HomeWorld RegionsEuropeFlawed heat incentive scheme set to cost Northern Ireland

Flawed heat incentive scheme set to cost Northern Ireland

A whistleblower has brought to attention ‘serious systematic failings” in Northern Ireland’s renewable heat incentive scheme, which have left a big hole in the country’s finances.

The scheme run by the Department of Enterprise, Trade and Investment (DETI) in Stormont was set up to encourage businesses and domestic users to switch to biomass heating systems, mostly burning wood pellets.
BBC reports that à‚£140m could be taken from the region’s block grant from the Treasury to plug the deficit caused by abuse of the scheme.

The regional scheme failed to include a number of key controls that were built into the scheme for Great Britain, 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 Northern Ireland no cap or payment tier system was placed on the money that could be claimed in proportion to the size of boiler. In effect, that enabled a business to produce unnecessary heat just to make money.

One of the claims was that a farmer was aiming to collect about à‚£1m over 20 years from the scheme for heating an empty shed. It was also claimed that large factories that had previously not been heated were using the scheme to install boilers with the intention of running them throughout the year to collect about à‚£1.5m over 20 years.

Kieran Donnelly, the auditor general, said there was “no upper limit on the amount of energy that would be paid for”. “The more heat that is generated, the more is paid,” he said.

In one example cited by the report, a business taking part in the same scheme in Great Britain could collect about à‚£192,000 over 20 years by using a boiler all year round, but a Northern Ireland firm doing the same could earn à‚£860,000.

There were 923 non-domestic applications under the RHI scheme in its first 34 months, before an announcement in September 2015 that the scheme would be tightened up with the introduction of tiered payments.

It took two months for the change to come into effect, and in that time 881 applications were made to sign up to it on the pre-existing no-cap tariff system. DETI has since been renamed as the Department of the Economy, and Economy Minister Simon Hamilton said ongoing costs of the scheme to taxpayers were “incredible”.

“Opportunities were missed to remedy the situation” by those “directly responsible for administering the scheme”, he said. “External consultants are already being appointed to conduct on-the-spot and thorough inspections of installations to ensure they meet the spirit and letter of the scheme.”

It is likely that an estimated à‚£19.4 million of expenditure will continue to be incurred every year on these 788 applications for the next 20 years – also considered irregular, unless the Department is able to get retrospective approval from DFP.

HM Treasury has ruled out any increase in its contribution and these costs will have to be met from the block grant for the next 20 years.