Former Wales and Northern Ireland Secretary Peter Hain has resigned from the shadow cabinet to campaign for a barrage across the Severn estuary.
There was speculation he would step down after chairing Welsh Labour's successful local council campaign.
Labour leader Ed Miliband praised the shadow Welsh secretary and Neath MP, and said he was a "great loss".
Among the frontrunners to replace Mr Hain, 62, is Pontypridd MP and shadow Treasury minister Owen Smith.
Other names likely to be linked to the post are Cardiff West MP Kevin Brennan, Chris Bryant (Rhondda), Huw Irranca-Davies (Ogmore) and Nia Griffith (Llanelli).
Labour leader Ed Miliband said Mr Hain had made an "enormous contribution from the front bench over the past 16 years".
"He will be a great loss to the shadow cabinet but we know his service to Wales and to the Labour Party will continue for many years to come," he said.
Mr Hain, who was brought up in South Africa, was a cabinet minister under both Tony Blair and Gordon Brown.
He told BBC Radio Wales: "I want to make a different contribution.
"I want to take forward the vital project, the biggest investment ever in Wales, £30bn investment, for the Severn barrage, and also the biggest single source of renewable energy in Europe and one of the biggest in the world.
"That's what I want to do and you can't really do that as shadow secretary of state.
"It's a post that in government I've done for nearly eight years and in opposition for two years and I think it's the right time to make this change."
Mr Hain, who will continue as an MP, told Mr Miliband of his intention to quit before last Christmas but wanted to see through Labour's local election campaign in Wales.
"We got our best results for a long, long time so I thought this was the right time to do it," he said.
"He [Mr Miliband] was disappointed but Ed is now well into his stride. He's gaining support, his stock is rising in the public mind, people have got to know him better."
With Labour in opposition, Mr Hain said stepping down from the shadow cabinet was his best option but he did not rule out coming back one day.
"If in the future, as I've discussed with Ed, there were to be an opportunity to serve again in government, obviously that's a matter for him, because the experience I've gained would obviously be relevant," he said.
Mr Hain, who told Mr Miliband he would also stand in Neath again at the next general election, said it would not be easy to make a Severn barrage become a reality.
The UK government has previously rejected plans for a publicly-funded barrage but did not rule out private schemes.
A private consortium, Corlan Hafren, wants to harness tidal power between south Wales and Weston-super-Mare on the other side of the Bristol Channel to create electricity.
"The private finance is potentially in place through the Corlan Hafren business project and they have assembled the necessary financial interests, sovereign wealth funds and investments," said Mr Hain.
He said this project was exciting because it would not call on public funds but would be entirely privately financed.
"There's all sorts of obstacles in the way and this is one of the reasons I'm standing down," he said.
"We will need to get a rather complex hybrid bill through Parliament that's got to be a private bill - it will need government support."
He said there appeared to be "positive noises" coming from the UK government towards the project.
Mr Hain, an anti-apartheid campaigner who moved to the UK from South Africa as a teenager, has had a long political career, entering the House of Commons after a 1991 by-election.
He was a member of the Labour government from 1997 until 2008, holding posts in the Wales Office, Department of Trade and Industry, Foreign Office, as well as being Welsh secretary, leader of the Commons, Northern Ireland secretary and secretary of state at the Department of Work and Pensions.
Conservative Welsh Secretary Cheryl Gillan paid tribute to Mr Hain's career in politics.
"First of all can I say I was very sad to hear that Peter Hain is standing down from frontline politics because he's had such a long and distinguished career over many departments..." she said.
"I shall certainly miss him but hopefully when his successor is appointed, I shall continue to work constructively with them."
First Minister and Welsh Labour leader Carwyn Jones said: "Peter has a played an important and prominent role in Welsh political life for many years.
"I'm sure whatever role Peter chooses to pursue away from the front bench at Westminster, he will bring to it his great skills as a communicator and campaigner. I wish him all the very best for the future."