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The Energy and Climate Change Secretary Ed Miliband has also announced £500,000 of new funding to further develop embryonic technologies like tidal reefs and fences. The progress of these technologies will be considered before decisions are taken whether to go ahead with a Severn tidal power scheme.

The tides in the Severn estuary are the second highest in the world. The largest proposal being taken forward has the potential to generate nearly 5% of the UK's electricity from a domestic, low carbon and sustainable source.

Over the past year, the Government-led feasibility study has been investigating a list of ten options, gathering information on the costs, benefits and environmental challenges of using the estuary to generate power.

The proposed shortlist is as follows:

Cardiff Weston Barrage: A barrage crossing the Severn estuary from Brean Down, near Weston super Mare to Lavernock Point, near Cardiff. Its estimated capacity is over 8.6 Gigawatts - twice that of the UK's largest fossil fuel power plant - and it could generate nearly 5% of UK electricity.

Shoots Barrage: Further upstream of the Cardiff Weston scheme. Capacity of 1.05GW, similar to a large fossil fuel plant.

Beachley Barrage: The smallest barrage on the proposed shortlist, just above the Wye River. It could generate 625MW.

Bridgwater Bay Lagoon: Lagoons are radical new proposals which impound a section of the estuary without damming it. This scheme is sited on the English shore between east of Hinkley Point and Weston super Mare. It could generate 1.36GW.

Fleming Lagoon: An impoundment on the Welsh shore of the estuary between Newport and the Severn road crossings. It too could generate 1.36GW.

All ten projects and the proposed shortlist will now be subject to a three month public consultation which begins today.

Energy and Climate Change Secretary Ed Miliband said:
"Fighting climate change is the biggest long term challenge we face and we must look to use the UK's own natural resources to generate clean, green electricity.

"The Severn estuary has massive potential to help achieve our climate change and renewable energy targets. We want to see how that potential compares against the other options for meeting our goals.

"The largest proposal to harness the power of the tides on the shortlist could save as much carbon dioxide as all the residential emissions from Wales.

"The five schemes shortlisted today are what we believe can be feasible, but this doesn't mean we have lost sight of others. Half a million pounds of new funding will go some way to developing technologies still in their infancy, like tidal reef and fences. We will consider the progress of this work before any final decisions are taken.

"We have tough choices to make. Failing to act on climate change could see catastrophic effects on the environment and its wildlife, but the estuary itself is a protected environment, home to vulnerable species including birds and fish. We need to think about how to balance the value of this unique natural environment against the long-term threat of global climate change. It is vital we seek public views and collect all information we need to make sure our climate change actions are ambitious yet fair."

Reacting to the news, Friends of the Earth Cymru Director Gordon James said:
"Offshore tidal lagoons offer the best option for harnessing the huge renewable energy potential of the Severn Estuary - their exclusion  [the short list contains two onshore lagoon projects] from the Government's short list is utterly incomprehensible and raises serious concerns about the consultation process.

"The development of tidal lagoons would have delivered huge quantities of green power more cheaply and quickly than a barrage, and with less impact on the environment.

"Ministers must abandon their fixation with the Severn barrage and invest in more effective and less damaging alternatives instead."

Welsh Assembly Government Minister for Environment, Sustainability and Housing Jane Davidson said:
"Harnessing the power of the Severn Estuary tides could make a significant contribution towards achieving the UK targets for renewable energy and reducing carbon emissions, but we must ensure that environmental issues are taken fully into account.

"The shortlisted schemes are based on relatively well understood hydroelectric technologies, with a mix of existing and new engineering structures. It is proposed that the economic, social, and environmental impacts of these be studied further in the second phase of the government study.

Ms Davidson said: "In addition to the shortlist other, less developed, schemes for capturing tidal energy could have potential in the longer term.

"I am pleased the Welsh Assembly Government, together with Defra and the South West Regional Development Agency are contributing £500,000 to support the development of innovative options for harnessing tidal power in the Severn Estuary.

"We are encouraging Welsh companies involved with marine technology to be among those applying for access to this fund to help demonstrate the potential of innovative technologies, as the South West RDA are encouraging those in South West England. We consider it essential that key stakeholders and the public at large are aware of the issues involved in capturing Severn Tidal Power and provide their input into the ongoing studies."