Environment Minister Peter Garrett announced the new scheme, which is set to replace the Home Insulation Program and the Solar Hot Water Rebate.

Both schemes were discontinued as of close of business yesterday.

Under the new scheme rebates for the installation of ceiling insulation and solar hot water systems will both be reduced to $1,000.

For insulation rebates householders, rather than installers, will claim the rebate through the Medicare system.

The new scheme requires all installers to re-register, pay a cash bond, show evidence of meeting the training and skills requirements.

One of the biggest issues for insulation installers is the insulation component of the new scheme will not come into operation until June 1, leaving many with quotes they won't be able to honor.

Central Highlands Insulation owner, James Smith, said he was not just concerned for his business but for the future of the entire industry.

"This new scheme will send a lot of businesses to the wall,'' Mr Smith said.

"There is no rebate at the current moment and won't be for three months.

Mr Smith said companies had spent large amounts of money re-training staff to meet government specifications and now there won't be any work.

Ballarat Associated Fibrous Plasters manager Shaun Holloway said the industry knew changes were inevitable.

"But to make the announcement at lunchtime and to close the scheme on the same day is a bit rich,'' Mr Holloway said.

"It's a bit of a shock as we must wait to find out what the new scheme is and if it's attractive to our customers.''

Insulation installers will have seven days to claim outstanding rebates.

Ballarat Renewable Energy and Zero Emissions president Nick Lanyon said he was angry.

"We're very disappointed to see the rebate reduced as people need a decent incentive to move from fossil fuel based systems to solar," Mr Lanyon said.