Controversial plans for a tidal power barrage across the mouth of the Severn river have been slammed by an influential group of MPs, in a further blow to the future of the long-running project.

A barrage across the Severn estuary could meet as much as 5% of the UK's electricity needs, but proponents have so far been unable to convince critics that wildlife, particularly birds and fish, could be protected.

On Monday, a report by the energy and climate change parliamentary select committee, which has been examining the issues, will be published. The MPs decided that current plans for a tidal power system, for an 18km fixed barrage between Brean in England and Lavernock Point in Wales, brought forward by Hafren Power, were unsatisfactory both for economic and environmental reasons.

The MPs found that the government would have to subsidise the scheme for decades in order to make it viable, and that the impacts on fish and other marine life, and the effects on the risk of flooding in the region, had not been adequately assessed.

Tim Yeo, chair of the committee, said: "More detailed [and] robust evidence about Hafren Power's proposal and claims is needed. We cannot recommend the Hafren Power scheme as currently presented to us."

He said that as well as economic concerns about whether the scheme would be competitive against other forms of low-carbon power, serious environmental concerns remained. "Far more detail and evidence is needed before the project could be regarded as environmentally acceptable. Concerns from industry, in particular the surrounding ports, have not been fully addressed. The impact on jobs and growth remains unclear.

"The Hafren Power proposal is no knight in shining armour for UK renewable. The government should consider whether a smaller tidal facility could develop expertise and provide evidence before a decision about scaling up is taken."

Hafren Power, which has the support of former Welsh secretary Peter Hain, rejected the committee's findings. Tony Pryor, chief executive, said: "The report is unhelpful and frustrating. We all know we have a lot more work to do and we will do it. The government has already told us it is not against the barrage and we are determined to press ministers and officials to engage fully. We believe the environmental and economic issues can be solved with everyone working together."

He said that a barrage would be more effective than smaller schemes, and would be cheaper and last longer than alternatives such as offshore wind farms. He said the scheme could attract up to £25bn in private sector investment and create 20,000 construction jobs directly with a further 30,000 jobs in support, and generate the lowest cost renewable energy available in the UK.

Green campaigners welcomed the committee's findings. The RSPB, WWF, Wildlife Trusts, Wildfowl and Wetlands Trust, Angling Trust and others said the scheme should be rethought.

Mike Birkin, south west campaigner for Friends of the Earth, said: "This report should be the final nail in the coffin for the current Severn Barrage proposal. The scheme is not cost-effective and has little public support."

But he said the Severn should be used to generate renewable power, through smaller scale tidal turbine projects. "There are plenty of other ways to harness clean energy on and offshore without sacrificing our wildlife and endangering homes and people with the risk of flooding," he said.

Proposals for harnessing and generating electricity from the Severn – which has one of the highest tidal reaches in the world – have been brought forward since the 1920s, but none has yet been put into practice.