The first capacity auction, which is scheduled to be held in December, will auction off 50.8GW of capacity, with the rest being auctioned off in late 2017.
The capacity procured in these auctions should be ready for delivery in 2018/19 and represents more than 80 per cent of the peak electricity use in the UK today.
The cost of arranging the back-up power via the capacity mechanism is predicted by Decc to add £2 per year to the average consumer’s energy bill.
Energy secretary Ed Davey said: “There was a real risk back in 2010 that an energy crunch would hit Britain in the middle of this decade and lead to damaging power cuts.
“But the excellent news is that with today’s announcement we have the final piece of the jigsaw of our detailed energy security plans and can now say with confidence that we have defused the ticking time bomb of electricity supply risks we inherited.”
The full implementation of the capacity mechanism is still subject to EU state aid approval.