A rebate for rooftop solar panels will halved six months earlier than planned in a move blasted by an industry group as "diabolical".
Climate Change Minister Greg Combet announced the solar credits scheme would end in January next year "due to continued strong demand for household solar''.
In a statement, Mr Combet said the subsidy cut was expected to save households between $80 million and $100 million on electricity bills next year.
"Phasing out the [scheme] early will strike the appropriate balance between easing upward pressure on electricity prices and supporting households and suppliers who install solar PV," he said.
Australian Solar Energy Society chief John Grimes said it would halve the rebate on a 3-kilowatt rooftop solar photovoltaic system from about $2500 to $1250.
The cost of a typical system would rise from about $6000 to $7250 from the start of 2013, he said.
The additional cost on a 1.5-kilowatt system would be about $900.
Mr Grimes said the surprise move would hit jobs and put solar PV out of reach for many middle-class households seeking relief from soaring power bills.
"People refer to this as the solar-coaster ride," Mr Grimes said. "Our standing joke is that a day is a long time in solar policy."
The acceleration of the rebate reduction comes as the government is under increasing pressure from the power industry to modify its 20 per cent renewable energy target.
Current projections suggest renewable energy supplies will exceed the goal of a 20 per cent share of total supply by 2020.
Renewable energy advocates warn that tinkering with the target would place at risk as much as $18 billion in additional investment in solar, wind and other non-fossil-fuel energy sources by the end of the decade.
Mr Grimes said solar PV prices had been falling fast because of a flood of low-cost production from China, but the reductions may not continue as the Chinese industry consolidates and loss-making firms go bust.
But Rheem, Australia's largest producer of solar hot water systems, welcomed the announcement, saying it would ''create a level-playing field for all solar hot water producers''.
The government said the small-scale solar scheme was expected to cost electricity consumers around 70 per cent less than in 2012.
Legally binding contracts to install supported systems, already entered into before today and made on the basis of the current rules, will be preserved.
The same applies to systems installed before 1 January 2013, the government said.
The government said more than 880,000 rooftop solar PV systems and more than 560,000 solar and heat pump water heaters have received support under the renewable energy target in the past five years.