Households and communities who install generating technologies such as small wind turbines and solar panels will be entitled to claim payments for the low carbon electricity they produce from April.
According to Department of Energy and Climate Change (DECC), the schemes are designed to bring about a significant increase in the amount of locally produced renewable energy, as a contribution to the wider shift of the energy mix to low carbon.
From April 1, householders and communities who install low carbon electricity technology such as solar photovoltaic panels and wind turbines up to 5MW will be paid for the electricity they generate, even if they use it themselves. The level of payment depends on the technology and is linked to inflation.
Ed Miliband, secretary of Energy and Climate Change, said: "The guarantee of getting an income on top of saving on energy bills will be an incentive to householders and communities wanting to make the move to low carbon living.
"The feed-in tariff will change the way householders and communities think about their future energy needs, making the payback for investment far shorter than in the past. It will also change the outlook for a range of industries, in particular those in the business of producing and installing small scale low carbon technology."
They will get a further payment for any electricity they feed into the grid. These payments will be in addition to benefiting from reduced bills as they reduce the need to buy electricity. The scheme will also apply to installations commissioned since July 2008 when the policy was announced.
The DECC also published today plans for a scheme to incentivise renewable heat generation at all scales. This will come into effect in April 2011 and guarantee payments for those who install technologies such as ground source heat pumps, biomass boilers and air source heat pumps.
Under the proposed tariffs the installation of a ground source heat pump in an average semi-detached house with adequate insulation levels could be rewarded with GBP1,000 a year and lead to savings of GBP200 per year if used instead of heating oil.
The heat incentive could help thousands of consumers who are off the gas network lower their fuel bills and gain a cash reward for greening their heating supply, DECC said.