Professor Sir David King warned that without government intervention, the private sector would not deliver the huge sums needed to keep the lights on and end the UK’s dependence on imported fossil fuels.
He said government-led investment in major low-carbon energy infrastructure would reboot the economy following the financial crisis and de-couple it from fossil fuels.
For example, there is a need to move road transport from petrol to electricity, which would require a new generation of nuclear reactors to cope with increased demand, he said.
But passively letting the situation unfold would see major energy companies building new gas-fired power stations, which would leave the UK dependent on imported gas, at the whim of exporting countries and facing rising costs as global demand for gas pushes up prices.
“I think the Treasury feels this is up to the market to deliver, but actually this isn’t going to happen.
“Infrastructure on this scale is going to need public-private partnership with strong Treasury intervention to signal where the investment should take place,” he said.
He added: “I think there are situations where dogma takes over from reason. That’s what I believe may well be happening here.”
He said the Treasury and No 10 needed to grasp the problem, as it was not enough to leave decarbonising the economy up to the Department of Energy and Climate Change.