The subsidy for onshore wind energy generation is to be cut by 10%, the government has announced.
The Treasury is thought to have favoured a larger cut of up to 25%.
It is one of a number of cuts which the Department for Energy and Climate Change said should encourage up to £25bn in new investment in energy generation between 2013 and 2017.
The measures should also reduce the impact on household energy bills, it said, saving £5-£6 a year on average.
Under the current arrangements £44 of the average household bill would go towards renewables in 2013-14, rising to £50 in 2016-17.
Under the new subsidy levels, that will be £6 less in 2013-4, £5 less in 2014-5, but will be £1 higher in 2015-6 and £3 higher in 2016-7.
MPs on the Commons Energy and Climate Change Committee warned earlier this month that cutting subsidies too fast could increase bills.
Energy Secretary Ed Davey said the projected investment of £20-25bn could also encourage the investment of “hundreds of thousands of jobs”.
“The economy needs that investment and our climate change challenge needs this green energy,” he told the BBC.
BBC environment analyst Roger Harrabin said there had been a long-running battle between Mr Davey’s Energy Department and the Treasury over the size of the cuts.
The 10% cut appears to be a victory for the Liberal Democrat energy secretary, our correspondent says. Some Conservative MPs with wind farms in their constituencies had lobbied for a much bigger cut.
The Energy Department has also said that if gas “proves cheap” it will play a major role after 2030, by which time the UK should have substantially reduced its carbon emissions from energy generation.
The Treasury insisted that if there is a global gas boom, UK consumers should share the benefits, Roger Harrabin said.
But that has raised fears that the UK could breach renewable energy targets as well as concerns about the volatility of gas prices.
The government’s official advisers on the Climate Change Committee have said that the increased use of gas could lead to targets being breached unless carbon capture technology is advanced to clean up emissions from gas.