A directive banning the Clean Energy Finance Corporation (CEFC) from investing in existing wind technology will also apply to small-scale solar projects, a move that will effectively throttle the industry, the Australian Solar Council said.

The federal government on Sunday confirmed that the $10bn CEFC will no longer invest in wind power, instead focussing on “emerging technologies”.

“It is our policy to abolish the Clean Energy Finance Corporation because we think that if the projects stack up economically, there’s no reason why they can’t be supported in the usual way,” Abbott told reporters in Darwin. “But while the CEFC exists, what we believe it should be doing is investing in new and emerging technologies – certainly not existing windfarms.

“This is a government which supports renewables, but obviously we want to support renewables at the same time as reducing the upward pressure on power prices,” the prime minister said. “We want to keep power prices as low as possible, consistent with a strong renewables sector.”

But it has emerged the government’s investment directive also applies to small-scale solar technology like rooftop panels that generate up to 100 kilowatts of power.

One-third of the current funding of the CEFC goes to solar projects, the majority of which are small-scale projects.

Scrapping funding for these projects would impact low-income households and renters and public housing users who cannot afford or do not otherwise have access to their own panels, head of the Australian Solar Council, John Grimes, told Guardian Australia.

“To say this is about lowering the costs of power is cynical in the extreme,” Grimes said. “What they’re doing with this is the precise opposite.”

He argued the move was payback for the solar industry’s successful campaign to keep small-scale solar power in the renewable energy target (RET).

“This certainly smells like revenge politics,” Grimes said, adding it was the government’s “backdoor” way of strangling solar power.

The environment minister, Greg Hunt, threw his support behind the industry as recently as Sunday morning.

“I’ve been repeatedly critical of the CEFC investing taxpayer funds in projects such as existing windfarms, rather than focusing on solar and emerging technologies,” he tweeted. “Our policy is to abolish the CEFC but in the meantime it should focus on solar and emerging technologies as was originally intended.”

The Coalition had secured the Senate crossbench’s support for the inclusion of wood waste in the RET in exchange for the provision of a new windfarm commissioner who would look into claims of the negative health impacts of turbines.

While the move to crack down on wind power has been welcomed by some, Grimes warned that the crossbench is still very much “committed to a solar future” and will feel as though their agreement with the government has “been absolutely violated”.

The Senate has twice voted down government legislation to scrap the CEFC, making it a trigger for a future double dissolution.

“The government is effectively blood-letting the CEFC since its attempts to abolish it have been fruitless,” the shadow environment minister, Mark Butler, said. “Tony Abbott is broadening his assault on renewable energy technologies, putting thousands of Australian jobs and billions of dollars in investment at even further risk.

“This is the most blatant example of Tony Abbott’s lack of vision for Australia’s future. The whole world is moving towards clean energy and Tony Abbott is scrambling to take Australia in the opposite direction,” Butler said.

The acting Greens leader, Scott Ludlam, told Guardian Australia the move is akin to a “protection racket” to try and ensure the viability of the coal and gas sectors.

He said the move was “designed to knock off” the very successful renewables industry by ensuring that the CEFC is not financially viable.

“By knocking off wind and solar, the only thing that you leave there is the high-risk stuff,” he said. “They’re trying to make it as difficult as possible for the CEFC.”