How did the scheme operate?
RHI was launched in NI in November 2012 and paid a set tariff for every kilowatt hour of heat produced from renewable resources in RHI-accredited installations.
The scheme was set up to meet the NI Executive’s target of generating 10% of total heat from renewables by 2020.
Contracts for the non-domestic RHI were fixed for 20 years and tariffs were adjusted in line with inflation. Originally, tariffs were paid at a flat rate and there was no cap on payments.
Who used the scheme?
The non-domestic RHI was popular with businesses with large heating requirements, in particular in the poultry and pig sectors in NI. An NI Audit Office report published last July states that there are 2,128 non-domestic RHI biomass boilers in NI.
There was also a domestic RHI scheme which was specifically for residential properties. This scheme operated on shorter contracts over seven years and July’s report states that there are 2,721 domestic RHI contracts in NI.
However, the non-domestic scheme currently carries an estimated bill of £1.15bn, as opposed to £30m for the domestic scheme, meaning the non-domestic RHI has subsequently been the focus of public attention.
How did costs escalate?
The NI Audit Office report identified the failure of the Department of Enterprise, Trade and Investment (DETI) to introduce tiered RHI payments in November 2012 as “a critical mistake”.
A tiered payment mechanism was used in the RHI in Britain and means greater usage leads to a lower rate of tariff paid to RHI users.
In their inquiry into the scheme, the NI Assembly’s public accounts committee heard that miscalculations by private consultants on the rate of tariffs to be paid to RHI users meant that the need for tiered payments were not identified, as boiler running costs were incorrectly thought to be higher than tariff rates.
Were there other issues?
A digression mechanism that allows tariff rates to change quarterly in response to changes in demand was used in the RHI in Britain, but was also not included in the NI scheme. Department officials have said that the initial low uptake of the scheme in NI meant that digression was not considered in NI.
The public accounts committee has also heard that a lack of review of RHI and changes to the scheme not being implemented quickly enough led to spiralling costs.
When did RHI uptake increase?
The critical period for increased applications, and therefore rising costs, was in the leadup to changes to the scheme in November 2015.
These changes saw the introduction of capped payments as well as a tiered payments mechanism. There were also changes to the banding ranges for biomass boiler sizes, meaning installing several small boilers for high payments was no longer as lucrative.
For example, the band for boilers 20kWh to 99kWh was most popular and had a tariff paid at 6.4p/kWh. Under the changes in November 2015, the band increased from 20kWh to 199kWh, payments reduce to 1.5p/kWh after 1,314 hours of heat produced each year and an annual cap of 400,000kWh was introduced.
The announcement was originally made in September and the NI audit office report states that almost the same number of applications joined the RHI in October and November 2015 than the previous 34 months of the scheme.
When did the scheme close completely?
RHI closed abruptly in February 2016 with no public consultation due to the spiralling costs of the scheme.
A major issue is that the UK Treasury has limited the amount of funding it will provide for RHI in NI, meaning at least £400m of the £1.18bn bill could potentially have to be met by the NI Executive block grant.
The NI Audit Office said that there was “clear indication” in April 2011 that RHI funding would not be without limit from UK Treasury. However, this was not picked up by department officials at the time. There are also other issues identified surrounding whistleblower allegations of abuse of the scheme that were not followed up by the department.
Why the political fallout?
First Minister Arlene Foster was DETI minister when the scheme was introduced in 2012. On Monday, Deputy First Minister Martin McGuiness resigned due to Mrs Foster refusing to step aside as First Minister while an investigation is carried out on the scheme.
Will the scheme change?
In December, Mrs Foster said that cost-cutting changes will be announced in January, meaning the £400m bill for NI tax payers will be reduced. It has been suggested that changes to legislation could allow tariff rates to RHI claimants in 20-year contracts to reduce.
Mrs Foster has said that all RHI boilers are to be inspected, although this has now been delayed with the poultry sector in lockdown over bird flu. All claimants of non-domestic RHI have also been contacted asking if they want to opt out of their names being made available to the public.
However, with the Deputy First Minister resigning from the joint office, the NI Executive looks likely to collapse, meaning assembly elections will follow. After this, the issue of resolving political tensions and forming an executive has to be overcome.
The time line for the announcement of cost-cutting measures to RHI and what impact they will have for scheme users is now unknown.