Britain faces a grim future of power blackouts and massive economic disruption unless urgent action is taken to head off a looming energy supply crunch, MPs said yesterday.

In a devastating assessment of the country's energy sector, a report from the Business and Enterprise Select Committee said that the Government's laissez faire approach was failing to deliver the estimated £100 billion of new investment that will be required to renovate Britain's crumbling infrastructure.

“The situation is now very serious and we believe that a simple trust in the market's ability to deliver without any intervention will see us facing an 'energy crunch' in the medium term,” the report said.

Peter Luff, the chairman of the committee, called for a “radical rethink ... if the lights are to stay on”.

The report, the product of a six-month study, said that Britain's power network was now so decrepit that power-generating capacity equivalent to nearly one third of present demand would be retired from service within 12 years.

It said that it was highly doubtful whether this could be replaced in time, especially with the downturn in the economy undermining the ability of utility companies to raise finance and make fresh investments in new plants, including wind farms and new nuclear reactors.

Other specific concerns included Britain's acute shortage of gas storage - only 13 days, compared with 99 days in Germany and 122 days in France. Mr Luff said that this was increasing the volatility of Britain's wholesale gas market, which, in turn, was harming consumers by forcing up prices.

The report read: “If the UK is to avoid falling victim to even higher levels of wholesale gas price volatility in the coming years, it requires a level of growth in gas storage that is an order of magnitude greater than that which the market has achieved on its own to date.”

Given the economic climate, it said that the Government “must now reconsider the likelihood that investment will take place without some form of regulatory intervention”.

The report also attacked Ofgem, the industry regulator, for being “slow to respond to rising concern over the functioning of the energy markets” earlier this year after a round of steep price rises.

It called for the Government to consider granting enhanced powers to Ofgem to allow it to deal with potential abuses in the wholesale power markets, amid concern that speculators were making big profits at the expense of hard-up consumers.

A spokeswoman for the Department of Energy and Climate Change said: “We take seriously our responsibilities in securing future energy supplies, but it's wrong to talk about an energy crunch. There will always be demand for energy so there will always be a market for generation. We have had reliable energy supplies for decades, and the industry has shown that it is responsive, and it is already building to meet future demand.”

The committee's warning followed a speech on Tuesday by Ed Miliband, the Energy Secretary, in which he laid out a blueprint for a far more muscular state role in Britain's energy sector.

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