In a statement to Parliament on Monday, Business Secretary Greg Clark said the project and proposed programme of lagoons "do not meet the requirements for value for money", meaning it would "not be appropriate to lead the company to believe that public funds can be justified".
Mr Clark said: "At £1.3 billion, the capital cost per unit of electricity generated each year would be 3 times that of the Hinkley Point C nuclear power station.
"If a full programme of 6 lagoons were constructed, the Hendry Review found that the cost would be more than £50 billion, and be 2 and a half times the cost of Hinkley to generate a similar output of electricity."
Continuing, Mr Clark said it is estimated it will cost at least £31.5bn less to build enough offshore wind to provide the same generation as a programme of lagoons.
"Taking all the costs together, I have been advised by analysts that, by 2050, the proposal that has been made – which would generate around 30 TWh per year of electricity - could cost up to £20 billion more to produce compared to generating that same electricity through a mix of offshore wind and nuclear, once financing, operating, and system costs have been taken into account," he said.
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The Business Secretary added it has been calculated this would cost the average British household up to £700 between 2031 and 2050.
The announcement contradicts a government-commissioned review by Charles Hendry in January last year, which backed the £1.3bn project to be built and stated Swansea should be used to investigate the technology's viability as well as making a strong contribution to the economy as well as the UK's decarbonisation goals.
Wales First Minister Carwyn Jones tweeted the UK Government has "dealt another crushing blow" to Wales and the Swansea community.
Elsewhere, Deputy Secretary of Unite Wales, Gareth Jones, called the UK Government's decision a "short-sighted job killer".
"The decision not to back the tidal bay lagoon denies Wales the opportunity of being at the forefront of green energy innovation, while at the same jeopardises hundreds of jobs in turbine production at GE at its sites in the Midlands," he said.
"This is a project which would give Wales an opportunity to build a new industry based upon its unique tidal resource. It has cross party support in both the Welsh Assembly and the House of Commons, with the Welsh government putting up £200 million to support it and keep the strike price down.
"Instead of securing a source of green energy for the next 120 years, the government has turned its back on Wales and made a mockery of its industrial strategy.
"Theresa May's government needs to review this wrong-headed and misguided decision and throw its full support behind the lagoon project which is clearly in the UK's best interests."
However Secretary of State for Wales, Alun Cairns, said despite the disappointment, ultimately the project "did not meet the threshold for taxpayer value".
(LM/MH)
