TOP bosses have dismissed Government targets for renewable power and demanded the UK push for energy market deregulation in Europe.

The Institute of Directors welcomed Tony Blair's announcement of a new review of energy policy, but said it could not come fast enough.

Energy has soared to the top of the business agenda as gas and oil prices leapt ahead, squeezing profit margins as firms tried to cope with rapidly rising higher costs.

Miles Templeman, IoD director general, said: "The sooner this happens, the better.

"Energy costs have shot up the business agenda and we need to see firm decisions made as soon as possible, so that companies can be assured there will be affordable energy supply in the future."

IoD chiefs warned that significant new generating capacity would be required over the next two decades to replace coal and decommissioned nuclear power stations. But replacing generating capacity with combined cycle gas turbine (CCGT) plants alone would raise problems over supply and price security and leave the Government's desired reduction in CO2 emissions in peril.

Mr Templeman said nuclear capacity should be maintained at least at current levels - around one-fifth of total electricity generation But the Government's targets for renewable energy sources were "overly optimistic" and would not be met, Mr Templeman said.

He added: "The latest energy review should not ignore the international dimension. First, Government commitments to cut CO2 emissions 20 per cent below 1990 levels by 2010, impose an extra cost on UK business beyond the Kyoto protocol. Second, the UK needs to lead a drive for true energy market liberalisation and deregulation across Europe