Ofgem said the amount of spare generation capacity could fall from 14 per cent to only four per cent by 2015, largely due to tough environmental targets and the closure of coal and oil-fired plants to cut carbon emissions.
Ofgem said this would leave Britain relying more on imported gas, which would make price rises more likely.
The regulator's chief executive Alistair Buchanan said Britain's energy industry faces "unprecedented challenges to attract the investment to deliver secure, sustainable and affordable energy supplies for consumers."
Responding to OFGEM’s report, Angela Knight, chief executive of Energy UK, said today: “We must secure over £150bn of investment in the UK to replace aging power stations and infrastructure and meet our carbon targets. All while making sure that energy bills are affordable for the millions of homes and businesses that rely on the power supplied by our members.