The government said the scale of the project and the impact it could have on securing energy supplies and tackling climate change was "breathtaking".

The study will also look at lagoons, and the social, environmental and economic impacts of all the proposals.

The barrage could extend from the South Wales coast to Weston-super-Mare.

HOW TIDAL POWER WORKS As tide comes in, sea water passes through barrage to landward side At high tide, sluice gates shut, trapping water in estuary or basin When tide recedes on sea-side of barrage, sluice gates open Water flows through barrage, driving turbines and generating power Power can be generated in both directions, but this can affect efficiency and economics of project

It would harness the power of this estuary using a hydro-electric dam, but filled by the incoming tide rather than by water flowing downstream.

The study is expected to last two years and will conclude with a full public consultation in 2010.

Business secretary John Hutton said: "The Severn Estuary has some of the best tidal potential in the world and could more than double the current UK supply of renewable electricity.

"We must understand the cost and the impact that a project of this scale could have, not least the environmental, social and economic effects.

"But the need to take radical steps to tackle climate change is now beyond doubt. Tough choices need to be made. We must consider all our low carbon energy options."

The study will assess the costs, benefits and impact of harnessing tidal power from the estuary, and identify a single preferred project.

Some environmental groups have warned that a barrage could affect wildlife.

The Royal Society for the Protection of Birds said it would put thousands of birds, salmon and other fish at risk.

The estuary contains mudflats, saltmarshes, rocky islands and food that support some 65,000 birds in winter.

Mr Hutton said the study would recognise the nature conservation significance of the estuary.