You want to see a modern monster? Consider Drax, Britain's largest coal-fired power station, providing nearly 4,000MW of electricity for the grid, burning up to 36,000 ton of coal a day and generating 22.8 million ton of carbon dioxide a year.

Yet most of its energy goes to waste. The next time an industrialist or power company tells us how difficult it would be to slash carbon emissions, consider that Britain's electricity system loses two-thirds of the energy it generates before it even reaches our plug sockets.

That is because our energy infrastructure is centralised, with predominantly large-scale coal, gas and nuclear power stations generating electricity far from where it is actually used.

These power stations generate enormous heat, but because there is no use for this heat, it is thrown away, wasted up cooling towers and into rivers or the sea. More energy is lost over the long transmission wires that run to our towns and cities. This outdated electricity system is responsible for one-third of all CO2 emissions in the UK. Britain is wasting enough heat to supply the hot water and heating needs of every building in the country.

There is a well-established, cheaper, cleaner and more secure alternative: decentralised energy. Using combined heat and power units, which can vary in scale from supplying a single home to a city district or an industrial area, heat produced in local power stations is channelled through underground networks to warm buildings and provide hot water. Efficiencies of as much as 95 per cent have been achieved.

A decentralised energy system works well with renewable technologies. Modern combined heat and power plants are multi- fuelled, allowing them to switch to cleaner fuels flexibly and use carbon-neutral biomass. The system can integrate solar electric panels and wind turbines alongside renewable heat sources such as solar thermal and geothermal. It is a more secure system, it is more efficient and it opens the way for a much greater range of technologies, helping cleaner fuels and re-newables take off.

It is already a reality. In Denmark, half of all electricity is generated in a decentralised system, in Holland 40 per cent. Most of Copenhagen uses combined heat and power, with heat networks travelling more than 40km. In Sweden, the city of Malm is pushing the boundaries further, with a district powered and heated by renewable energy in a decentralised framework.

Leaders in the UK are beginning to grasp the potential of de- centralised energy. David Cameron, who describes nuclear power as "the last resort", says: "We need to move from the old-fashioned top- down model of energy supply. In a word, the future's not centralised, it's decentralised." Sir Menzies Campbell says: "We need a decentralised system for producing and supplying Britain's energy, with a strong emphasis on re-newables. New nuclear power is not the answer to climate change."

Only Tony Blair is committed to a wasteful, vulnerable, centralised energy system. His passion for nuclear power could fatally undermine renewable technologies and efficiency measures in the UK, as is happening in Finland, the only other European nation forging ahead with nuclear new-build. Decentralised energy is a technology with the potential to revolutionise our approach to climate change.