The UK Government has announced a consultation on proposals to slash feed-in tariffs (FITs) – the mechanism used to support renewable energy projects up to 5 MW in size – in a move that could effect small and micro hydropower development in the country.

The consultation is being launched as the government reviews subsidies in the small-scale renewable electricity sector in a bid to prevent an overspend of its budget. Slashing tariffs has however been criticized by a number of renewable organizations as ‘short-sighted’ and damaging to jobs and investment in the renewables sector.

The government is proposing cuts of up to 87 per cent to FIT rates awarded to solar PV, onshore wind, hydropower and anaerobic digestion projects. It has also proposed changes to quarterly and deployment degressions, with renewable energy schemes losing all support by January 2019, and wants the changes to be implemented by January 2016.

The Department of Energy and Climate Change (DECC) said that it wants to impose the measures in order to control costs as it expects to breach the limits of the Levy Control Framework – the budget for supporting renewable energy that is funded by energy consumers. It has proposed a cap on new FITs expenditure of between £75-100 million by 2018/19 and says that if this budget cannot be met, it would legislate to end the scheme for new participants as soon as possible.

Trade organizations Renewable UK said that the degressions and caps put forward in the proposals would increase risks and "scare away" investors. It also believes that they will trigger a rush of projects between now and the end of the year.

"We don’t agree with these self-defeating proposals and will be urging DECC to take up our alternative," said Mike Landy, Head of Policy at the STA. "A sudden cut combined with the threat of scheme closure is a particularly bad idea – it will create a huge boom and bust that is not only very damaging to solar businesses and jobs but does nothing to help budget constraints. We really are astonished at how self-defeating these proposals are."

The government’s announcement follows other consultations announced earlier this year to end FIT pre-accreditation for onshore wind projects and close the renewables obligation (RO) scheme for solar farms of less than 5 MW in size.

"Such significant changes can’t be introduced within the proposed January 2016 deadline without hurting many businesses and individuals who have been investing in new projects," said Maf Smith, Deputy CEO of RenewableUK. "The next four months will turn the British energy market into a wild-west market with energy consumers stuck in the middle."