Subsidies for larger solar electricity schemes could be slashed under plans outlined by the Government.
Ministers have said they are concerned about commercial “solar farms” benefiting from incentives designed to boost small scale green electricity projects.
The feed-in tariffs (FITs) scheme pays people for the electricity they generate from small scale renewables installed on homes, schools, communities and businesses.
The Department of the Energy and Climate Change (DECC) has published proposals to significantly reduce the support for all schemes above 50 kilowatts - the equivalent of putting solar panels on around 20 homes.
The consultation follows the launch in February of a fast-track review into how FITs work for solar photovoltaic over 50kW after evidence showed there could already be 169MW of large scale solar capacity in the planning system – equivalent to funding solar panels on the roofs of around 50,000 homes if tariffs were left unchanged, DECC said.
The rates would see the biggest projects paid just 8.5p for each unit of green electricity they produce, instead of more than 30p under the existing arrangements.
Mid-size schemes would also see their subsidies slashed by as much as half under the proposals put out for consultation.
Climate Change Minister Greg Barker said: “Our cash for green electricity scheme is a great way to reward homes, communities and small businesses that produce their own renewable power.
“I'm committed to an ambitious roll-out of microgeneration technologies as part of the coalition's green vision of a much more decentralised energy economy.”
He said the proposals would stop larger scale solar schemes “soaking up the cash” that should go to homeowners who install solar panels, and to other renewables such as small scale hydropower or wind turbines.
“The FITs scheme was never designed to be a profit generator for big business and financiers,” he said.
“Britain's solar industry is a vital part of our renewables future and our growing green economy. The new tariff rates we're putting forward today for consultation will provide a level of support for all solar PV and ensure a sustained growth path for industry,” Barker said.
But Howard Johns, chairman of the industry body the Solar Trade Association, said the review of solar subsidies was even more damaging to the sector than had been anticipated.
“Given that just a week ago the UK Government launched its own ‘Carbon Plan’ outlining how it will become the greenest government ever, this review is a complete disaster for the solar industry and comes at a time when we should be focusing on building renewables and harnessing the power of our natural resources.
“In one of the few low-carbon sectors that is increasing employment figures, strengthening an economy and offering prospects for the younger generation, it seems extraordinary that the coalition have decided to launch this consultation,” Johns said.
Renewable Energy Association chief executive Gaynor Hartnell said the Government's move, which she described as pulling the rug out from under the feet of those who had ventured into the market was “precisely the wrong response”.
“Larger PV projects are cheaper, and have a major role in driving down costs,” she said.
“The UK will return to the solar slow lane. It's as good as a retrospective change and that does untold damage to investor confidence. It’s not acceptable and we will fight it,” Hartnell said.
Environmental consultancy WSP Environment & Energy said the changes, designed to stop solar farms in fields “carpeting” the countryside, would also damage large roof-top solar panel schemes.
Chris Stubbs, director at the consultancy, said the reduction in tariffs would make many schemes unviable, while not saving the Treasury any money.
The proposals put out today also include slightly raising the support for producing energy from waste such as farm slurry, known as anaerobic digestion, following concerns that the existing subsidies are not enough to make schemes worthwhile.
Environmental groups criticised the plans, which they said would hit renewable projects in communities, schools and small businesses.
Greenpeace chief scientist Dr Doug Parr said: “As the world struggles with the problems that nuclear power can bring it is bizarre and short-sighted that the UK is knifing the support levels to community scale solar developments.
“Solar and other renewable energy can bring jobs and industry to the UK and avoid fossil fuel imports - if the coalition means what it says on green growth this looks like the wrong decision at the wrong time.”
The Government plans to bring in the changes to solar incentives in August, while a full review of the feed-in tariffs will implement any further changes in 2012.