The government's support for micro generation renewable energy has come under fire again today after leaked documents revealed that applications for grants to install green energy systems have slumped.

The Low Carbon Buildings Programme was reformed last year after it proved so popular that monthly allocations of grants were repeatedly exhausted on the first day of each month. The government responded last May by cutting the maximum size of the grants on offer from £15,000 to £2,500 and now leaked documents have revealed that the number of people applying for grants collapsed during the second half of last year.

According to a breakdown of grant allocations obtained by The Guardian just 270 grants for photovoltaic (PV) solar panels were granted last year, compared with 130,000 in Germany.

Philip Wolfe, executive director of the Renewable Energy Association, said that the PV sector had been particularly badly hit by the changes as the high cost of panels meant that grants of just £2,500 had limited impact. However, he added that the loss of confidence in the programme had also impacted cheaper renewable energy systems.

The figures obtained by The Guardian confirm this, revealing that 843 grants were made for solar hot water panels were made last year, compared to 1,610 in the seven months from May 2006 when the scheme started.

Similarly, there were 110 grants for micro wind turbines last year, compared with 380 in the first seven months of 2006, while no grants were processed for ground source heat pumps in the last three months of 2007, compared with 30 to 40 grants a month in 2006.

Wolfe said that such swinging cuts in the grants on offer was always going to have a massive impact on the health of the still embryonic micro-renewables industry. "We met up with the relevant department recently and had to try really hard not to say "we told you so," he added. "When the budget was increased for the programme last year only for the level of grants to be cut it there was always going to be a problem."

Wolfe urged the government to reinstate the grants back to their previous levels and argued that they may even have to be raised further to restore confidence in the initiative.

The report will also again increase pressure on the government to adopt a feed in tariff (FIT) whereby households are guaranteed an above market price for any energy they generate using microgeneration systems that is then fed back into the grid. The model was pioneered in Germany where it has underpinned a booming renewables market and was picked up last year by the Conservative Party which has promised to introduce a similar scheme if elected.