Government attempts to 'reclaim' the green agenda by ploughing £1 billion into effort to cut Britain's overseas gas reliance

Ministers will divert money currently earmarked to build a new gas fired power station into projects to cut electricity demand

The Government is to plough up to £1 billion into projects to cut Britain’s reliance on overseas gas, as part of a drive by Conservatives in the Coalition to try and “reclaim” the green agenda.

Under proposals to be announced later this year ministers will divert money currently earmarked to build a new gas fired power station into projects to cut electricity demand.

The move will be portrayed by David Cameron as proof that the Conservatives are still committed to being a “green” Government despite plans to push ahead with fracking.

In the next few weeks Mr Cameron will give a keynote speech on the environment where he will warn that with worldwide energy demand due to rise by a third over the next two decades only those countries that energy efficient that will remain competitive.

In a direct challenge to Conservative climate change sceptics he will warn the Britain cannot afford not to prioritise green energy and electricity saving measures.

As part of that the Department of Energy will announce plans to allow companies to “bid” for up to £1 billion in public funds to carryout large scale energy efficiency projects which would otherwise be uneconomic.

Government sources suggested this could include replacing the entire stock of motorway lighting to efficient LED bulbs and retrofitting energy efficient technology to electricity intensive industries like steel and aluminium smelting.

But under the proposals companies would also be able to “bundle” hundreds of smaller electricity saving projects such as installing efficient domestic electric heating in homes to bid for the funds. All electricity saving would have to be assessed a verified.

DECC has estimated that if a 10 per cent electricity demand reduction could be achieved, this could result in electricity system cost savings in the region of £4bn by 2030.

This they say would more than compensate for the costs of making efficiency investment in homes and businesses.

The move will be spear-headed by the Conservative minister Greg Barker who is also responsible for the Green Deal.

The Green Deal, which was launched last month, aims to reduce domestic energy demand by providing homeowners with upfront capital to carry out energy saving improvements to their home with the cost of capital being covered by lower gas and electricity bills.

Electricity generation is the UK’s largest single source of greenhouse gases, contributing around a third of the UK’s total CO2 emissions.

Under the Government’s plans to replace the current generation of coal power stations and ageing nuclear reactors the UK will in future rely on renewables, nuclear and gas power stations to provide future electricity needs.

Built into the system will be a number of gas power stations – which can be turned on at a moments notice to provide “standby resilience” to prevent the lights going out at times of maximum demand.

But ministers believe they could build at least one less power gas station if they can take consistent demand out of the system.

“This won’t affect the money for renewables,” said a source. “Its about saying can we spend less money building gas power stations and reduce our carbon emissions over the long term.”

Greenpeace said it would welcome the move.

“An effective new energy efficiency programme would be welcome since it would cut Britain’s energy bill, and reduce our dependence on burning expensive and polluting imported gas,” said its political director, Joss Garman

“The only risk is that money could be diverted away from getting renewable energy projects off the ground. Ed Davey can avoid this by simply re-directing hand outs currently headed to the gas industry.”