The Government's decision to cut subsidies for solar energy to all but the smallest projects will threaten investment and job creation in the alternative energy sector, environmental and industry groups warned yesterday.
The Department of Energy and Climate Change (DECC) said the change to feed-in tariffs would maintain funding for households to put up panels by diverting them from larger projects.
But campaigners said the decision would kill off schemes planned by schools, housing associations and other community organisations.
Howard Johns, the chairman of the Solar Trade Association, accused the Treasury of handicapping DECC's ability to respond to developments in the market when the UK should be investing in one of the industries of the future.
He added: "Crushing solar makes zero economic sense for UK plc because it will lose us major manufacturing opportunities, jobs and global competitiveness. It also risks locking us in to more expensive energy options in future."
He said investors were getting out of the UK, jeopardising major manufacturing opportunities. He called on the Prime Minister, who has solar panels in his house, to intervene to stop the Treasury taking short-sighted decisions.
DECC said it had taken the decision after a period of consultation because the number of large-scale solar projects eligible for subsidies was far higher than expected.
The department's minister, Greg Barker, said: "Without action the scheme would be overwhelmed. The new tariffs will ensure a sustained growth path for the solar industry while protecting the money for householders, small businesses and communities and will also further encourage the uptake of green electricity."
Feed-in tariffs were launched in April last year and more than 40,000 installations have registered.
The change, trailed earlier this year, will prioritise domestic and other small solar power installations of up to 50kW, which typically cover several houses and will be unaffected.
Feed-in tariffs for bigger projects will be slashed. Installations between 50 kW and 150kW will get 19p per kilowatt-hour, down from 32.9p, and bigger installations will have their subsidies more than halved.
When the Government announced its review it said it needed to avoid large-scale solar "farms" squeezing out the domestic market. DECC said yesterday that every 5MW large-scale solar scheme would cost about £1.3m a year. That means that 20 such schemes would cost the same as installations for more than 25,000 households.
Friends of the Earth said the consultation had been "a farce" and that the results threatened the creation of thousands of new jobs in the fledgling green energy sector.
Donna Hume, Friends of the Earth's green energy campaigner, said: "With mounting concern about the rising cost of fossil fuels and the impact of global climate change, the Government should be increasing financial support for clean, green energy – not cutting it.
"Our schools, businesses and housing estates could become mini-power stations so we all play our part in the green energy revolution."
The Solar Trade Association said the Government was "crippling" the industry just as countries such as Germany, China and Japan were moving it to the centre of energy policy.