Prompt action will ensure that consumers do not pay more than is necessary and also allows time for a wider range of reforms to be considered, said Ofgem.
Ofgem has put forward a wide range of options for further consultation, including improved market signals, obligations on suppliers and capacity tenders to give greater confidence to help meet the nation's carbon targets. Other options also include more structural reform ranging from a centralised renewables market through to a central buyer of energy.
Alistair Buchanan, chief executive of Ofgem, said: "Our evidence shows that Britain has a window of opportunity to put in place far reaching reforms to meet the potential security of supply challenges we may face beyond the middle of this decade.
"The overwhelming majority of responses to Ofgem's October consultation show that there is an increasing consensus that leaving the present system of market arrangements and other incentives unchanged is not an option. Ofgem has therefore put forward a range of possible options to unlock the up to £200bn of investment Britain may need. We are keen to work with Government to find the best way forward."
According to Ofgem, reform is needed because a combination of factors have come together including: the global financial crisis, significant world-wide demand for investment in energy, tough EU emissions targets, the closure of ageing power stations and an increasing dependency on gas imports.