Subsidies for new small-scale renewables installations could be slashed or even cut completely next year, according to proposals from the Government.
The so-called Feed-in-Tariff (FiT) scheme was introduced in 2010 to encourage the deployment of renewable energy. The scheme pays households and businesses that install low-carbon energy sources such as solar panels or small wind turbines for the electricity they generate and allows unused energy to be sold to electricity suppliers.
In a consultation report released today, the Government proposed limiting the FIT scheme to a maximum overall budget of between £75m and £100m from January 2016 to 2018/19 and added that, depending on the views of stakeholders, these changes could take effect as soon as January 2016.
"If, following the consultation, we consider that the scheme is unaffordable... we propose ending generation tariffs for new applicants from January 2016 or, alternatively, further reducing the size of the scheme's remaining budget available for the cap," the report said.
RenewableUK, the trade association for the green energy industry, said the changes could not be introduced within the timeframe without hurting many businesses investing in new projects.
"The next four months will turn the British energy market into a 'wild west' market, with energy consumers stuck in the middle," said deputy chief executive Maf Smith.
David Cameron's Conservative government has already announced that it will scrap new subsidies for onshore wind farms from April next year, despite outcry from environmental groups.
They have also announced plans to close support for small-scale solar projects, change the way renewable projects qualify for payments and modify subsidies for biomass plants.
The cost-cutting measures have been prompted by the rising cost of government support for green energy. Figures published by the Department of Energy and Climate Change 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.