TOM ELLIOTT: Now you would've heard it earlier on today that the Australian Energy Market Operator, AEMO, has released its annual electricity supply forecasts. And guess what? It's bad news for Victoria again. That's right, our state, which used to have more energy resources and just the cheapest power available pretty much anywhere in Australia, is going to have another summer facing the imminent threat of blackout. Now we shouldn't be surprised because we did have a blackout last summer, and we keep being told, well, we've got to build more capacity and latency in the system. But we don't, alright. The only new things we've built is individuals putting solar panels on their houses and the problem with solar panels is they work very well in the middle of the day, particularly in summer, but they generate a ton of power precisely at the time when we don't use so much power. Then the problem is we all get home at night and we want to switch on the air-con, and the TV, and the oven, and all the other things that use electricity in our house, and of course solar electricity is gone by that stage, and that's when they have to switch the coal fired plant back on. As I learnt from EnergyAustralia today, you can't just switch old coal fired plants on and off several times a day, they just don't work like that. So it's a problem and blackouts are the result. Anyway, Lily D'Ambrosio, the State Energy Minister spoke with Neil Mitchell this morning. She said it was all the Federal Government's fault. Joining us now, from the Federal Government, is the Federal Energy Minister Angus Taylor. Mr Taylor, good afternoon.

ANGUS TAYLOR: Good afternoon, Tom.

TOM ELLIOTT: Were you surprised by the AEMO findings that Victoria faces another summer with a potential blackout?

ANGUS TAYLOR: No, I'm not surprised at all. What we've had is a Victorian Government that's forcing unprecedented amounts of solar and wind into this system, and they're encouraging the premature close down of coal fired power stations, like we saw with Hazelwood, and they've got a moratorium on gas which can play a role in flexibly coming in and out of the market as you need it when the sun goes down, in response to your earlier comments. That is a very dangerous cocktail of policies. Now we stand ready to support the Victorian Government to underwrite new firm generation in the market. The trouble is they don't want coal and gas. They want more solar and wind, and they're determined to do it, Tom.

TOM ELLIOTT: Well, just in case you weren't listening this morning, this is what Lily D'Ambrosio, the State Energy Minister here in Victoria, had to say about you.

[Excerpt]

LILY D'AMBROSIO: We need to make sure that we work collaboratively, we have a national approach to this, because we just can't keep relying on the existing coal fired generators. They're getting older. We need new energy supplies coming in and that means a national approach.

[End of excerpt]

TOM ELLIOTT: Well, there you go. She seems to be agreeing with you. She wants more generation, a national approach, and you have to get on board.

ANGUS TAYLOR: Well, Tom, what she wants is - and this is their plan - is well over 5,000 megawatts of solar and wind in the system with almost no backup. I mean, it won't work. We're not going to get on board with a plan that is going to ensure that Victorians have unreliable and unaffordable power. When you had some of the lowest cost energy in the world, if you only go a few years back. We need the Victorian Government to raise this moratorium on gas. We need the Victorian Government to stop a premature closure of coal fired power stations. We need the Victorian Government to move away from this insane target they have to force this much solar and wind into this system without an alternative- without back options in place. Until they're prepared to do that, we stand ready, as I say, to support new dispatchable generation into the system.

TOM ELLIOTT: Just so we're clear - so if the Victorian Government would allow, for example, a HELE, a high output, low emission coal fired plant to be built, you would help finance it, but they have to give the permission - they have to put up their hands and say we would like this to be done.

ANGUS TAYLOR: We have to have enough coal and gas in the system, Tom. I mean, there's no there's no ifs, buts, and maybes, we’ve got to have dispatchable power.

TOM ELLIOTT: [Talks over] No, no - I just want to be clear, though. So it's like the East-West Link - the Federal Government's got money ready for this project but the State Government has to agree that they want to do it.

ANGUS TAYLOR: Exactly right. Now, is it coal, is it gas; what mix? Can we get more hydro into the system? That's a good question, although Victoria is not particularly well suited for that. There is no question there has to be coal and gas in the system for many, many years to come. But you've got a Victorian Government that wants to see the coal fired plants gone - we saw that with the Combet review, they want to force it out of the market - and they've got a moratorium on onshore gas exploration and development.

TOM ELLIOTT: I read this interesting article which featured Catherine Tanna, who is the Chief Executive of EnergyAustralia, about the older coal fired plants, which Victoria still has a few. She says this: they were never designed to be ramped up and down or be turned off in the middle of the day and when you start asking, particularly the older plants, to do this, you encounter more reliability issues. So what she's saying is, is that if we pump more solar, you know, in the middle of the day it's all solar power and we don't need the coal fired plants. If we switch them off and then try and switch them on again later on the day, they tend to break down. Were you aware of that?

ANGUS TAYLOR: Absolutely, 100 per cent, and this is what happens. So if you look at the Victorian Government's plan, they want to put about, well, over 5000 megawatts of solar and wind need the system. Now, if you want your coal fired power stations to keep going under those circumstances, they have to be able to flex. The truth is, they can't. They break when you make them flex.

TOM ELLIOTT: Okay. So if the Victorian Government came to the table and let's sit down sensibly and work out what we need and what should be built, what do you think Victoria needs to build?

ANGUS TAYLOR: Well, there's no question it needs more dispatchable power in the system.

TOM ELLIOTT: Okay, and what's the best way to do that?

ANGUS TAYLOR: At the end of the day, Tom, in big chunks that can only be gas and coal - there's no alternative. So, gas and coal has to remain in the system. You can, through investment, make coal more flexible, but you need to know that the State Government is not going to force the coal out.

TOM ELLIOTT: Right.

ANGUS TAYLOR: Gas by its very nature is flexible, but you've got to have access to affordable gas, and with a moratorium in Victoria, that's not going to work.

TOM ELLIOTT: Okay.

ANGUS TAYLOR: So the policy settings would need to change in Victoria for us to have any chance of helping the State Government solve the problem. They are refusing to change those policies - there's no sign of change. We need to see change, and then we're more than happy to work with them to solve the problem.

TOM ELLIOTT: Alright. I really appreciate your time. I know you've got to get on board an aeroplane right now. Angus Taylor there, Federal Energy Minister.

ANGUS TAYLOR: Thanks Tom.