Waxing lyrical: David Lynch on his new passion - and why he may never make another movie

For several years in the late 2000s, David Lynch used to post an almost-daily weather report on his website from his hometown, Los Angeles. I guess he finds something brilliantly surreal about the meteorological stasis of Southern California, and on the day I drive to meet him at his studio, the weather is the same as it is virtually every other day in the Hollywood Hills. Blue skies, golden sunshine, a gentle breeze.

The studio, which he has occupied for almost 20 years, is in the house where Bill Pullman lived with Patricia Arquette in Lynch's dreamlike 1997 noir, Lost Highway: a cluster of geometric patterns in poured concrete, spread across a slope in a quiet neighbourhood just below Mulholland Drive. Los Angeles may be the capital of the mainstream, but it's also the home of the weird, which makes it an ideal habitat for the director and his unique brand of bizarre Americana.

"I always say people should find a place where they feel good, and I feel good here," he says. "I like LA because of the light. The light makes me feel so good. It's really beautiful. And there's something about LA being so spread out that gives you a feeling of freedom. Light and freedom."

That LA sunlight streams uninterrupted through the large windows into Lynch's workspace, which is not so much an office as an artist's studio. Large canvasses recline against the walls; an apparently unfinished abstract drawing lies flat on a table; the desk is cluttered with art tools and creative detritus, leaving just enough empty space to accommodate his modest Apple laptop.

Now 67, Lynch still wears his signature white shirt buttoned to the neck, a pair of paint-spotted old khakis and a dark sports jacket with at least one elbow worn through. He still styles his grey quiff like a rockabilly. He smokes from a pack of Natural American Spirit cigarettes ("100% Additive-Free Natural Tobacco"), deftly flicking the spent butts on to the concrete floor around the desk. He drinks from a vast cup of coffee, a beverage he loves so much that he recently put his name to three "David Lynch Signature Cup" organic coffee blends.

"I must have a very high tolerance for caffeine," he says. "I always associated smoking and drinking coffee with the art life. They go hand in hand. There's something about drinking coffee and smoking that makes me happy and facilitates thinking. I just really love those things."

Lynch may be best known for his movies, but the last time he made a feature – the epically odd Inland Empire – was in 2006. So we're here to talk not about his filmmaking, nor his art, nor his signature coffee blends, but instead about his burgeoning music career. In the bowels of the house beneath us is the well-appointed recording studio where he recently recorded his second solo album, The Big Dream. And tinkering at the mixing desk is his collaborator and engineer "Big" Dean Hurley – who is, in fact, relatively small.

Lynch released his debut LP, Crazy Clown Time, in 2011. As you might expect from the director of Blue Velvet, the album's blues- infused electronica was angst-inducing and atmospheric. The Big Dream is more of the same: dark, layered soundscapes, marked by the lyrical and musical motifs of early rock'n'roll. Lynch plays guitar and sings, distorting and processing his vocals to unsettling effect. In the absence of any new movies, the records make an intriguing addition to his oeuvre.

The director was born in Montana in 1946, and, during the first 10 years of his life, he recalls, "I would hear a lot of music on the radio, classical and popular, but I wasn't choosing the stations. Then Elvis Presley came along and, for me and about 10 trillion other people, he changed the face of music. It was just so fantastic, so powerful, so beautiful."

Over the years, Lynch's sound design has become almost as celebrated as his imagery – indeed, he once said that although "people call me a director, I really think of myself as a sound man" – and his films contain several renowned music cues, such as the tiny woman in the radiator serenading Jack Nance in Eraserhead (1977); or Dean Stockwell (aka Al from Quantum Leap) miming Roy Orbison's "In Dreams" as Dennis Hopper gurns violently in Blue Velvet (1986). He's also enjoyed an enduring working relationship with film composer Angelo Badalamenti, who wrote the unmistakable synth theme for his influential early 1990s television drama, Twin Peaks.

Lynch didn't cut a record himself until 1997, when he was put in contact with the Scottish vocalist and fiddle-player Jocelyn Montgomery, and produced her LP Lux Vivens: The Music of Hildegard von Bingen (a 12th century German Benedictine nun). It was after that project, unlikely as it sounds, that Lynch found his current, electro-blues groove. "I started to make sound effects with the guitar. That's what got it going, right there. I've always loved the electric guitar: to hold it and work it and hear what it does is unreal. All of the songs on both of my albums started with a jam, pretty much. Dean and I jam. If we're lucky we catch something in a certain sound or beat. And that's our point of departure."

