The Government U-turn over its renewable energy subsidy threatens to ratchet up pressure on cash-strapped families while killing off ambitious green projects which would have shaved money off domestic fuel bills, campaigners have warned.

The Local Government Association (LGA) has launched a staunch criticism of "unrealistic and unacceptable" proposals to significantly reduce the lucrative Feed-in Tariff (FiT) subsidy, despite initially encouraging community groups and councils to produce their own solar energy.

Last week's announcement that solar panels not registered before the new December 12 deadline will be unable to tap into the cashback incentive at its current, attractive rate has put serious pressure on councils and homeowners to get their schemes completed in the next four weeks – an unrealistic deadline for many.

It has presented councils with the conundrum of whether or not to pursue ambitious solar plans, conscious that failure to meet the deadline could leave their already-depleted coffers with significant financial holes which the new tariff rate is unlikely to plug. Homeowners, too, will see the once-lucrative subsidy wither away to something which some claim, economically, is hardly worth bothering with.

David Parsons, chairman of the LGA environment board, said while it was imperative to protect residents against "runaway" schemes that did not provide value for money, councils and local people were paying for Government mistakes.

He said rushing through the cuts would leave schemes that were commissioned on the basis of the previous rate of subsidy in jeopardy.

He added: "To expect councils and the solar industry to deliver projects and have them registered within six weeks is unrealistic and unacceptable.

"As a result many projects will now be stopped immediately. The costs incurred to councils as a result of this could run into hundreds of millions of pounds.

"This is going to have a terrible impact on families who could have benefited from cheaper energy. It could also lead to the loss of thousands of jobs as energy firms find contracts falling by the wayside," he warned.

The Government's decision to rein-in the tariff was prompted by concerns the fund was being gobbled up by large companies capable of producing solar energy on a mass scale.

But community groups have also found their tariffs reduced.

It has meant the Government has found itself facing double legal challenges from a host of Westcountry energy companies, while campaigners including Stephen Frankel of the ambitious Wadebridge Renewable Energy Network in North Cornwall have written to Prime Minister David Cameron begging for a re-think.

Ian Smith, managing director of Cornwall-based sustainable energy charity Community Energy Plus, said the new financial incentives still offered a reasonable return on investment.

But he added: "The aspect of the proposals which is truly outrageous is the speed at which the new tariffs are being introduced.

"It's causing chaos within the sector while damaging consumer confidence.

"The industry desperately needs clarity on the review of all FiTs... so that we can get on with long-term planning and not be at the mercy of the Government pulling the rug from beneath us again." Independent Cornwall Councillor and environment expert Julian German said home owners and businesses were destined to lose out if the Government persisted with the FiT cuts – particularly in Cornwall where conditions for solar power are unrivalled in the UK.

He added: "There will be significant cost to the taxpayer. Ironically, the very thing which should have helped snip money off energy bills and earn money for local authorities is now costing taxpayers and councils who are paying the price for doing what the Government encouraged – investing in green technology."

Torbay Council has recently shelved plans to fit solar panels to up to 45 public buildings.

Deputy mayor David Thomas said: "If we were to receive information that the Government was looking again at this and pushing the deadline back to next April it would be really useful and give us time to get back on board."