Millions of homeowners will be offered cash payouts to generate their own electricity from roof-mounted solar panels and wind turbines, under a scheme starting today.

The so-called feed-in tariff, which is designed to boost investment in the industry, will offer households, communities and businesses that produce renewable power an above-market rate over 20 years for every unit of electricity they generate.

Homeowners using photovoltaic panels could earn £900 a year tax-free and cut bills by £140, the Government asserts.

However, critics said that the scheme’s average returns on investment, of 5 per cent to 8 per cent, may be too low to encourage mass take-up. Returns are significantly below the 10 per cent average in Germany, where similar arrangements have led to a big expansion of renewable energy.