He said renewable power will become “dominant”, with new subsidies being provided to immature power generators including offshore wind and wave power as the UK tries to meet ambitious carbon targets.
Huhne is desperate to meet a target of slashing carbon production by 34 per cent by 2020. To achieve this more than £110bn of investment is needed in grid upgrades and new power stations.
The coalition will phase out a scheme that allowed renewable energy providers to trade “awards” with traditional power generators trying to fulfil their carbon obligations.
Instead low-carbon support will be extended to cover nuclear and clean coal. The government also says it will examine rules that mean energy firms do not have to pay a tax to use fossil fuels to produce electricity.
Energy and climate change secretary Huhne said: “We have a once-in-a-generation chance to rebuild our electricity market, rebuild investor confidence, and rebuild our power stations.”
Critics say the changes, which are subject to a two-month consultation period, could push bills higher by up to £500 a year.