Britain needs to spend more than £110bn on new electricity supplies to keep the nation's lights on, the Government has claimed.
Energy Minister Chris Huhne has warned that with ageing power stations closing down, urgent market reforms are needed.
One of the key proposals in a White Paper published on Tuesday, is the introduction of contracts which guarantee long-term stable prices for electricity from low-carbon sources.
These include nuclear power stations and offshore wind farms.
If the price of electricity outstrips the prices guaranteed in the contracts, companies will have to pay back the difference, preventing a windfall for low-carbon generators.
According to Mr Huhne, the current electricity market is unable to meet the demand - and, without action, risks of costly blackouts will be higher at the end of the decade.
He said: "The scale of investment needed in our electricity system in order to keep the lights on is more than twice the rate of the last decade.
"This package will keep the lights on and bills down; it will insure us against shocks from volatile parts of the world like Libya, and end the dithering about our need for new plants."
Opinion is divided on what the reforms will mean for customers, however.
Critics have claimed that the so-called 'contracts for difference' will instead lead to even higher prices - and end up being a hidden subsidy for nuclear power.
Louise Hutchins, climate campaigner for Greenpeace, said: "Consumers are bearing the brunt of colossal price hikes in domestic energy bills because of the over-reliance of the big six energy suppliers on importing expensive fossil fuels while at the same time ignoring clean energy sources around our shores."
According to the Department of Energy and Climate Change, leaving the market as it is would see household electricity bills increase by £200 by 2030, but reforms will end up costing £160 per household a year by that time.
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