The government plans to cut tax reliefs for community energy schemes to build new renewable power capacity such as solar and wind.

The move will deal a further blow to the UK’s embattled renewables sector, green campaigners have warned.

The Treasury is to remove tax reliefs of 30% or more for community energy schemes that reduced the risk for investors and encouraged private capital to help build new energy capacity.

The move, which emerged this week during the finance bill’s third reading, had not been expected. It means that investors in community energy projects will not be able to benefit from the so-called Enterprise Investment Schemes, the Seed Enterprise Investment Scheme or the Social Investment Tax Relief, making such investments much less attractive.

It comes on top of previous subsidy cuts and proposals by the government to cut subsidies for domestic solar installations – so called feed-in tariffs – by 87%.

‘Too much negativity’ being thrown at renewables

Jan-Willem Bode, the managing director of Mongoose Energy, one of the largest green energy groups in the UK, said: “Many [shareholders] feel like pulling the plug right now because it is just too much negativity thrown at the sector.”

Bode said a typical green energy launch project will have 400 to 600 members – “a significant number for a green energy group” – with a minimum investment of £200 in shares. He said Mongoose Energy was aiming for 10,000 investors by March 2016.

Cuts to the feed-in tariff would “definitely be a blow to the green image of the government”, said Bode. “But with the latest announcement it has become clear there has been no desire at all to have a vibrant renewable energy sector and especially a community energy sector.”

Mongoose Energy, to be chaired next month by Ed Davey, the former energy secretary, with a confirmed pipeline of 100MW of renewable energy, has a £110m portfolio of projects to bring into community ownership such as ground-mounted solar rays in farms, roof-mounted solar panels at schools as well as a hydropower mill. Some of the projects are still under construction or in the process of being funded.

90% of community energy projects already at risk – before these cuts

A survey earlier this month of 80 community energy groups with membership totalling 11,000 people, revealed 90% of groups said their developing projects were completely or partially at risk due to the proposed cuts.

The industry has warned the cuts to subsidies would lead to the loss of 27,000 jobs, with 1,000 jobs already lost as solar firms go out of business. The new research suggests it would also threaten approximately £127m in investment.

The report found 38 Community Energy England (CEE) groups had received £7.4m in feed-in tariff subsidies since the scheme began in 2010, which had brought in £50m of private investment and generated £45m for local economies.

Projects at risk from the cuts include community solar and hydro projects in Cumbria, which will lead to the county losing at least £750,000 in investment.

A purely political choice

Barbara Stoll, a Greenpeace energy campaigner, said the subsidies added just £6 a year on people’s bills and solar was moving towards becoming subsidy free. She accused the government of making a “political choice, not an economic necessity”.

Emma Bridge, of CEE, said: “Community energy reduces energy bills, provides energy efficiency advice, develops skills, generates revenue in the local economy … and delivers value for money and this value for money will increase as the sector matures.”

She added: “The government’s proposed changes to the feed-in tariffs will seriously damage this vibrant and growing sector, making it far more difficult for communities to take control of the energy they use.”

Andrea Leadsom, the energy minister, told senior MPs at an energy committee meeting the government remains as committed as ever to meeting emissions reduction targets. Earlier this month she told the parliamentary energy and climate change committee the new government had been forced to implement urgent measures to address an overspend in subsidies to protect bill payers from rising costs.

Several solar companies have blamed the planned subsidy cuts for their closure, which has caused more than 1,000 job losses. Leadsom accepted the plans had caused uncertainty. But she said it was a short-term issue and that future announcements about an energy policy “reset” would be aimed at giving investors certainty.

Aisha Gani is a Guardian reporter on the news desk. She has also worked on the features desk and with the interactive team. Follow her on Twitter: @aishagani

This article was originally published on the Guardian Environment and is republished with thanks via the Guardian Environment Network.