The plans, the government say, are aimed at moving the UK to the front of the global race for electricity investment, driving the growth of clean energy industries in the UK, and ensuring the best possible deal for consumers.

The Department of Energy and Climate Change (DECC) is proposing four main policy areas to increase the attractiveness of investing in clean energy.

It wants to increase long term certainty on investment in power generation through carbon prices.

It will introduce long term contracts for low carbon generation which offer top up payments for low carbon generators.

Additional payments are proposed for the construction of reserve plants or demand reduction measures to ‘ensure the lights stay on’.

There are measures to limit how much carbon the ‘most dirty’ power stations’ – coal – can emit. An Emissions Performance Standard will reinforce the existing requirement that no new coal is built without carbon capture and storage.

Energy and climate change secretary Chris Huhne said: “These reforms lay the foundations for a sustainable economy, bringing billions in investment in the UK through greater certainty, safeguarding jobs up and down the supply chain, and giving the UK real competitive advantage in advanced energy technologies.”

Observers expect the proposals to lead to energy price rises for consumers, but Mr Huhne said he thought the increases would be far less than critics were suggesting and that prices would certainly rise if no reforms were made.

Greenpeace cautiously agreed with this view. Greenpeace policy director Dr Douglas Parr said: “Business as usual in the energy market would see future bill payers massively exposed to changes in international gas prices – an option that only an ostrich would see as sensible.

“The costs of correcting this market failure are dwarfed by the potential risks of inaction.”

A consultation process will now begin on the transition to new market arrangements. It is anticipated that reforms will be in place by 2013.

Alison Brown

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