Cameron pledges 'biggest shake-up' of energy policy

The Tories' long-awaited energy plans – billed as the biggest shake-up of energy policy in a generation – also propose increased investment in nuclear and renewable power.

The energy regulator would act as supervisor of an electricity "bank" to ensure supply always stayed ahead of demand, just as in financial markets where a central bank specifies the reserves that other banks in the system should have

The long-awaited policy paper Rebuilding Security also proposes a floor price for carbon so that potential investors in power plants "know where they stand".

A streamlined planning system would allow for the speedy facilitation of nuclear power stations and carbon capture and storage (CCS) technology.

Launching the paper at a National Grid terminal in Kent, Mr Cameron said: "British energy policy is out of date.

"It was designed almost 30 years ago for a world in which Britain had an excess of generating capacity; in which we enjoyed the benefits of growing North Sea oil and gas production; and in which neither local pollution nor climate change were the concerns they are today.

"Today, we are setting out a programme for the long-overdue reform of British energy policy – together with the actions we will take to mobilise the investment required to enact those reforms and our strategy for minimising the cost to consumers."

Shadow Energy and Climate Change Secretary Greg Clark added: "The challenges of climate change and of securing our energy supplies present a growing threat and five more years of Gordon Brown would only make a precarious situation worse.

"We need radical change and in this Green Paper we set out plans for the biggest overhaul of British energy policy in a generation.

"Our policies will deliver secure, sustainable and affordable energy for the years ahead, while boosting investment and creating jobs.

"Ours is a plan to turn a threat into an opportunity, demonstrating the energy leadership and values needed to get Britain back on track."

Tories believe developers should be "incentivised" to build enough generating capacity to provide a reliable electricity supply at times of peak demand.

An energy regulator in the electricity market would be able to monitor capacity and where it was inadequate, it would have the power to secure the capacity required in order to prevent shortages and blackouts.