The independent agency has also called for the overall target for large-scale renewable energy generators such as wind farm operators to be left unchanged at 20 per cent of total power generated by 2020, a recommendation applauded by the clean-energy sector.

Under the current settings, the renewable energy target is projected to cost households between $12 and $64 extra a year. The agency suggested a change to the definition of what counts as "large-scale" to prevent the costs rising.

Electricity prices have become one of the hottest political issues as a mix of factors – ranging from excessive investment in poles and wires, and the carbon tax – have sent power household power bills soaring by as much as 50 per cent in the past three years, with more increases to come.

One element of the target, involving small-scale renewable energy such as rooftop solar photovoltaic panels, remains uncapped. The authority recommended changes to the settings to prevent costs blowing out if commercial buyers were to match the rapid take-up of solar PV seen in the residential sector.

"It's really to head off the possibility of there being a real boom in commercial solar installations," Climate Change Authority chairman Bernie Fraser said.

If such installations remained within the small-scale category they "could potentially be quite expensive", he said.

As a result, solar PV installations of more than 10-kilowatt capacity may become part of the large-scale renewable energy portion, which is capped at 41,000 gigawatt-hours by 2020, the authority said.

'Backward step'

Australian Solar Council chief executive John Grimes said the recommended change would hurt the industry.

"The proposal to move solar systems above 10 kilowatts into the large-scale renewable energy target will significantly undermine investor certainty and lead to business plans being ripped up," Mr Grimes said.

"We need to encourage larger power users to invest in solar and this [recommendation] will be a backward step."

Australia's households have been adding solar panels to their roofs at the rate of 300,000 or more a year, with demand fuelled in part by state feed-in tariffs, which are mostly being wound back.

As residential demand plateaus or declines, the solar industry had been looking to commercial users, such as shopping centres and warehouses, to pick up the slack.

Reaction from political parties to the authority's recommendations has been mixed.

The Minister for Climate Change and Energy Efficiency, Greg Combet, welcomed the findings, saying the renewable energy target was "an important complement to the carbon price in delivering a clean energy future and making the most of Australia's significant renewable energy resource".

"The government recognises the importance of stability in the nation's climate change policies in delivering clean energy investment and opportunities," he said, adding that the government would respond to the authority's recommendations early in the new year.

The federal opposition's climate action spokesman, Greg Hunt, said the Coalition would consider the review over the coming weeks.

"We note the concession that state feed-in tariffs and the federal ALP's phantom credits scheme, both of which we have long warned against, have needlessly driven up electricity prices,” he said.

Greens leader Christine Milne said on Tuesday the review should call for a goal higher than 20 per cent renewable energy by 2020.

“What we actually need is to shift to 100 per cent renewable energy as soon as possible, so we should set a minimum goal of 50 per cent by 2030,” Senator Milne said.

In fact, on current projections, renewable energy's share of the electricity market may rise as high as 26 per cent by 2020, in part because higher prices are leading to a drop in demand from families and businesses alike.

Mr Fraser said, however, that sticking to the overall settings was preferable to modifying the target and creating unpredictability for investors and their backers.

Renewable energy from hydro power, wind farms and solar generators has doubled since 2001 and now accounts for about a tenth of the total. Investment in the sector exceeded $5 billion last year, and clean energy advocates say another $18 billion in is the pipeline by 2020 from large-scale generation alone.