Ontario's Liberal government announced Thursday it would lower the premiums it pays for future wind and solar energy projects, but electricity bills will keep rising.

The province will drop the guaranteed rate for small rooftop solar projects from 80.2 cents per kilowatt hour to 54.9 cents, while larger solar installations will get between 34.7 cents and 44.5 cents a kWh.

The amount guaranteed for power from industrial wind turbines will drop from 13.5 cents per kilowatt hour to 11.5 cents, regardless of the size of the wind farm.

Ontario Power Generation, the government-owned utility, is paid 5.6 cents a kWh for nuclear power and between two cents and 3.5 cents per kWh for power from its hydro-electric facilities.

Residential consumers pay between 6.2 cents and 10.8 cents a kWh.

There were thousands of contracts approved during the first two years of the feed-in-tariff program at the higher rates that will last for 20 years.

"It will be no surprise that this review suggests prices go down, so prices will be going down," announced Energy Minister Chris Bentley.

"We expect about 20 per cent on average in solar and about 15 per cent on average for wind."

Green energy accounts for only about five per cent of the increase in electricity bills, said Bentley.

However, the government's 2010 fall economic update, which warned hydro bills would jump 46 per cent over five years, said green energy would be responsible for 56 per cent of that increase.

Industry insiders knew the premiums for wind and solar power would come down, but expressed concerns Thursday that the lower prices will kill some projects.

"We believe that this new price will prove extremely challenging for many projects and could prevent a number of them from proceeding," said Robert Hornung, president of CanWEA, which represents wind power producers.

"This is particularly true for smaller projects and new entrants to the industry, reducing the number of communities and the diversity of players able to contribute to and benefit from the government's ambitious objectives."

The Progressive Conservatives said the lucrative premiums paid for wind and solar power are making electricity unaffordable for families and driving companies out of Ontario, and called on the Liberals to cancel the feed-in-tariff program immediately.

"It would stop the high subsidies that have caused energy bills to skyrocket," said Opposition energy critic Vic Fedeli.

"We believe that the FIT has caused huge damage to Ontario businesses and it has become a jobs killer."

The Liberals pointed out Fedeli was mayor of North Bay in 2007 when the council voted to install solar panels on the roof of city hall, accusing the rookie Tory member of hypocrisy.

The New Democrats say if the price of renewables is coming down the province should scrap its plans to spend at least $33 billion refurbishing nuclear plants and building two new reactors and focus more on green energy.

"Why isn't he taking the next logical step, moving away from nuclear and committing to a renewable future for Ontario," asked NDP energy critic Peter Tabuns.

"If we don't do that we are going to face huge increases in our hydro bills. That needs to be recognized."

Groups such as Greenpeace and Environmental Defence also called on the Ontario government to abandon nuclear power in favour of wind, solar and other renewable forms of energy.

"The drop in renewable prices is proof that the Green Energy Act is a success," said Greenpeace spokesman Shawn-Patrick Stensil.

"Now the McGuinty government needs to allow affordable renewable power to fairly compete to replace Ontario's aging nuclear stations."

Bentley also promised the province would give priority to new wind and solar projects that have local support, but stopped well short of giving municipalities a veto over new green energy installations.

"We've rejected a municipal veto. We'd have 440 different rules around the province," he said.

"What we have done ... is found the right balance to make sure that we can continue to bring on clean and green energy projects, but also making sure that those with municipal support are more likely to proceed than those that don't (have it)."

The Association of Municipalities of Ontario welcomed the government's announcement as a step in the right direction, but said the fact that the province retains the power to decide where wind and solar farms are located will "disappoint" some communities.

"AMO welcomes clarity on where renewable projects will not be permitted, such as on prime agricultural lands and subdivisions," AMO President Gary McNamara said in a release.

"The changes announced today should have the effect of gravitating green energy projects toward communities that support them."

The government will meet its goal of generating 10,700 megawatts of electricity from renewable sources by 2015 -- three years early -- said Bentley, and will review that figure next year to see if it should be increased to add more green energy to the power supply mix.

Contracts have already been signed for about 75 per cent of the 10,700 megawatts the province hopes to generate from green energy.