Disastrous renewables scheme could strip £30 million from this year's Executive budget

The Economy Minister has been urged to clear up confusion over exactly how much money will be lost from the Executive’s budget this year because of a massive overspend in the Renewable Heat Incentive scheme.

The renewables scheme will ultimately cost the public purse around £1.8 billion by the time it ends, due to a lack of oversight.

The scheme was designed to allow businesses to install biomass boilers, solar thermal and heat pumps, but according to a whistleblower, some companies ran woodchip boilers constantly in order to claim the long-term subsidy.

The scheme, now closed, encouraged the installation of green heating systems by paying a tariff per kilowatt of heat burned over a 20-year period.

But a failure by Stormont to control the programme led to a huge layout of cash, with one farmer allegedly in line to receive £1m of public money over the next two decades for heating an empty shed.

Ulster Unionist economy spokesperson Steve Aiken MLA has called on the Economy Minister to spell out what programmes and areas of expenditure are being cut within the current financial year to pay for the significant overspend.

Chairing a meeting of the Economy Committee, Mr Aiken said: “Members will have heard the Finance Minister detail to the Assembly on Tuesday how much the Executive’s budget is being hit by the overspend in the Renewable Heating Incentive - currently subject to an investigation from both the Public Accounts Committee and the Department for the Economy.

“We have been told that the Executive has set aside £20 million of the resource budget in this financial year to meet pressures arising from the RHI scheme.  

“This does not tally with a recent written answer the Finance Minister, issued which said the Department for the Economy had projected a funding deficit of around £30m for the Renewable Heat Incentive scheme in the current year.

“Whilst urgent clarity is required about the exact figures, we are talking about a major and self-inflicted hole in the Department for the Economy’s budget.  

“I am proposing the Committee writes to the Minister asking how these major extra costs are going to be absorbed in year by the Department for the Economy.  

“The question we need answered is simple: what programmes and areas of normal Departmental expenditure, targeted at growing the Northern Ireland economy, are being abandoned this year, and in the years to come because of the RHI scandal?”

Assembly member Daniel McCrossan branded the debacle “one of the biggest scandals since devolution” as he and fellow members of the Public Accounts Committee (PAC) quizzed officials involved in the administration of the scheme..

The Department of Enterprise, Trade and Investment designed the RHI scheme but appointed government utility regulator the Office of Gas and Electricity Markets (Ofgem) to administer it, for a cost of £1.5 million.

Ofgem officials faced over four hours of questioning at Parliament Buildings on Wednesday.

Dr Edmund Ward from Ofgem told PAC committee members that risks associated with the lack of a cap were raised in its feasibility study in 2011.

His colleague Chris Poulton acknowledged some faults with the organisation's handling of the scheme, including a failure to minute key meetings with DETI, but he pointed out that it was designed by DETI and administrators do not set policy.

The Renewable Heat Incentive scheme was introduced in November 2012, following a parallel scheme in the rest of the UK, and was aimed at helping Northern Ireland to reach its 2011-15 target of 10% of heat consumption from renewables by 2020.

It paid a fixed amount for every kilowatt of heat energy produced by renewable technology for 20 years after installation.

The Northern Ireland scheme failed to include a number of key controls that were built into the GB scheme, including tiering of payments - so that a reduced rate applied after the equipment had been operated for 15% of hours in a year - and degression, so that the tariff changed in response to changes in demand.

In the early years of the Northern Ireland scheme, demand was low and DETI's priority was identifying ways to boost demand and getting the domestic scheme up and running.

Between 2012 and 2015 the rates paid in GB fell by 50%, yet the rates in Northern Ireland increased.

When demand began to increase significantly the Department was unable to react quickly due to legislative constraints.

In April 2015 , as demand increased, DETI proposed an amended scheme with a much lower second tier tariff.

DFP approved the business case for the scheme at the end of October but didn't give retrospective approval for 788 applications that were completed between April 1, 2015 and October 29, with an estimated annual cost of £11.9 million.

For a claim approved before November 2015, there was no upper limit. The more heat that was generated, the more would be paid. A biomass boiler used 24 hours a day could generate £737,580 over 20 years, compared to £66,420 in GB.