An initiative which sees green energy businesses claw back millions of pounds in taxpayers’ cash is to be scrapped.

The Renewable Energy Generation Relief Scheme (regrs) currently offers qualifying companies rates rebates of up to 100per cent.

It cost 7.3million last year, more than double the 3.5 million paid out in 2011 at the end of the scheme's first twelve months.

Firms can currently apply for every building used for the generation of heat or power from biomass, biofuels, fuel cells, photovoltaics, water, wind, solar power or geothermal sources.

Businesses can be reimbursed for between 2.5 per cent and 100 per cent of rates they have paid, dependent on the value of the properties.

However, the Scottish Government, which runs the scheme, intends to limit the subsidy to “schemes in community ownership” from April next year.

A finance document circulated within local government, which has been seen by The Herald, provides details of the provisional total revenue and capital funding allocations for 2016-17.

It states: “The Scottish Government proposes to reform renewable energy relief from 1 April 2016. Relief is proposed to be limited to schemes incorporating community ownership. Further detail of the revised relief will be confirmed shortly.”

When the UK Government decided to end a subsidy scheme for onshore wind farms earlier in the year, Energy Minister Fergus Ewing met representatives from 130 businesses and communities affected by the scrapping of the Renewables Obligation.

First Minister Nicola Sturgeon and other ministers have spoken out against plans to end the subsidy payments a year ahead of schedule, while industry body Scottish Renewables said £3billion of investment in Scotland could be at risk.

Labour MSP Ken Macintosh, who was alerted to the curtailing of renewable energy relief by his constituents in his Eastwood constituency in East Renfrewshire, said: “The renewables industry in Scotland is already reeling from the decision of the UK Government to remove support.

“They thought the SNP Government in Edinburgh would help fight their corner and now they get this sneaky punch in the ribs.

“The constituents of mine who are affected are small indigenous Scottish businesses, exactly the sort of companies we should be supporting."

Alan Baker, managing director of Greenock-based 2020 Renewables, a medium sized developer, said he had been shocked by the announcement.

“For a typical project of six or seven turbines, we’re taking a hit of £60,000 per annum. Over the 25-year life of the windfarm it’s about £1m. If you roll that out across the portfolio we’re probably taking a £40m hit over 25 years."

Stephanie Clark, Policy Manager at Scottish Renewables, said: “It is disappointing that the Scottish Government has chosen to remove part of its support for Scotland’s renewables industry at a time when UK Government actions have adversely affected the economics of the sector,” she said."

Meanwhile, green energy projects have become the largest generator of electricity in Scotland for the first time.

The country produced 49,929 gigawatt hours (GWh) of electricity in 2014, with 18,962 GWh from renewable power sources or almost half (49.7 per cent) of the electricity demand.

The Department of Energy and Climate Change said renewable energy production rose by 11.9 per cent from 2013, with a total of 38 per cent of the electricity generated in Scotland coming from this sector. It compared to 33 per cent from nuclear and 28 per cent from coal, gas and oil combined.

Energy minister Fergus Ewing said they showed the sector was "stronger than ever."

A Scottish Government spokesman said: “In 2010 we took action to protect the renewable energy sector, a fledgling sector, which saw significant rates bill increases at the 2010 revaluation.

"Now that the sector has reached financial maturity, and given the challenging fiscal environment imposed by the UK Government, we are taking steps to target the relief to delivering a benefit to schemes incorporating community ownership.

"The precise detail is still to be finalised, and we welcome further engagement with Scottish Renewables and others in this respect.

"We will also review the position for renewables at the next rates revaluation in 2017, and as part of the Draft Budget have also committed to reviewing the wider business rates system.”