Households which contribute electricity to the National Grid using renewable energy sources will receive payments from the Government.
The ‘clean energy cash-back’ scheme known as Feed in Tariffs (FITs) will introduce payments based on a fixed price per unit of electricity and will be set high enough to encourage hundreds of thousands of homes to invest in renewable sources of power. If agreed the legislation will come into effect for April 2010.
Local energy suppliers will adjust consumer bills according to the number of units fed back into the grid. Homeowners with low energy consumption and a solar panel could receive net payments from their energy company.
villages will be encouraged to generate wind, water and solar power, and be paid for how much they produce.
Energy secretary Ed Milliband defended some possible price rises in the near future saying that this alternative to importing energy was 'the right way to go'.
Mr Miliband adds: 'My job is to counter those effects as much as I possibly can - helping people with energy efficiency, and having tough regulation for example.'
'This is excellent news for rural landowners across the UK,' says Robert James of Savills Energy. 'For rural landowners and businesses using large amounts of electricity, such as dairy farmers for example, or sometimes even those with just sufficient wind resource and grid connection, renewable energy is a financially viable option under this proposal. The new tariff will pay for all energy generated by a wind turbine, irrespective of whether the farmer or landowner uses it or sells power back to the grid. The amounts paid are in addition to any saving the landowner will make by purchasing less electricity from their supplier and any income earned from selling their surplus electricity to their regional supplier.'
At present, those who feed electricity into the National Grid can get a reduction on their fuel bills through smart meters. However, ministers hope that the promise of cash in people's pockets will encourage them to seek new ways of generating their own power.
Similar "clean energy cash back" schemes already operate in 19 European countries including Germany.
Read more about the clean energy cash back scheme on the BBC news website.
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