The agency, which provides financial grants for 40 per cent of the CSIRO's energy research, was set to be stripped of $1.3 billion as part of the government's Omnibus Savings Bill.

The Coalition also planned to merge its funding role with the Clean Energy Finance Corporation, which expects to see a financial return on money it invests in research.

What transpired was a compromise, reached with Labor, to limit the cuts to $500 million after criticism from the opposition, academics and workplace unions.

The Canberra-based agency, which employs close to 50 departmental staff, will be funded for five years with $550 million cast over forward estimates.

ARENA was established in 2012 by the Gillard government and was to be abolished by the Abbott government in 2014. It received a stay of execution in March 2016 despite plans to cut funding. Professor Andrew Blakers, a professor of engineering at the Australian National University, also described the proposed cuts as an "existential threat" to clean energy innovation in Australia.

Community Power Agency director Nicky Ison said the decision was "a retrograde step".

"We're at a critical moment where Australia's electricity system is undergoing its biggest overhaul in decades and transitioning to renewable energy," she said.

The Clean Energy Council also criticised Labor for supporting the cuts and said the decision would "rattle the confidence of investors".

"A cut to ARENA's funding is a move at odds with the federal government's innovation agenda and is a disappointing change in the ALP's position," the council's chief executive Kane Thornton said.

"While we recognise the budget constraints facing the nation, clean energy innovation is a crucial lever to transition the Australian economy and create investment and employment opportunities for the future."

Greens NSW Senator Lee Rhiannon said clean energy investment in NSW is under serious threat – "Labor took clean energy investment backwards by striking a dirty deal with the Coalition to cut half a billion dollars from ARENA. This deal highlights the Coalition’s false commitment to innovation, and Labor’s false commitment to clean energy”.

Since ARENA was established in 2012 it has delivered $1 billion to 250 renewable energy projects in NSW alone, including a total of $268.4m for large scale solar projects in Broken Hill, Nyngan and Moree. The power plant in Broken Hill reduces more than 105,840 tonnes of carbon dioxide every year, on average.

ARENA has also helped to develop critical research and development, and issued a $35.9m grant for The Australia-US Institute for Advanced Solar Photovoltaics at the University of NSW, who are leading research efforts across the country. 

So not only is this a brutal blow to clean energy investment, research and development across the country, it is a huge setback for regional communities in NSW, which benefit from projects like these. The Greens will introduce an amendment to protect the entire $1.3 billion of ARENA funding.