The 350-megawatt wind farm, with a planned 150 turbines nearly 300 feet tall, powering 150,000 homes, was expected to be the biggest in the southern hemisphere.
AGL Managing Director Michael Fraser said the government's approach was a fraud that threatened the industry's ability to meet the target of obtaining 20 percent of power from renewable sources, the Herald reports. More than $30 billion of expected investment is needed to reach the target.
The oversupply of certificates had caused investment in renewable energy to stop, he said.
The only new wind farms AGL would definitely build were those required under contracts to supply power to desalination plants for the Victorian and South Australian governments, Fraser said.
''Beyond that, you simply won't see us invest until this issue gets resolved,'' he said.
The project was expected to create 500 jobs during construction. Fraser said up to seven of AGL's other wind farms being considered are also under threat.
''The reality is that you've seen virtually no new announcements around large-scale investments in the renewable sector from anybody for months now,'' he said.
Victoria state Energy Minister Peter Batchelor said Canberra's policies have delayed investment in renewable energy projects and undermined job creation.
''We in Victoria want to move away from our overwhelming dependence on brown coal, but to do that we need to encourage investment in new wind farms,'' he told The Age.
Coal-fired plants supply about 86 percent of Australia's electricity.
Batchelor said the value of renewable energy certificates has fallen from more than $50 in May 2009 to less than $35 now.
"We are very concerned about the inability of the national renewable energy scheme to stimulate jobs and investment in Victoria," he said.
When the legislation was passed in August, it was expected to generate $28 billion of investment in new generation capacity in Australia over the next decade and the creation of 28,000 jobs in industries such as wind and solar power, according to the Clean Energy Council, an alliance of the Australian Wind Energy Industry Association and the Australian Business Council for Sustainable Energy.
A spokesman for Australian Climate Change Minister Penny Wong acknowledged that the fall in price for certificates partly reflected the higher uptake of solar water heaters as a result of state incentives and the federal stimulus package, The Age reports.