The decision ends a stand off between the Department of Energy and Climate Change and the Treasury, which had been pushing for a 25% cut.
It also comes two days after Scotland's first minister, Alex Salmond, wrote a letter to UK energy minister Ed Davey stating Scotland was pressing ahead with a 10% cut. Historically, Scotland's energy subsidies have been on a par with the rest of the UK.
The UK government claimed the changes could bring investment of £20-25 billion between 2013 and 2017. It also said the package could see the production of £79/TWh in renewable energy by 2017.
In a statement, Decc also said it was introducing a £500 million allowance to secure investment in gas fields on the UK Continental Shelf. In a statement Decc said "we do not expect the role of gas to be restricted to providing back up to renewables, and in the longer term we see an important role for gas."
There have been reports of a rift with UK chancellor of the exchequer George Osbourne over the policy. Osbourne is believed to have wanted concessions for the gas industry in return for keeping the 10% cut.
Speaking about the policy review, Davey said: "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."
"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."
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