Government has closed the LCBP with immediate effect as part of its £6 billion spending cuts.
The government's decision to close the Low Carbon Buildings Programme (LCBP) early as led to concerns that the budget deficit will have a detrimental effect on the industry's renewable programmes.
The LCBP was already due to come to an end next year, to be replaced with the proposed Renewable Heat Incentive (RHI) in April 2011.
However, the £6 billion spending cuts announced by government on 24 May included an £85 million reduction in the Department of Energy & Climate Change's budget (DECC).
Shortly after the spending cuts were outlined, DECC announced that it was immediately closing LCBP to new applications, saving the department an estimated £3 million.
Existing grants will be honoured, as well applications received before the announcement. This will not affect customers that have already received offer letters, or those with an existing valid application.
Neil Schofield, head of sustainable development at Worcester, Bosch Group, said: "Despite the fact that the programme has been an enormous success, it would appear that it has fallen victim to the need to make cuts in the budget deficit.
"That decision now leaves us with an enormous hiatus between the closure of LCBP and the start of the RHI programme in April 2011. My fear is that the renewable momentum, which has been growing with the introduction of the Feed-in-Tariff, pay as you save and RHI, will now be lost."
Howard Johns, chairman of the Solar Trade Association, said: "This is very bad news for the solar industry, and a very disappointing move from the new coalition."