Cuts to solar subsidies have been delayed until August, instead of going ahead from July 1 as planned.
UK Energy Minister Greg Barker told MPs: "We have decided that the continuing cost reductions in PV (photovoltaic) technology and installation justify further changes in tariffs.
"But to help the sector through this period of transition, the changes should be made on August 1 rather than July 1."
Barker’s announcement came a week after Energy Secretary Ed Davey hinted ministers might "tweak" the latest cut to feed-in tariffs (FIT) which aim to encourage households to install solar panels.
Earlier this year, the Government defended plans to further cut the subsidy available, confirming it would press ahead with a controversial move to halve the payments for panels installed from March and planned further cuts from July.
Ministers have warned the falling costs of solar technology made the subsidies too generous and feed-in tariffs (FITs) risked spiralling over budget.
But in a statement to the Commons today, Barker signalled a U-turn saying he had listened to the industry.
Barker said tariffs for domestic installations will fall from the planned maximum of 16.5p to 16p, which he said reflected the "particularly strong performance" of the industry in cutting costs.
He revealed future tariff changes would happen every three months which, he said, would bring greater stability to the market.
"The amount of the tariff cut, if any, will be announced at least two months in advance and crucially will not depend on a political judgment, as with the old system introduced by the old government, but on uptake in the previous three months," Barker said.
"It should smooth out deployment more evenly and provide greater budgetary control and greater predictability for investors."
He also announced a taskforce aimed at further slashing installation costs and proposals for a National Solar Centre in Cornwall.
Barker said: "This exciting and far-reaching plan is being brought forward by Cornwall Council and the Building Research Establishment.
"This is great news for the South West and further evidence of the solar sector coming of age."
But shadow energy minister Luciana Berger criticised the Government's "chaotic mismanagement" of cutting FITs, claiming it threatened the industry and undermined investment.
She said: "This debacle, a mess created by this minister, began over eight months ago and has so far cost the department more than £80,000 in legal fees."
Berger continued: "We heard a lot of smoke and mirrors about why you are moving the July deadline. But the truth is it is not because you want to, but because you have to.
"Will you confirm the Government has missed the deadline legally required to provide notice to Parliament for the next round of cuts to have come into force by July 1?
"Is it not your incompetence the real reason you have been forced to come here today?"
Berger asked if the changes to the FITs would still mean a one third drop in new installations this year - but welcomed the continued link to the retail price index of inflation.
But she raised questions over whether under the scheme the Government could meet its own target of generating 22GW of power from solar energy by 2020.
The shadow minister said: "You said you listened to the industry. But if you really listened you would not have dragged them through the courts to try and impose devastating cuts which went too far and too fast.
"This was a battle you lost. This entire process has been a long list of blunders by you and the department.
"In February you said the cuts would deliver for far more people and deliver more than Labour - yet the number of installations have collapsed since the cuts in April.
"You said the Government would deliver 22GW of solar power by 2020 yet at the current rate of installations that target will be missed by over 100 years."
Berger called for independent regulation of the tariff and said thousands of jobs had already been lost as a result of the cuts.
But Barker told MPs the Government's changes to feed-in tariffs would move the policy from creating a cottage industry to one available to the population at large.
And he denied the Government had fumbled the timing of the announcement - insisting the move to August had been a careful decision.
He said: "What we wanted to do was send a very clear message to the industry that we were listening to them. As a result we have moved from July 1 to August 1. Very planned, very deliberate and a very, very thoughtful way."
And he continued: "Deployment is absolutely key for sustainable UK industry. What our impact assessment will say, what the clear ambition and expectation of the coalition is... (Labour's plan) would have seen the introduction of around 250,000 solar panels on roofs.
"Look at the scheme. Thanks to our reform we will now see over one million solar panels on British homes by the general election."
Tory MP Christopher Pincher (Tamworth) asked about the impact of the revised policy on household bills after the Government earlier argued Labour's subsidies would have sent utility costs soaring.
Barker said: "Had we proceeded with the Labour scheme, we would have added at least £61 to hard-pressed consumers' bills.
"Under our plans, we anticipate they will add just £9 to consumer bills because we are taking advantage of rapidly falling costs and passing those on to consumers up and down the country."
Liberal Democrat Andrew George (St Ives) welcomed the statement and asked: "Going forward, your statement presupposes that every quarter there might be a consideration for a tariff cut.
"Of course, we don't know what is going to happen commercially. Can you reassure us that there may be occasions, perhaps very rare, when it may need to go up as well?"
Barker said: "The only way we are going to see large scale deployment of solar is if costs come down. I can assure you the way the new mechanism works is if deployment suffers because the tariff is not generous enough, that will be reflected in the figures which informs the cut.
"If deployment undershoots there will be no cut in the following quarter, or indeed the quarter after that if it's still undershooting.
"My expectation, however, is for industry costs to continue to fall - perhaps not at the staggering rate we have seen not just last year but in the first quarter of this year as well - but to continue to fall over the short to medium term."
Labour's Chi Onwurah (Newcastle upon Tyne Central) said: "Many have sought to focus on the green deal in order to create new jobs (during uncertainty over feed-in tariffs). Could you guarantee to me that the green deal will meet its targets and incentivise the move to a low-carbon economy and the jobs that go with it?"
Barker said: "I can indeed."