A new ministry to oversee energy and climate change policy was created on Friday.

The move was welcomed by the power industry. Senior executives said that the shake-up, which will merge parts of the Department for Business, Enterprise & Regulatory Reform (Berr) and the Department for Environment, Food and Rural Affairs (Defra) into a single organisation to be led by Ed Miliband, reflected the growing importance of energy policy in Downing Street.

It comes as Britain struggles to upgrade its ageing power infrastructure, meet tough carbon emissions targets and secure adequate long-term energy supplies as oil and gas output in the North Sea declines.

Nick Horler, chief executive of ScottishPower, said: “This is an opportunity for a holistic and co-ordinated approach to the giant challenges of ensuring energy security and protecting the environment.”

Another power company chief executive said: “Anything which provides a more co-ordinated approach to climate change and energy issues has to be encouraging.”

However, there was regret at the loss of John Hutton, who has been appointed Defence Secretary. The former Business Secretary was seen as being among the most successful ministers dealing with energy issues in years. “In an ideal world it would have been Hutton being appointed to head this new department,” a source at one of Britain's big power companies said.

The industry is hoping that the creation of the new structure will bring to an end infighting between Berr and Defra over key areas of energy policy, including fuel poverty and the types of incentives required to channel fresh investment into green energy projects.

Neil Bentley, director of business environment at the CBI, said that the new structure could prove problematic if one faction were to gain the upper hand: “Both climate change and energy security are vital national interests that need the Government's fullest attention and urgent action,” he said. “Combining them may help to identify both synergies and trade-offs, but we must avoid either becoming subordinate to the other. Ultimately, sound, timely policy decisions matter most, not departmental names or structures.”

Others expressed uncertainty about how Mr Miliband, the former Cabinet Office Minister, was likely to handle his new brief. His approach will be crucial on areas of energy policy, including negotiations over new European Union targets for the amount of energy generated from wind and wave power. Since January, Britain has been committed to raising its share of renewable power generation from 4 per cent to 40 per cent by 2020, a target that experts say is unachievable.

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