More firms will be encouraged to sign up to energy contracts which could see their power cut at times of peak demand under Government plans to help prevent blackouts.

Energy Secretary Ed Davey said it was a "sensible" plan to reduce demand, and hundreds of firms had contracts which allowed that to happen in exchange for a financial benefit.

Mr Davey insisted "we are going to keep the lights on" and said there was an "investment renaissance" in the energy sector, with projects including nuclear and renewable generation.

Loading article content

Asked whether the plans included asking industry to close down or move production to off-peak times, Mr Davey said such measures already existed but were being expanded.

"If they want to, if they are prepared to do that and be paid for it, and it makes commercial sense for them that's a very sensible way," he said. "This has been around for a long time, there are 200 of these contracts already out there, what we want to do is see if we can expand that."

Ofgem has warned that spare generating capacity could fall as low as 2%, increasing the risk if a power station is taken offline or cold weather increases demand. But Mr Davey said: "We are going to keep the lights on, that's clear. When we came to power energy investment had been relatively low, the Labour Party failed to deal with Britain's energy deficit.

"From day one we have been pushing investment up massively."