Ministers could avoid building nuclear reactors by encouraging families to fit solar panels and other renewable energy equipment to their homes, a startling official report concludes.

The government-backed report, to be published tomorrow, says that, with changed policies, the number of British homes producing their own clean energy could multiply to one million – about one in every three – within 12 years.

These would produce enough power to replace five large nuclear power stations, tellingly at about the same time as the first of the much-touted new generation of reactors is likely to come on stream.

Download the new Independent Premium app Sharing the full story, not just the headlines

And, it adds, by 2030, such "microgeneration" would save the same amount of emissions of carbon dioxide – the main cause of global warming – as taking all Britain's lorries and buses off the road.

The conclusions of the report – approved and partly financed by the Department of Business, Enterprise and Regulatory Reform (DBERR) – sharply contrast with initiatives hurriedly launched by Gordon Brown last week in reaction to the lorry drivers' fuel-price protests.

In his most pro-nuclear announcement to date, the Prime Minister indicated that he wanted greatly to increase the number of atomic power stations to be built in Britain. And he met oil executives in Scotland to urge them to pump more of the black gold from the North Sea's fast-declining fields – even though his own energy minister, Malcolm Wicks, admitted that this would do nothing to reduce the price of fuel.

Even more embarrassingly for the embattled Mr Brown, the report closely mirrors policies announced by the Conservative Party six months ago to start "a decentralised energy revolution" by "enabling every small business, every local school, every local hospital, and every household in the country to generate electricity".

Yesterday Peter Ainsworth, the shadow Environment Secretary, said: "We have found that there are huge economic, social and environmental gains to be made by doing this. It is good that, at last, part of the Government seems belatedly to be coming to the same conclusion, and we can only hope that the Prime Minister can rise above his panic-stricken clutching at old technologies and grasp the opportunities microgeneration offers for clean and more secure energy supplies."

The 130-page report, due to be launched by Mr Wicks, has been produced by a consultancy, Element Energy, after a wide-ranging survey of public attitudes on installing household renewable energy systems. It has been financed, and steered by, 14 official and other bodies including DBERR, the official Energy Savings Trust, five regional development agencies, British Gas, the Micropower Council and the Ashden Trust.

The department's approval marks something of a revolution in itself, since its predecessor, the Department of Trade and Industry, was for decades hostile to renewable energy and microgeneration. Its mandarins hated the thought of allowing millions of ordinary people to affect energy supplies by generating their own heat and power.

As a result, Britain is almost bottom of the European league for exploiting renewables – above only Luxembourg and Malta – despite having the best resources in the entire continent. Though ministers claim their efforts have been "highly successful" in boosting these clean sources of energy, they now account for only about 4 per cent of electricity – compared, for example, with 14 per cent in Germany.

Ministers also boast that 100,000 British homes now have microgeneration, mainly solar thermal panels that heat water – but in Germany they adorn more than a million roofs.

Last year just 270 solar photovoltaic panels, which produce electricity, were put on Britain's homes, compared with 130,000 in Germany. At this rate, David Orr, chief executive of the National Housing Federation told MPs last month, it would take the UK 1,500 years to equal the number Germany has. Britain's only manufacturer of the panels, Sharp, calculates that less than a week of its year-round production actually gets installed in this country, with the rest exported to the continent.

The new report shows that, unlike in Germany, government incentives to householders fail to persuade them to invest in renewable energy. It concludes that they are daunted by the high initial cost of buying and installing them and want to see returns within three years.

The Government gives grants to help with the initial costs, but these are too small and too restricted to be effective. Indeed, ministers deliberately cut them back at the very point when they looked as if they were inspiring a rooftop revolution.

When first launched two years ago, the grants – which, for example offered up to £7,500 to install photovoltaic panels – were an instant hit. Payments soared to £1.4m in November 2006 alone, exceeding expectations more than four times over. But instead of welcoming it, ministers determined to dampen down the soaring demand. First they rationed payments to just £500,000 a month – with the result that, in February 2007, this entire allocation was used up in just two hours.

When this was ridiculed, they suspended the scheme altogether, relaunching it with the grant for photovoltaic panels slashed by two-thirds, and the one for wind turbines cut in half. Demand duly slumped.

For the past year, payments have been running at just £200,000 a month, far beneath the original target. But in April ministers rejected pleas from environmentalists and the renewable energy industry to increase the grants. Statistics to be released tomorrow will show that, partly as a result, only 18,000 new microgeneration installations have been completed over the past four years.

The new report instead suggests that Britain adopt the same approach as has been successful in Germany, which pays householders for feeding the electricity they produce from microgeneration into the national grid; the rate of these "feed-in tariffs" for photovoltaic panels is especially generous, fuelling their rapid expansion. At least 15 other European countries have also adopted them.

Last November, Gordon Brown appeared to back them, indicating that it should be "made easier for people to generate their own energy through microgeneration, and sell it on to the grid". But little has happened since, with ministers promising only to "look" at feed-in tariffs. They failed to include them in the Government's Energy Bill, sparking the biggest rebellion of Mr Brown's premiership, when 33 Labour MPs last month defied the whips.

A staggering 278 MPs have now signed an early-day motion calling on the Government to adopt them. Yet, last Wednesday, speaking for the Government in a House of Lords debate, Lord Jones, a junior DBERR minister, called feed-in tariffs "a regulatory nightmare and extremely expensive". He added: "If we were to change now we would destroy the consistency and stability that business craves and private sector investors need."

The report also gives a fair wind to a proposal by the Micropower Council to set statutory targets for household renewables, to give the industry the certainty it needs to expand.

The confusion in Government over micropower echoes the chaos of its entire energy policy on display last week. Ministers panicked at the fuel price protests, which blocked the A40 on Wednesday, just as they did seven years ago when larger protests paralysed the country.

Then Gordon Brown, as Chancellor, rapidly backed away from green taxes, despite having promised to put "the environment at the core of the Government's objectives for the tax system". Last week he and his ministers were scrambling over themselves to react to the new protests, contradicting each other over whether they would perform U-turns over plans to raise fuel duty by 2p, and increase road tax disproportionately on bigger cars.

The Prime Minister also increased his backing for nuclear power. Previously he had only suggested that new reactors should be built to in place of old ones as they were closed down. But on Wednesday he said he would be "more ambitious", adding: "We are pretty clear that we will have to do more than simply replace existing nuclear capacity in Britain."

The report offers a very different future, as do the Tories, who see microgeneration as central to their philosophy of redirecting power to individuals. David Cameron sees "decentralised energy" as "a key part of our political vision, energy for the post-bureaucratic age". He believes microgeneration could make Britain, and individual communities, "self-sufficient in energy".

Opinion

"There are huge economic, social and environmental gains to be made by doing this"

Peter Ainsworth, Shadow Environment Secretary

"We will have to do more than simply replace existing nuclear capability. We will be more ambitious"

Gordon Brown, Prime Minister

"A large proportion of homes in the UK could be generating their own energy, saving tons of emissions"

Philip Sellwood, Chief executive, Energy Saving Trust

"We are not going to make any progress in the fight against climate change if we have to rely on piecemeal initiatives"

Steve Webb, Lib Dem environment spokesman

"Thirty-five per cent of our maximum demand for electricity should come from nuclear. We have plenty of uranium"

Sir David King, Former chief scientific adviser

"This levelling of energy demand will make it possible for nuclear power to supply virtually all of our energy needs"

John Ritch Director general, World Nuclear Assoc

To have your say on this or any other issue visit www.independent.co.uk/IoSblogs