(Reuters) - Government support for renewable energy must end gradually and in tandem with cuts in fossil fuel subsidies, say investors and lobbyists who complain bitterly about unpredictable chopping of incentives.

Most green energy sources still struggle to compete with fossil fuels except in favorable areas, for example for onshore wind in coastal areas of western Europe or in Texas.

Supporters accept low-carbon incentives will come to an end in line with the falling costs of green technologies, but demand governments also halt support for coal, gas and oil.

Investors want a gradual, transparent fall in green technology support, after a trend of unexpected cuts which have made renewable energy a high-risk business.

Europe has the most generous support for solar, but a sharp cut in subsidies after 2008 in Spain, then world market leader, has left a legacy of uncertainty.

Now Italy, the second biggest market after Germany, is in the throes of overhauling solar incentives after months of delays, with new caps for 2011-2012. Germany is praised for flagging annual cuts in incentives well in advance.

"Europe is not necessarily very investment friendly in what we do because of the very volatile regulatory environment," said Bernard Lambilliotte chief financial officer at clean energy investors Ecofin, which has around $1.9 billion under management in energy assets.

"China is a lot more predictable and consistent usually, than for example, Italy," Ecofin alternative energy analyst Max Slee told Reuters.

In an example of unhelpful wind tinkering, a proposed change in incentives in South Africa in March forced investors to re-visit plans, said the head of the Global Wind Energy Council lobby, who acknowledged incentives were still very generous.

"It's just that now they all have to go back and re-do the economics of their projects," said Steve Sawyer, referring to a 20 percent cut which closely followed the launch of such support. "Whether it's done rationally or in a knee-jerk fashion in relation to some other political issue is always the issue."

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