The UK's highest court said it could not challenge a High Court ruling that blocked the halving of payments to households generating solar energy.
Critics argued the plan to bring the lower rate in in December was too short notice and lacked proper consultation.
The lower tariff will now apply to panels installed after 1 April.
Campaigners argued that the plans had caused huge uncertainty in the industry, which employs tens of thousands of people.
Friends of the Earth's executive director Andy Atkins described the ruling as "a landmark decision which will prevent ministers causing industry chaos with similar subsidy cuts in future".
The government said the court's decision drew a line under the case.
"We will now focus all our efforts on ensuring the future stability and cost effectiveness of solar and other microgeneration technologies for the many, not the few," said Energy and Climate Change Secretary Ed Davey.
What the ruling means
Anybody who had a domestic solar scheme finished before 12 December 2011 gets the old rate of 43.3p per kilowatt hour for the full 25 years of the scheme. That was not at issue in this case.
Now that the government has lost its appeal, anyone who had a scheme finished between 12 December 2011 and 2 March 2012 will also still get the full 43.3p/kwh for the whole 25 years of their scheme.
Installations finished between 3 March and 31 March temporarily get the old higher rate until 1 April when it is reduced to 21p/kwh.
Schemes finished after 1 April will only get the reduced rate of 21p/ kwh.