The Energy and Climate Change Secretary Ed Davey has announced that the subsidy for onshore wind generation will be cut by 10%.
The reduction is smaller than the Treasury had advocated.
Mr Davey said:
"Because value for money is vital, we will bring forward more renewable electricity while reducing the impact on consumer bills between 2013 and 2015, saving £6 off household energy bills next year and £5 the year after."
The Commons Energy and Climate Change Committee is holding an inquiry into the economics of wind power.
Earlier this month Dr Rob Gross from Imperial College and the UK Energy Research Centre told the committee:
"In terms of generation costs onshore wind is among the cheapest of the low-carbon options.
"Offshore wind is rather more expensive, but there are good reasons to hope that the costs can be brought down."
He warned that cuts to subsidies must not be "turned into a political decision when it is a techno-economic decision that should be made in a transparent way, in a way that persuades the international investment community that Britain takes investment in low-carbon seriously".
Dr Gross also said that a cut to the level announced today "is a perfectly reasonable figure at the moment, because developers in this country have to manage uncertainty around electricity wholesale prices".
He added: "If we could build as much wind by the mid 2020s as the Chinese appear to be able to build in a single year, we would meet our targets quite comfortably."
The support for onshore wind from 2013-17 will be reduced by 10%. The level of support is guaranteed until at least 2014 but could change after then if there is a significant change in generation costs.
DECC said a call for evidence on onshore wind industry costs will be launched this autumn and report in early 2013. It will also consider how local communities can have more of a say over, and receive greater economic benefit from, hosting onshore windfarms.
Mr Davey said:
"Renewable energy will create a multi-billion pound boom for the British economy, driving growth and supporting jobs across the country.
"The support we’re setting out today will unlock investment decisions, help ensure that rapid growth in renewable energy continues and shows the key role of renewables for our energy security."