The government has failed in its appeal to overturn the decision that blocked a bid to reduce the feed-in tariff (FiT), a subsidy that is paid to homeowners that sell the electricity from their solar installation.

The Court of Appeal upheld the High Court ruling that said it was unlawful for the government to halve the tariff before a consultation had finished last year.

Solar businesses and Friends of the Earth had warned that thousands of jobs were at risk if the government cut the tariff in December, as well as it being unfair on homeowners to reduce the rate at such short notice.

However, the government has vowed to continue fighting and may take its case to the Supreme Court.

The current tariff is just over 43p per kilowatt-hour generated. The government is already planning to reduce the rate to 21p for people that sign up to the FiT scheme from 3 March, in a separate move from the court case. The lower rate would then kick in on 1 April for those homeowners.

However, had it won the appeal today the government may have decided to backdate the lower FiT rate for any installations made on or after 12 December.

Energy and climate change secretary Chris Huhne says he ‘disagrees’ with the Court of Appeal’s ruling.

He says that the reduced rate is needed so that there can be more installations receiving FiTs, rather than using 'the available money [in our budget] to pay a higher tariff to half the number of installations’.

Huhne adds: ‘Solar PV can have a strong and vibrant future in UK and we want a lasting FiTs scheme to support that future and jobs in the industry.’

Friends of the Earth welcomed the Court of Appeal’s decision and urged the government to give up on the appeal process. It says ministers should ‘concentrate on safeguarding the industry rather than wasting more time and money on further appeals’.

Friends of the Earth’s executive director Andy Atkins adds: ‘This landmark judgement confirms that devastating government plans to rush through cuts to solar payments are illegal – and will prevent ministers from causing industry chaos with similar cuts in future.’

The Confederation of British Industry also says the government should now ‘draw a line under this saga’.

According to renewable energy company Eco Environments, due to the timing of the reduction in the FiT, there is now a ‘short-term window of opportunity to enjoy a solar panel gold rush’.

Director David Hunt says the outcome in the courts today is a ‘fantastic result’ for homeowners who have made an installation since 12 December or are about to do so.

Homeowners that make their installation before 3 March will receive the higher FiT rate of 43.3p for the next 25 years.