Starting April 1st, property owners who install green energy generating technologies - such as small wind turbines and solar panels - can claim payments for the low carbon electricity they produce, even if they use it all themselves.
The level of payment depends on the technology and is linked to inflation, but power from a solar panel could earn someone £900 - in addition to a £140 reduction on their household energy bill.
Energy and Climate Change Secretary Ed Miliband 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.
"This 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."
The 'renewable heat incentive' scheme will apply to all installations commissioned since July 2008.
Mr. Miliband announced the incentive scheme as he visited low income homes in Dagenham being helped by eaga's 'Clean Energy for Social Housing' project. The project offers free clean energy technology to tenants in social housing which will lower their electricity bills and carbon emissions.
John Swinney, eaga Director of Strategy and Corporate Services, said:
"By utilising the incentive initiative and installing free solar technology this programme can cut energy bills for those most in need. We are also recruiting and training renewable energy engineers directly from the local communities where the green technology is being installed.
"This innovative development can be offered right across the UK. We expect thousands of households to benefit in the first few years and up to 300 additional green energy jobs could be created as part of this programme."
The Department of Energy and Climate Change also plans 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 proposals, installation of a ground source heat pump in an average semi-detached house with adequate insulation levels could be rewarded with £1,000 a year and lead to savings of £200 per year if used instead of heating oil.
For more information about the renewable heat incentive scheme, visit the Department of Energy and Climate Change website.