Plans to build the world's largest tidal energy project on the Severn Estuary will be ruled out by a government report this month.
The £20bn scheme between Wales and Somerset will now only proceed in the unlikely event that it finds private financing, according to The Observer.
It would have provided 5% of the UK's electricity.
Environmentalists are expected to welcome the news, though critics will say it is further evidence the government is not living up to its promises on the 'green economy'.
The report will recommend feasibility studies for a much smaller version of the project, costing around £3bn, though this would also require some private backing.
A consortium thought to be interested in raising funding for the scheme is the Severn Tidal Power Group (STPG), a consortium which includes Sir Robert McAlpine and Balfour Beatty. But a spokesman told The Observer it was unlikely to foot the estimated £250m cost of getting the project to planning stage due to the risk of the application being refused.