The amount paid to homes and businesses that install solar panels, and sell electricity back to the grid, has been cut dramatically because the Government says it was too generous.
The amount has been cut from 60 cents a kilowatt hour to 25 cents. Those with existing solar panels will not be affected by the change.
Larger scale solar projects are mostly based in regional Victoria and several companies have shown interest in establishing offices in major regional centres.
Energy Minister Michael O'Brien says solar energy has a bright future in Victoria and he doubts tariff cuts will deter potential investors.
"There's still a strong appetite for rooftop solar in this state and you have to ask yourself where are they're going to go?" he said.
"We will be the second most generous state in the country and I think that speaks volumes for this Government's commitment to practical, sustainable measures to support renewable energy."
However, environment groups say the move is a major blow to Victoria's emerging solar energy industry.
Mark Wakeham from Environment Victoria says regional communities stood to benefit the most from the growth of solar power and that is now in jeopardy.
"Renewable energy is one of the world's fastest growing industries, yet all the signals that are being sent from the Baillieu Government is that it's not interested in supporting renewable energy and getting those new jobs and investment," he said.
Meanwhile, a solar energy company has suspended plans to open offices in regional Victoria after the Government reduced financial incentives for solar power.
The Mark Group planned to open offices in Bendigo, Ballarat, the Latrobe Valley and Geelong in the next year, creating about 200 new jobs.
Chief executive Robert Grant says the changes to the scheme have created too much uncertainty and the expansion to regional Victoria is on hold.
"We will see what the market reaction is to it, if the market reaction is minimal then we will go ahead and continue to expand but there is no question that the growth we had planned for this business of over 200 jobs and four new locations over the next 12 months will now be on hold," he said.
Investing
The organisers of a central Victorian solar panel project say they are worried the changes will discourage people from investing in the scheme.
Under the Goldfields Solar Hubs project, about 300 homes and businesses in the region have installed solar panels on their roofs.
It is hoped that number will be 1,000 by this time next year.
One of the project coordinators, Karen Corr, says the change in policy is not helping.
"This is a major backward step," she said.
"We're trying to engage people in to community to install solar panels and be part of our virtual solar hub.
"[With] ... the 300 solar panels installed so far we're already generating almost one megawatt per year and we're aiming for much higher than that, so this is absolutely impacting our project from that perspective."
The Electrical Trades Union (ETU) says a State Government's decision to slash the solar feed-in tariff will kill Victoria's solar industry.
The state secretary of the ETU, Dean Mighell, says it will decimate investment and jobs in Victoria's solar industry.
"The Government's announcement will ensure that the solar industry virtually stops dead," he said.
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