The UK government has introduced plans to scrap subsidies for small-scale solar farms and biomass plants.
The plan, outlined by the Department of Energy and Climate Change, would help reduce household electricity bills, claimed energy secretary Amber Rudd. She further said the cancellation of the subsidies would be fully justified by the falling cost of delivering solar power.
The plan would affect solar installations generating less than 5MW planned after April 2016, as well as new biomass projects.
"I'm not ruling out further subsidy for the solar industry,” said Rudd during an interview on BBC Radio 4. “What we are doing today is introducing measures to limit that subsidy. We can't have a situation where industry has a blank cheque and that cheque is paid for by people's bills.”
In addition to closing support for small-scale solar schemes, the government also wants to change the way renewable projects qualify for subsidies.
The proposals come just a month after the government said it would scrap new subsidies for onshore wind farms from April next year.
Figures published by the Department of Energy and Climate Change (DECC) show the cost of renewables subsidies could reach £9.1bn a year by the 2020/21 tax year compared with a proposed budget of £7.6bn. This bill would have to be footed by the consumers. Rudd said the solar subsidies alone add around £3 to the utility bills. Further increase is caused by subsidies for other resources.
"Solar has been a great British success story and we will continue to support solar, but on a different level, on a capped level, so that I continue to look after bill payers' interests as well,” Rudd said.
However, critics warned the measures are undermining the confidence of investors and will threaten investment in renewable electricity altogether.
"The government has stripped away without warning incentives for projects on which many companies have made major investment decisions in renewable technologies," said Richard Kirkman, technical director at Veolia UK, a subsidiary of French environmental services group Veolia.
As part of extensive reforms of Britain's electricity market, the government has been changing the way it supports renewable energy by replacing direct subsidies with a contracts-for-difference (CfD) system.
Under the scheme, qualifying projects are guaranteed a minimum price at which they can sell electricity and renewable power generators bid for CfD contracts in a round of auctions.
But Rudd on Tuesday cast doubt on whether there would be another auction of CfD renewable support by telling a parliamentary committee she could not confirm it would take place.
Asked to clarify Rudd's comments, a DECC spokeswoman said only that decisions on any further CfD auctions would be taken in due course.
Under the first round of auctions held last December, the government awarded contracts to 27 renewable projects worth a total of more than £315m.
Previously, the government said the budget for the next CfD allocation round would be confirmed later this year and that the second auction could take place in the autumn.
Other European governments have also curbed generous renewable subsidies.
Last year Germany changed its renewable energy law, seeking to cap support for renewables, while Spain changed its subsidy scheme for solar plants after higher than expected demand.