The UK government says it plans to significantly reduce subsidies paid to small-scale green power installations.

Under the proposals, the amount of money paid to home owners, businesses and schools producing electricity from roof-top solar and small wind turbines will be severely limited from January 2016.

Subsidy schemes could be closed to new entrants from the start of next year.

Ministers want to ensure that consumers who pay for the schemes through their bills get the best deal possible. They admitted in July that spending on renewable energy schemes was set to be higher than expected. Having already announced plans to limit cash paid to on-shore wind generation and large-scale solar farms, the Department of Energy and Climate Change (DECC) is now proposing significant cutbacks for small-sized green energy producers. Solar and wind energy installations of less than 5MW are supported by feed-in tariffs – schemes that pay producers a subsidy for the electricity they generate, plus a bonus for any electricity exported back to the national grid.

Under the new proposals, the amount to be paid from next year will fall to 1.63p per kilowatt hour from a current level of 12.92p for a new residential solar system.

The consultation says that government spending on feed-in tariffs should be limited to between £75m and £100m from 2016 to 2018/19.

But DECC warns that if that limit is breached then “the only alternative would be to end generation tariffs for new applicants as soon as legislatively possible,” which is expected to be January next year.

The Solar Trade Association (STA) says the proposals are not good news and the idea that the scheme might end for new entrants could become a self-fulfilling prophecy.