SIX billion dollars in investment in wind and solar power will be lost as a result of a compromise deal on the renewable energy target, energy market analysts say.
Bloomberg New Energy Finance says investment in Australian projects will fall from an expected $20.6 billion by 2020 to $14.7b after the Abbott government and Labor reached a deal to reduce the target.
Monday's agreement, which came after more than 12 months of political gridlock, will slash the original large-scale target of 41,000 gigawatt hours of annual renewable energy production by 2020 to 33,000 gigawatt hours.
Clean Energy Council chief executive Kane Thornton said the expected drop in projects is "what we've had to accept in order to resolve this situation".
"The industry was entirely frozen. There was no new investment if the situation continued," he said.
The government prompted the stalemate when it launched a review of the bipartisan scheme last year, causing the sector a loss of $2b as wind and solar projects stalled under a cloud of political uncertainty.
It originally proposed cutting the target to 26,000 gigawatt hours, while Labor refused to go below a figure of 35,000 to 39,000.
Bloomberg's Australian head Kobad Bhavnagri said the organisation forecast that investment by 2020 would be 29 per cent lower under the new target "but no resolution to the impasse meant the industry was uninvestable".
He warned uncertainty would linger despite the deal as the drawn-out process had demonstrated a bipartisan "legislated policy can be changed. People will continue to talk about policy risk."
Two-year reviews dropped
The government and Labor reached the compromise in Melbourne on Monday after the government agreed to drop a proposal to continue reviewing the target every two years.
Instead, the Clean Energy Regulator will publish an annual statement showing progress toward the target and any impact on electricity prices.
Minutes after the deal was reached, the opposition's environment spokesman Mark Butler declared Labor would increase the 2020 target if it wins the next election and said Labor had begun talks with industry about "a bold, ambitious plan" for Australian renewable energy beyond 2020.
Industry Minister Ian Macfarlane said "we're pleased to have brought this to a conclusion" and the government was looking forward to the clean energy sector "getting out there and meeting a target which means they have to build more renewable energy generation in the next five years than they've built in the last 15".
Legislation to go to Parliament next week will still contain a plan to allow the burning of native timber to count towards the renewable energy target.
Labor, the Greens and the industry oppose this but the government hopes to pass the change with support from the Senate crossbench.
Mr Thornton said restoration of bipartisan support would unlock the sector and some new projects would get underway quickly.
But others could take several months as businesses that had made cuts re-established themselves.
"It has been a tough 15 months, but this development will be a huge weight off the shoulders of the 20,000 people working in the industry," he said.
The Australian Industry Group said the compromise "will lift the cloud on the renewables sector, give a second wind to energy users, and restore a bedrock of policy certainty for business."
But the deal wasn't welcomed by all.
The Greens said the cut was "irresponsible from an environmental, economic and health perspective", while Greenpeace and the Australian Conservation Foundation labelled it "backwards" on climate policy and a win for big polluters.
The Australian Solar Council said 33,000 gigawatt hours "is a bad deal" and there was no argument that supported reducing the target.