The government has confirmed plans to more than halve state subsidies for solar panel schemes of up to 4 kilowatts.
In a written statement to Parliament, Greg Barker, the energy minister, also promised to implement minimum efficiency standards for buildings applying for the subsidies.
Mr Barker said the solar subsidies, known as feed-in tariffs, had been heavily over-subscribed and risked creating a boom and bust in the solar energy market.
But firms which have geared themselves up to take advantage of the subsidies have been stung by the timescale of the proposed cut. Under the proposals, which have yet to go to consultation, any schemes installed after 12 December will only be able to receive the tariff until April next year.
Paul Johnson, commercial director at Apollo acknowledged that there had been speculation about a likely government move to reduce the tariff but he said it was impossible to resource a company properly for such a quick turnaround.
“You don’t factor in the FiT suddenly changing on the 12 December,” he said.
The government move follows a PwC report last week which suggested that even a halving of the tariffs, might not be enough to fund the programme beyond 2013. The scheme was supposed to last until 2015.
Mr Barker said the average cost of domestic installation had fallen by 30 per cent since the scheme was introduced in April 2010.
“My priority is to put the solar industry on a firm footing so that it can remain a successful and prosperous part of the green economy, and so that it doesn’t fall victim to boom and bust,” he said.
“The plummeting costs of solar mean we’ve got no option but to act so that we stay within budget and not threaten the whole viability of the FITs scheme.
“Although I fully realise that adjusting to the new lower tariffs will be a big challenge for many firms, it won’t come as a surprise to many in the solar industry who’ve themselves acknowledged the big fall in costs and the big increase in their rate of return over the past year.”
Feed in Tariff for generators under 4kW capacity will be 21p per kWh from April next year. This is down from 43.3p per kWh rate.