There is, however, one non-original song on The Big Dream, a cover of Bob Dylan's "The Ballad of Hollis Brown". It has a simple plot – in contrast with Lynch's own cryptic narratives elsewhere – but a characteristically unsettling one: a man kills his family and himself out of despair at their grinding poverty. "That was Dean's idea," says Lynch. "We covered a cover: Nina Simone's version of the Dylan song. It's a great song, but also what Hollis Brown is going through is, unfortunately, really timely right now."

He goes on: "I love Bob Dylan. Who doesn't? He tapped into some kind of vein and it keeps on keeping on. There's nobody like him. He's unique, and just… way out cool."

He could almost be talking about himself. Like Dylan, Lynch has acolytes of all ages, and certain music critics have even identified a "Lynchian" strain in recent pop, exemplified most prominently by Lana Del Rey, of whom he professes to be a fan. Band du jour Bastille recently released a single named "Laura Palmer", after the teen victim at the heart of Twin Peaks, while the cover of their debut album featured Lynch-like headlamps playing across a road at night.

The esteem in which Lynch is held in the pop world is also evident in the hip vocal collaborators he has attracted, from Karen O of the Yeah Yeah Yeahs to Swedish singer Lykke Li, who appears on The Big Dream's spine-chilling bonus track, "I'm Waiting Here".

As for his audience, not so long ago Lynch made a spoof iPhone ad that went viral, in which he railed against the phenomenon of people watching films on their phones. Many people will likely hear his music the same way. Is he comfortable with that possibility?

"Headphones mean that the sound is right in your head, and that's OK – although it does seem that if someone's really into the music they shouldn't be driving or even walking, because they could get killed. But I can't listen to music and do other things. I hate it. Music as background to me becomes like a mosquito, an insect. In the studio we have big speakers, and to me that's the way music should be listened to. When I listen to music, I want to just listen to music."

"It's the same with cinema: if you have a chance to enter another world, then you need a big picture in a dark room with great sound. It's a spiritual, magic experience. If you have the same movie on a little computer screen with bad sound – and this is the way people are seeing films now – it's such a shame. It's a shameful, shameful thing. It's so pathetic."

Lynch hasn't directed a movie in almost a decade, and though there are occasional rumours of a script in the works, he seems doubtful that he'll ever make a feature film again. In 2011, he told another interviewer, "I don't know what's happening to cinema. It hasn't settled into what it's going to be next." Now, he says, it is settling – and he doesn't like what he sees.

"It's a very depressing picture. With alternative cinema – any sort of cinema that isn't mainstream – you're fresh out of luck in terms of getting theatre space and having people come to see it. Even if I had a big idea, the world is different now. Unfortunately, my ideas are not what you'd call commercial, and money really drives the boat these days. So I don't know what my future is. I don't have a clue what I'm going to be able to do in the world of cinema."

To many, Lynch's masterpiece was Twin Peaks, and he has attempted to return to the small(ish) screen since: his much-admired 2001 movie Mulholland Drive was initially planned as a television pilot. Last year, he and his fourth wife, actress Emily Stofle, had a baby daughter, who currently keeps him from watching much television, but he admits to enjoying Mad Men and Breaking Bad. He doesn't count out the prospect of making another show himself, and the economic models of AMC, HBO or Netflix might prove more amenable to his vision than the movie studios. "I like the idea of a continuing story," he says. "And television is way more interesting than cinema now. It seems like the art-house has gone to cable."

While his followers await further screen work, Lynch is happy to continue focusing on "small projects": evangelising about transcendental meditation via his David Lynch Foundation for Consciousness- Based Education and World Peace; appearing in a very funny recurring cameo role in the FX sitcom Louie; waiting for a new, 18-tonne press to be delivered to his favourite printing workshop in Paris, so that he can get to work on some vast lithographs. He also has an exhibition of paintings and drawings coming up in LA this autumn. Lynch started his career as a fine artist, and for now he seems content to end it the same way.

There will most likely be a third album, too. "Dean will say to me, 'David, you know this is the ninth song we've done since the last album?' I'll say, 'You're kidding me. So if we do three more, we'll have another album?' It's so much fun to experiment and find something that feels good. It's like painting: you get on one thing and that's what keeps coming out. But pretty soon it becomes boring to you, and it leads to something else. There's a transition, when you're sick of what you're doing and yearning for the next thing. And the only way to get there is to just keep trying and not be afraid to destroy something. And eventually an idea for the next thing will come out of it."

'The Big Dream' is released on 15 July on Sunday Best records