UK households and businesses must contribute to major investments to revamp the country’s energy infrastructure, the energy secretary Chris Huhne has said.

Unveiling a package of reforms, Huhne said that ageing power stations and an outdated grid will need £110bn to overhaul, even without renewable generation.

“Since privatisation in 1990, our electricity market has served us well, delivering reliable, affordable electricity. But in the years ahead, we face unprecedented challenges. The existing market was not designed to meet them,” Huhne said in a statement.

Around a quarter of existing power stations will close over the next decade, threatening the security of electricity supplies, according to Huhne, while demand for electricity could double over the next 40 years as the population increases.

The energy reforms, which will come into effect in 2013, include new long-term contracts for renewable energy generation, a minimum price for carbon emissions from fossil fuel plants, and contracts that encourage companies to help their customers become more energy-efficient.