Three appeal judges today unanimously upheld a High Court ruling that
Energy Secretary Chris Huhne lacks the power to introduce the controversial "retrospective" scheme.
Later Mr Huhne remained defiant - even though four judges have now ruled against him, with none in his favour - and confirmed he would seek to appeal to the Supreme Court, the highest court in the land.
His decision will cause dismay to the solar industry, which says continuing uncertainty triggered by the legal action has already led to projects being abandoned and jobs lost.
The Renewable Energy Association (REA) called for an end to the "fiasco" so that "the UK solar industry can get back to business".
John Cridland, director-general of the Confederation of British Industry, added his weight to the call, saying: "The judgment should be used to draw a line under this saga, which saw the Government scoring a spectacular own goal and confidence in the renewables sector undermined."
But Greg Barker, the minister of state for energy and climate change, told BBC Radio 4's World at One programme it was necessary to fight on "to put the brakes on a subsidy-fuelled boom impacting on people's electricity bills".
He said: "This could cost, if we're not successful, consumers £1.5 billion. That is a big sum of money and I think it worth taking legal risk in order to protect the consumer."
The Department for Energy and Climate Change (DECC) argues solar panels are getting cheaper and current subsidy levels are "too generous"
and will severely deplete resources available for future solar generators and other alternative energy technologies - as well as hit the consumer's pocket.
The Government wants to reduce feed-in tariff subsidies (FITs) - payments made to households and communities that generate green electricity through solar panels - on any installations completed after December 12 last year.
High Court judge Mr Justice Mitting ruled before Christmas that it would be unlawful to implement plans to approve the cuts in April this year by referring back to the December 12 deadline.
The deadline fell 11 days before the end of a consultation period on the proposals.
Lawyers for Mr Huhne appealed and argued that Mr Justice Mitting had gone wrong in law and the Secretary of State possessed the necessary
power to modify the tariff rate in the way he proposed under the 2008 Energy Act.
But today appeal judges Lord Justice Lloyd, Lord Justice Moses and Lord Justice Richards disagreed.
In the lead judgment, Lord Justice Moses declared the Energy Secretary "plainly has no such power to make a modification with such a retrospective effect".
Parliament had never conferred such a power, he said.
But later, Mr Huhne said: "We disagree and are seeking permission to appeal to the Supreme Court."
"We have already put before Parliament changes to the regulations
that will bring a 21p rate into effect from April for solar PV installations from 3 March to help reduce the pressure on the budget and
provide as much certainty as we can for consumers and industry.
"We want to maximise the number of installations that are possible within the available budget rather than use available money to pay a higher tariff to half the number of installations."
The appeal court's unanimous decision was a victory for environmental campaigners Friends of the Earth (FoE) and two solar companies - Solarcentury and HomeSun - which said the plans to halve subsidies were creating "huge economic uncertainty".
They also accused Mr Huhne of "making a mockery" of the consultation process.
FoE executive director Andy Atkins said the "landmark judgment" would prevent ministers "from causing industry chaos with similar cuts in future".
He said: "The Government must now take steps to safeguard the UK's solar industry and the 29,000 jobs still facing the chop.
"Helping more people to plug into clean British energy will help protect cash-strapped households from soaring fuel bills."
HomeSun chief executive Daniel Green welcomed the courts' "4-0 victory", and said: "Almost everybody except DECC (the Department of Energy and Climate Change) have appreciated the potential and importance
of the solar industry - from the National Trust, the Church of England through to the CBI, as well as the British people.
"The Government must now move on and deliver a feed-in tariff which is fair and not just for the rich."
Jeremy Leggett, chairman of Solarcentury, said the "historic judgment" should be welcomed by "the entire renewable energy industry".
David Parsons, chairman of the Local Government Association's environment board, called on the Government to "act swiftly" to end the "huge uncertainty" created by the proposed cuts and the subsequent legal
action.
Mr Parsons said: "By announcing cuts to subsidies at such short notice, the Department for Energy and Climate Change caused the cancellation of thousands of solar panel installations.
"Some councils were left with little choice but to let down thousands of tenants, while writing off millions of pounds which had been spent preparing and tendering for solar panel installations which would never see the light of day.
"This has also caused damage to local economies, with renewable energy firms shedding hundreds of jobs as a result of contracts falling by the wayside."
Commenting on the Government's decision to appeal further, Liz Peace, chief executive of the British Property Federation, lamented the loss already caused in renewable energy schemes.
"These schemes will not be revived whatever the Government decides to do on a further appeal to the Supreme Court, and it is disappointing that the implementation of cuts to solar FITs at very short notice and without meaningful consultation has created so much confusion."
PA
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