THE price of renewable energy certificates would collapse and the value of the large-scale renewable energy sector would be "destroyed'' under the more drastic proposal contained in the review of the Renewable Energy Target, which is due to be released on Thursday.
The lesser proposal, to scale back the target to reduce the amount of renewable energy produced, would not be much better, the industry says, setting the scene for a fiery fortnight before the government issues its final response to the review.
It is understood the review, conducted by a panel led by businessman Dick Warburton, modelled five options and settled on two key recommendations. The first, known as the "true 20 per cent" option and which is favoured by Environment Minister Greg Hunt, would reduce the annual production of renewable energy in 2020 from 41,000 gigawatt hours to 27,000GWh.
This is because forecast total energy production has been downgraded for 2020, and that 27,000GWh is now 20 per cent of the renewed forecast.
The second, and more drastic option, and which is understood to be favoured by Industry Minister Ian Macfarlane, involves winding up the scheme but grandfathering existing large-scale projects to protect current investments.
An appraisal by Bloomberg of this option, known as "closed to new entrants'', warns of dire consequences for the industry. "Closing the LRET to new entrants is likely to cause certificate prices to collapse and the value of the Large-Scale Generation Market to be destroyed,'' it says.
Existing renewable projects could be exposed to lower wholesale electricity market prices which would be less than half their costs.
"Equity investors will be quickly wiped out and projects will likely default on debt payments,'' it says.
"Bankruptcies of renewable developers could then be expected and exposed renewable energy assets will probably be stranded.''
The government has already determined its response and is working on a proposal to go to cabinet as early as next week or the week after for an announcement in mid-September. It is tight-lipped about which option it will choose but assures it remains cognisant of investor certainty and sovereign risk.
But it faces a legislative nightmare with Labor and the Greens opposed to any change and Clive Palmer saying he will block any change before the 2016 election because the government has no mandate.
Liberal Democratic Party senator David Leyonhjelm said the scheme should be axed altogether and her accused Mr Palmer of advocating for higher power prices.
The industry maintained that either recommendation in the Warburton review would spell its doom.
Infigen Energy chief executive Miles George, who was in Canberra on Thursday lobbying, said the "so-called real 20 per cent would be a tiny rate of growth that you wouldn't have sufficient activity in our industry to keep big players here and keep it competitive".
"[Regarding the grandfather clause] It would be extremely complicated to put in place a form of market mechanism that is supposed to compensate for the stream of revenue that we would have otherwise got if the legislation hadn't been reduced.
"Either option [from Warburton review] is death without full compensation and pretty grim with compensation," he said. Mr George said an overhaul of the target would force investors to look overseas.