Residents were yesterday coming to grips with the deflating news that AGL Energy was considering dumping its $800 million development, which would have created up to 500 jobs during the construction stage.

"It's very disappointing and will dent the town's confidence," said Jenette Henderson, former secretary of the Macarthur Advancement and Development Association (MADA). When the project was announced last year there were high hopes it would trigger new local industry and a population boom to bolster the small town, about 35km south of Hamilton, which officially has 306 residents.

AGL's managing director Michael Fraser said this week up to eight windfarms being considered by the company were under threat because of a collapse in the price of renewable energy certificates.

About $30 billion of expected investment needed to reach the Federal Government's target of having 20 per cent of power generation from renewable sources is at risk.

Mr Fraser described the Government's policy as a fraud and said over-supply of renewable energy certificates through the solar hot water scheme had caused investment in renewable energy to stop.

MADA president Janet Angel took a positive view on AGL's gloomy prediction.

"We are certainly disappointed because it would have encouraged more people to move into town," Ms Angel said.

"However, there are other enterprises around Macarthur. The sheep industry and farming in general is strong.

''We are still hopeful. Nothing's set until it happens."

She said tourism was increasing and the inclusion of Mount Eccles in the region's Kanwinka geopark gave it international recognition. The recent Great Victorian Bike Ride which attracted thousands of participants also helped lift the town's profile, with a survey of riders finding 41 per cent rated Macarthur the friendliest of seven towns on the route, Ms Angel said.