It is estimated the barrage could generate up to 5% of Britain's electricity needs
The UK Government says it is still interested in the idea of a tidal barrage across the Severn estuary after a report the plan could be dropped.
The Times newspaper reports the project will be shelved as part of a government cost-cutting drive.
But the Department of Energy and Climate Change said it was waiting on the results of a feasibility study due to be published next year.
It said there were "many factors" to look at before making a decision.
The newspaper said plans to build a 10-mile long tidal barrage, that could generate up to 5% of Britain's electricity, are likely to be shelved under a government cost-cutting drive.
It claims the project, which it said would cost up to £23bn to build, is set to be indefinitely postponed early next year when ministers announce whether to commit fresh public funding.
The barrage would be built between Lavernock Point near Cardiff, to Brean Down near Weston-Super-Mare.
But a spokesperson for the DECC told BBC Wales: "We have always said we are seriously interested in the prospect of generating power from the Severn, which has huge potential for generating renewable power.
"However there are many factors to taken into account in reaching a decision on whether to go ahead, including impacts and costs.
"That is why we are conducting a feasibility study which is looking at a range of different technologies and pulling together a robust evidence base.
"We said in our renewable energy strategy that we don't assume a Severn tidal scheme is necessary to meet our 2020 renewable targets as government does not want to pre-judge the feasibility study conclusions."