The U.K. government signaled it may cut the prices paid for electricity from renewable energy sources, saying it began a “comprehensive review” of feed-in tariffs introduced last year.

Evidence that larger-scale solar farms may “soak up” money meant for roof-top solar panels, small wind turbines statement. A review was originally planned to start next year. and smaller hydropower facilities prompted the study, the Department of Energy and Climate Change said today in an

The move will allow the government to change the above- market prices paid for wind and solar electricity by more than already planned when the new prices come into force in April 2012. The department said it will speed up an analysis of solar projects bigger than 50 kilowatts and that new tariffs may be mandated “as soon as practical.”

“This is going to put the jitters into some market segments,” Dave Sowden, chief executive officer of the Solihull, England-based trade group Micropower Council, said today in a phone interview. “It’s the fast-track threshold of 50 kilowatts that is of concern, because that’s going to catch a lot of rooftop installations. That’s come as a surprise.”

“Nothing in reading the tea leaves of parliamentary language flagged concern in that area,” Sowden said. Even so, he said the setting of a timetable is important because it shows the government is trying to create investor certainty.

The government said on Oct. 20 that an early review of the system was possible, though at that time it spared the feed-in- tariffs from changes brought in with budget cuts across all government departments.

Stopping the Rumors

The energy department said it aims to complete the review this year, with price changes coming in April 2012 “unless the review reveals a need for greater urgency.” Sowden said the Micropower Council would have preferred six months between the end of the study and the introduction of price changes.

Even so, Andrew Lee, head of Osaka-based Sharp Corp.’s U.K. solar unit, said the move had been expected because of repeated remarks by ministers expressing concern at the possibility of large-scale solar farms proliferating. Today’s announcement may give more certainty to the market by stopping rumors, he said.

“We expected them to do a review,” Lee said by telephone today. “If they want to do it earlier, that’s fine, so long as they’ve guaranteed to keep prices unchanged until 2012. That puts my mind at ease. This is not necessarily bad news for the industry.”

Record Installations

U.K. installations of solar panels last year were a record 33 megawatts, doubling the previous installed total, after the feed-in tariffs were introduced in April guaranteeing as much as 12 times the market rate for power from renewable sources.

In the wake of the program, Sharp announced a doubling of production of panels at its plant in Wrexham, Wales. Companies from the German utility E.ON AG to Tesco Plc entered the market, offering to sell and install panels for their customers. The county of Cornwall in southwest England said it anticipated a “gold rush” that could lead to 1 billion pounds ($1.6 billion) of investment in England’s poorest region.

“Large-scale solar installations weren’t anticipated under the FITs scheme we inherited,” U.K. Secretary of State for Energy and Climate Change Chris Huhne said in today’s statement. “I’m concerned this could mean that money meant for people who want to produce their own green electricity has the potential to be directed towards large scale commercial solar projects.”

Another study will be made into farm-based anaerobic digestion plants, the department said in the statement. No retroactive tariff changes will be made, it said.