tomago smelter, the biggest electricity consumer in Australia, have to shut 600 megawatts - the equivalent of this generator - three times because there wasn't enough power available. Now, that's before Liddell shuts. That's before Liddell shuts. We've seen the price spike on all three of those occasions, including last night, the same thing happened. If it has to shut for another hour - each of those is two to three hours - if you had to shut for another hour, it would never reopen. So, we have a fragile grid. We have a grid where there is a need for more flexible, dispatchable generation which is what you get from these gas generators. Both of them will be built hydrogen-ready. Both of them can complement the very, very significant investment, record levels of investment we're seeing in renewables. And so combined, they can give us the outcome we want.

SABRA LANE: You're a free market party and a government that would normally let market forces decide where and when to invest. So doesn't this intervention send confusing messages to local and foreign investors?

ANGUS TAYLOR: Well, we intervene when markets don't work. Competition policy is a key belief of the Liberal and National parties. We believe in competition. We believe in having enough supply and competition in markets to make them work, particularly a utility market like this, as it sells to everybody in New South Wales and across Australia. And so we need to have competition. We need to have supply. There are times when governments have to step in to make markets work the way they should. Now we can, as I say, deliver a return to taxpayers as investors, but we can also deliver a very significant dividend to taxpayers through putting downward pressure on prices, keeping the lights on and driving down emissions at the same time. So this is a good deal all round.

SABRA LANE: The latest report from the International Energy Agency says if the world is to meet climate goals, then it's going to have to end investments in new coal mines, oil and gas wells. So, isn't this new gas plant out of step with that and possibly winding up as a stranded asset and a big waste of money?

ANGUS TAYLOR: No, that's not right. I mean, the International Energy Agency has said for a long time that gas generators are an important part of the answer here. They'll need to transition to hydrogen. These generators, both of them will be built hydrogen ready and they complement renewables. And this is the key. Renewables, you know, they work when the sun shines and the wind blows, but they don't when the sun doesn't shine and the wind doesn't blow. You've got to have that complementarity. Alan Finkel put this well when he says gas is the perfect complement to solar and wind. So we do need to have the gas generation in the market to continue to see that record level of investment in renewables, highest level of household solar in the world, the highest level of solar and wind outside of Europe. So those are extraordinary outcomes, but you've got to complement it with this flexible dispatchable capacity. Pumped hydro can do that, but gas is also a means to do that.

SABRA LANE: This announcement is happening with the crucial New South Wales by-election being held this weekend that the Coalition could lose. Should voters see this as anything other than a blatant leg-up for the Berejiklian Government?

ANGUS TAYLOR: Well, it's a state election, not a federal election. This is a federal decision that we've made and we set the April-

SABRA LANE: That's right and it's a crucial, it's happening in a crucial key New South Wales state seat that the Coalition could lose and end up in minority.

ANGUS TAYLOR: We set the April 30 deadline to have 1000 megawatts of planned capacity for 2023. We set that deadline well before we knew of any state by-election, Sabra. So this is critical for the people of New South Wales. Our timeline is the closure of Liddell in 2023. That's the timeline that counts. Now, if we don't get these projects up and running, these two projects, and of course our projects in the Hunter Valley, Kurri Kurri, then we will not meet that 2023 deadline. That's the deadline that counts.

SABRA LANE: Minister, thanks for talking to AM this morning.

ANGUS TAYLOR: Good on you. Thanks, Sabra.