The nearly two-year investment drought in large-scale renewable energy is about to be broken after the Coalition backflipped on its backflip about the need for ongoing reviews, and finally struck a bipartisan agreement with Labor to slash the Renewable Energy Target from 41,000GWh to 33,000GWh.

The agreement was reached on Monday morning after a reported intervention from Prime Minister Tony Abbott’s office, in response to the squabbling not just between the Coalition and Labor, but also between the government’s own ministers.

The deal, struck in Melbourne between Industry Minister Ian Macfarlane, Environment Minister Greg Hunt, and Labor’s Mark Butler and Gary Gray, will reduce the amount of large-scale renewable energy to be built between now and 2020 by more than one-third — from around 8500MW to 5500MW. That represents lost investment of between $5 billion and $6 billion.

It means also that Australia becomes the first developed country to formally reduce its renewable energy target, adding to its dubious distinction of being the first to kill a carbon price. Quite why, the Coalition government has never made clear.

It says the original 41,000GWh target would mean that renewables would account for more than 27% of total demand, but it has never explained why this was bad (apart from for coal generators). Its own Warburton review, and others, found that the higher the target, the more consumers would benefit from lower prices, not to mention lower emissions and pollution.

The only beneficiaries of a reduced target are incumbent coal- and gas-fired generators mostly, and the satisfaction of the ideologues opposed to wind and solar. But the deal — and the locking in of the target until at last 2018 — will finally give the certainty the industry needs to sign contracts and obtain financing to bring projects to market. Something is better than nothing, the argument goes, although there is furious debate about whether a compromise was a good idea, or even necessary.

It seems that this deal was done after the Clean Energy Regulator managed to make it clear to those within the Prime Minister’s office that the idea that the “penalty price” would inflict untold pain on consumers — a constant refrain of Macfarlane and Hunt — was absolute bollocks, even in the unlikely event that the industry could not meet this much reduced target.

Clean Energy Council chief executive Kane Thornton said the agreement to remove the review provision was the final major stumbling block for the renewable energy industry.

“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. It will also help to unlock Australia’s massive renewable energy potential.”

Thornton said the industry was “obviously disappointed” with a reduction of the target.

“We remain concerned about the impact of this lower target on the opportunity for emerging technologies like large-scale solar, and will continue to work with both major parties on appropriate policy measures to address this.”

This is recognition of the major complaint of the solar industry, particularly those not within the Clean Energy Council, that large-scale solar would be the principal victim of this reduced target, a strange outcome for a Coalition government nominally in support of solar technologies but not a big fan of wind energy.

Still, many think that large-scale solar is not dead in the water. Bloomberg New Energy Finance thinks that one-third of the new build over the next five years could come from large-scale solar, mostly in Queensland, where the market for energy will increase because of the energy-hungry liquefied natural gas sector.

Some say this is an optimistic and highly conditional outcome. But some developers are confident they will get their projects up, while others point to the Western Australian market and others still to the emerging corporate market, and demand for smaller solar systems, particularly from councils such as Sunshine Coast, Fremantle, and now Wanneroo.

As for wind energy, there are dozens of projects in South Australia, Victoria, New South Wales and even Queensland totalling more than 6000MW that will now dust off their plans and seek contracts with obligated parties (mostly energy retailers) and then finance.

Some may go straight to market, getting finance for “merchant plants” and then try to land a power purchase agreement later. Renewable energy certificates are now at more than $50, the highest since 2008 and nearing record levels — making it a possibility for some of the lowest-cost wind farms (usually the ones with the best wind resource and close to grid connections).

Still, work on wind or solar farms will not begin tomorrow. The legislation based around the agreement yesterday will not go before the House of Reps until early June, and to the Senate until a few weeks after that. There could be hurdles in the Senate, where the mostly anti-wind crossbenchers are holding yet another inquiry, and given the Coalition’s track record, no investor will stump up money until the legislation is in place.

*This article was originally published at Renew Economy