Deal, set to be agreed to by cabinet, will pave way for bipartisan agreement to break Australia’s renewable energy investment drought

Federal cabinet is set to agree to a compromise deal on the renewable energy target on Thursday, paving the way for a bipartisan agreement to break the investment drought caused by a year-long political deadlock.

But long months of political haggling and the reduced quantity of renewable energy required under the compromise policy mean its biggest beneficiary is likely to be windfarms – which are bitterly opposed by some Coalition MPs and which treasurer Joe Hockey once said he found “utterly offensive”.

The RET – which currently requires 41,000 gigawatt hours of energy to be delivered from renewable sources by 2020 – has been in limbo since the government commissioned self-professed climate sceptic Dick Warburton to undertake a review in February last year.

It recommended the target be slashed, but after fierce industry and community criticism, cabinet asked the environment minister, Greg Hunt, and the industry minister, Ian Macfarlane, to try to reach a bipartisan agreement with Labor to allow continued investment without fear of policy change.

Labor and the renewables industry insisted the target had to be in the mid-to-high 30,000GWh. When the government refused to budge from about 26,000GWh last year, Labor walked out of the talks.

In recent months the Coalition raised its “bottom line to 32,000GWh and Labor reduced its demand to 33,500GWh. Last week Labor gave more ground and agreed to 33,000GWh. Liberal backbenchers such as Dan Tehan and Sarah Henderson, who want the concessions in the agreement for the renewable and aluminium industries in their regional Victorian seats, urged the government to strike the deal. The Australian Chamber of Commerce and Industry chief executive Kate Carnell also backed the compromise.

Macfarlane, who had been holding out against any increase in the government’s position because he was worried the industry did not have the capacity to build so much renewable power in the timeframe (which would trigger a “penalty” payment on electricity retailers), is understood to be ready to agree.

This means cabinet is likely to tick off the deal on Thursday. The industry insists there are no barriers to building the required amount of renewable energy providers.

It is understood Coalition and Labor ministers are likely to meet on Friday to ink the agreement, which will have to be legislated.

Much of the original hostility towards the RET within the Coalition was actually directed at the wind industry, but because stalled wind projects are ready to proceed they are almost certain to use up almost all the remaining RET target.

This has left the solar industry angry. Big solar projects are unlikely to benefit because the target will have already been taken up by wind power, and some in the government are also concerned that the policy won’t encourage multiple renewable technologies.