Towns and communities will miss out on the benefits of green energy projects after a change in UK government rules, it has been warned.

Energy campaigners have been left shocked after UK ministers decided to remove the tax relief they could offer investors.

It means that those trying to build schemes such as small-scale hydros or small wind turbines, only have a few weeks to attract investors before they lose out on the promise of 50 per cent or 30 per cent tax relief on their stake.

It could mean the difference between a return of up to 11.7 per cent on their investment, compared to about 4.4 per cent.

Share offers will now need to be closed and all finance in place by Monday November 30, so the associated administration effectively will have to be completed by the Friday before.

It could mean an end to plans to build two turbines on the Shetland island of Fetlar.

Robert Thomson, project manager, said: “We are shell-shocked. We only got the news last night. It really is touch and go now. We thought we would have till March to raise £223,000.

"We launched the share offer last Friday and have got £10,000 in already. But now we only have until the end of November to get the rest. We are having an emergency meeting tonight, but it really is on a knife edge.”

Meanwhile the Edinburgh Community Solar Co-operative is also encouraging investors to move quickly.

The innovative co-operative was launched last month and has already raised more than £100,000. The scheme aims to raise £1.4 million to install solar panels on 25 public buildings across the capital.

Co-operative Chair Richard Dixon said: “I would encourage anyone with an interest in investing in the solar co-op to visit our web site and download the share offer document. Time is certainly of the essence."

Stephanie Clark, Policy Manager at Scottish Renewables, said a growing number announcements from the UK Government in the last four months had left "a pall of uncertainty hanging over the renewable energy industry".

"But in this case there is no doubt: the removal of tax relief from these valuable co-operative schemes is likely to lead to a dramatic decline in the number of towns and villages which will benefit from green energy in future,” he said.

Meanwhile a Scottish Government spokeswoman said: “This most recent development takes away one of the competitive aspects of community energy in terms of being able to raise capital cheaply.

"It also further undermines getting new electricity generation onto the grid, which is foolhardy given National Grid’s recent assessment of a further tightening of the gap between electricity supply and demand. We will work with all our community groups who are seeking to raise capital in this way to get share offers completed before the deadline.”

A Treasury spokesman said that while the government was committed to supporting the investment needed to achieve a cost-effective transition to a low-carbon economy, "we also want to do this in a way that is fair and provides value for money to hardworking taxpayers.

“We are aware of significantly increased interest in the use of subsidised community energy for low-risk tax planning purposes, which is why we have made changes to these schemes to ensure they remain effective at delivering investment to high-risk businesses that need funding to develop and grow, while protecting taxpayers from potential abuse.”