Thirty-three Labour MPs voted against their party and demanded the introduction of a system of rewards for people who install solar panels and wind turbines at home.
Ms Allen had written to all MPs in advance of a debate on the Energy Bill calling for them to back an amendment that would have forced the government to devise a reward scheme within a year.
The move was defeated by 250 votes to 210, but only after the government – which opposed the move on cost grounds – was forced to call its supporters back from campaigning in the English and Welsh local elections.
At present, about 2 per cent of the UK's energy comes from renewable sources – a situation that Allen described as a "national disgrace".
Critics believe that the government's cautious approach will increase the amount of renewable energy to just 5 per cent by 2020 – missing the 15 per cent European Union target.
They want the UK to copy a scheme in Germany where homeowners, farmers, small businesses and owners of public buildings are paid a fixed amount for every unit of renewable energy they generate. Around 14 per cent of Germany's energy is from renewable sources.