A new solar farm is set to make NSW the nation’s leading producer, but funding and policy uncertainty are dissuading other companies from following suit.

NSW is set to become the nation’s biggest producer of solar energy, with funding from two federal environmental programs that Prime Minister Tony Abbott wants to axe.

Construction of a 56 megawatt solar power plant near Moree in northern NSW is expected to begin within months after the two companies behind the project secured a deal to supply energy to the national electricity grid.

The agreement means the solar facility, being built by Australia’s Pacific Hydro and Spanish group FRV, will receive tens of millions of dollars in federal funding from the Australian Renewable Energy Agency (ARENA).

The project has already been offered loans of up to $60 million from the Clean Energy Finance Corporation which, like ARENA, Mr Abbott wants to abolish.

The Senate has twice rejected the coalition’s attempts to repeal legislation that set up the corporation and has also refused to agree to moves announced in the budget to abolish ARENA.

The Moree Solar Farm will be the sixth large-scale project of its kind in NSW in an 18-month period, and is expected to make the state the nation’s largest solar generator, providing enough power for about 15,000 homes.

NSW Environment Minister Rob Stokes said the Moree project would result in a “more competitive market”.

“It means that we have several different fuel sources for our electricity generation that we can rely upon,” he said.

AGL Energy is building two large solar projects in western NSW – a 102MW plant at Nyngan and a 53MW plant at Broken Hill.

But despite abundant sunshine, Australia ranks 30th in the world on utility-scale solar installations and uncertainty over government policy means other projects could be shelved.

US solar giant Recurrent Energy, which is proposing an 80MW solar plant on Queensland’s Darling Downs, is to close its Australian office because of the lack of clear federal policy direction.