The UK risks facing blackouts in 2015 on top of higher electricity bills because it is running out of energy generating capacity in the next four years.
The warning from Ofgem is part of new analysis which predicts the highest risk of electricity shortfall would be in 2015/16.
The regulator forecasts the amount of spare generation capacity, also called electricity margins, could fall from 14% now to around 4% in the next four years.
The forecast comes three years after Ofgem’s Project Discovery report, which warned electricity shortages could lead to a rise in energy bills. It now suggests the increase in risks to security of supply in the next four years could be due to coal-fired power stations closing sooner than it had predicted in 2009.
Alistair Buchanan, Ofgem’s Chief Executive suggested more investment is needed to build new generating capacity.
He said: “The unprecedented challenges facing Britain’s energy industry, identified in Ofgem’s Project Discovery, to attract the investment to deliver secure, sustainable and affordable energy supplies for consumers, still remain. Ofgem is working with Government on its plans to reform the electricity market to tackle these issues.”
Energy Secretary Ed Davey said the Government would “consider carefully the implications” and respond to the report before the end of the year.
He added: “Security of electricity supply is of critical importance to the health of the economy and the smooth functioning of our daily lives. That is why the Government is reforming the electricity market to deliver secure, clean and affordable electricity.”