The UK government has suffered a third defeat in its attempts to cut solar panel incentives, with the result that tens of thousands of claimants will receive higher payments.

On 23 March the UK supreme court rejected the government’s appeal over a court ruling in December that its halving of solar payments were “legally flawed”, marking the end of legal options for the Department of Energyand Climate Change. It is the second government appeal to fail, following a unanimous upholding of the original ruling by court of appeal judges in January.

The 30 735 homeowners and businesses that installed solar panels after a 12 December cut-off date and before 3 March will now be eligible for the previous, higher feed-in tariff of 43p per kWh of energy generated, which was cut to 21p with just six weeks’ notice. The higher payments will add £700m to energy bills, which is the mechanism for paying FiTs, over 25 years.

Andy Atkins, the executive director Friends of the Earth, which brought the legal challenge with solar companies HomeSun and SolarCentury, said: “This is the third court that’s ruled that botched government solar plans are illegal – a landmark decision which will prevent ministers causing industry chaos with similar subsidy cuts in future. The coalition [government] must now get on with the urgent task of restoring confidence in UK solar power.”

Jeremy Leggett, SolarCentury’s chairman, said: “I hope the government is now clear that it will be held to account if it tries to act illegally and push through unlawful policy changes. We would much prefer not to have taken this path but ministers gave us no choice. Our hope now is that we can work together again to restore the thriving jobs-rich solar sector that has been so badly undermined by government actions.”

Ed Davey, energy and climate change secretary, said he was disappponted by the decision “but the court’s decision draws a line under the case. We will now focus all our efforts on ensuring the future stability and cost effectiveness of solar and other microgeneration technologies for the many, not the few.”

The supreme court order said that the application by the then energy and climate change secretary, Chris Huhne, “does not raise an arguable point of law of general public importance which ought to be considered by the supreme court at this time” considering the previous rulings. The previous cases hinged around whether the secretary of state possessed the necessary power to modify the tariff rate in the way he proposed under the 2008 Energy Act, which Mr Justice Mitting in December decided he did not, a view that Lord Justice Lloyd, Lord Justice Moses and Lord Justice Richards agreed with.

The government announced further changes to the scheme in February, and raised its ambition for solar power in the UK, saying it would provide enough electricity for 4m homes by 2020.