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UK renewable subsidies to cost $11 billion by 2020/2021 -NAO

Solar panels are seen in fields near Andover in southern England May 3, 2013. Renewable energy production and infrastructure are gaining investor appeal as they become less dependent on government support in more European markets, the asset management arm of insurer Allianz saidlast week. REUTERS/Toby Melville (BRITAIN - Tags: POLITICS ENVIRONMENT ENERGY) - RTXZ96F

LONDON (Reuters) - Britain's renewable electricity subsidies are set to cost 8.7 billion pounds ($10.8 billion) a year by 2020/2021, pushing up household energy bills, the National Audit Office said on Tuesday.

The government initially set a cap on the levy control framework (LCF) of 7.6 billion pounds for 2020/2021, but this is now expected to be exceeded by 1.1 billion pounds, the NAO said in a report.

"This is equivalent to 110 pounds on the typical household dual fuel energy bill in 2020, 17 pounds more than if the schemes stayed within the cap," the National Audit Office (NAO) said.

The LCF is designed to protect consumers by placing a cap on the subsidies given to renewable power generators such as wind and solar.

The cap would be exceeded due to a fall in fossil fuel and wholesale electricity prices, and after the government underestimated the amount to electricity that would be produced under certain schemes, the NAO said.

"Government's forecasting, allocation of the budget and approach to dealing with uncertainty has been poor, and so has not supported value for money," said Amyas Morse, head of the NAO.

Some of the British subsidies, such as feed-in-tariffs, pay power generators an extra fee for each megawatt hour (MWh) they produce, while others such as the contract-for-difference (CfD) pay a top-up to wholesale power prices to ensure a minimum price is met.

The government moved last year to rein in some of the spiralling costs by cutting subsidies for onshore wind, solar and biomass plants.

The NAO acknowledged the efforts to cut costs, but said the government "needs to do more to develop a sufficiently coherent, transparent and long-term approach to controlling and communicating the costs of its consumer-funded policies."

(Reporting by Susanna Twidale; Editing by Ruth Pitchford)