National energy intervention deal 'very close' in bid to drive down power prices

With the Commonwealth promising to intervene in the energy market by Christmas, there's speculation a cap on coal and gas prices will be optioned as a tool to reduce power prices as national cabinet meets virtually to discuss energy, COVID-19 and disaster planning.

Ahead of the first ministers meeting, the NSW Treasurer and Energy Minister Matt Kean declared the Commonwealth and black coal producing states were "close to a deal" and that NSW would not pursue compensation for lost coal royalties as a result of any possible cap.

Mr Kean said he was confident there would be a "great outcome" from national cabinet as Australia grapples with the spiralling economic ramifications of the war in Europe.

"We're very close to landing a deal," he said at the end of a meeting of the nation's energy ministers.

"NSW wants to work with the Commonwealth to ensure that we protect not only electricity users in NSW, but indeed electricity users across the national energy market.

"We will do our bit. We're very close to landing a deal."

Instead of seeking compensation for lost royalties, Mr Kean said NSW was seeking financial assistance for families and businesses for "doing what needs to be done to lower bills".

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The Prime Minister is recovering from his second bout of COVID-19, so Anthony Albanese, premiers and chief ministers will dial in to the meeting remotely.

Federal Energy Minister Chris Bowen said the nation's leaders have been working together "very, very closely" to come to a deal.

"The fact of the matter is .. we have certain powers at the federal level," he told reporters in Brisbane. "The states have certain powers and we've been working together to work out the best way of those powers coming together."

"It is not the fault of Australians that power prices are so high. The cost of production hasn't gone up."

The energy ministers referred to "immediate" cost-of-living measures for the energy system being on the table on Friday, but it is understood the flow on of any price cap on coal or gas to retail power prices may take months.

In a meeting lasting more than five hours, energy ministers thrashed out power price pressures and the shift to renewable energy.

They emerged from the Brisbane talks announcing they had approved a "capacity mechanism", a national scheme to drive investment in renewable power as old, coal-fired power stations "inevitably close".

The ministers said the capacity investment scheme could drive as much as $10 billion of investment in "new renewable dispatchable capacity" for the grid.

"It's a keeping-the-lights-on mechanism," Mr Bowen said. "It's been in the too-hard basket for a long time. Today we put it on the to-do list."

A capacity mechanism ensures that there is sufficient generation capacity for power plants. In this agreement, Mr Bowen said the Commonwealth will call options for bids for dispatchable renewable energy which the Commonwealth will underwrite going forward.

"This is a sensible, carefully designed mechanism, which will unleash investment in clean dispatchable energy right across Australia," the minister said.

He flagged there will be more detailed discussion about the design elements but he said the agreement was a "big step forward."

"This is one team. No matter what jurisdiction, doesn't matter what political party, one team working together to get the job done on behalf of the Australian people," he said.

Victorian Energy Minister Lily D'Ambrosio said her state could now meet its renewable energy targets, while Queensland Energy Minister Mick de Brenni described the new scheme as the death of "Angus Taylor and Scott Morrison's CoalKeeper".

"Only when the market is dominated by clean, renewable energy will we see wholesale energy prices come down permanently," he said.