Renewable Heat Incentive Scheme

Part of Ministerial Statement – in the Northern Ireland Assembly at 11:45 am on 19th December 2016.

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Photo of Arlene Foster Arlene Foster DUP 11:45 am, 19th December 2016

I took the opportunity over the weekend to speak to officials to establish why that is the case, and there are three reasons. I have to say that none of them is good or very acceptable, because cost controls, as we know now with the benefit of hindsight, should have been in place right from the beginning of the scheme.

First, there was an understanding from the specialist report — the Cambridge Economic Policy Associates (CEPA) report — that the tariff set was lower than the cost of the fuel. That was the fundamental mistake, as I said in my statement. The suggested rate for biomass boilers below 100 kW was set initially at 4·5p per kilowatt-hour. At that rate, the consultants noted, there was no need for tiering, as, at the time, the proposed rate was less than the cost of wood pellets and therefore there was no incentive to use the boiler excessively just to claim the subsidy.

Secondly, there was not the level of demand for the Northern Ireland RHI in the first few years. In fact, the first application for the scheme was received in January 2013. Remember that the scheme opened in November 2012. Over the first four years, there was an underspend of approximately £15 million. Therefore, it was thought — incorrectly, as it turns out — that the need to introduce cost controls did not arise.

The third issue is around governance. The governance processes in the Department did not enforce compliance with commitments given when the scheme was approved, including careful review of tariffs and risks. Cost control was proposed back in the 2013 consultation paper but not acted on. There was no submission to me saying, "We think that you need to look at cost controls" or, "This has been raised as an issue". Nothing came to me on that matter.

The cost controls in Great Britain should of course have been replicated in the Northern Ireland scheme. I am giving you the reasons that were given to me as to why they were not replicated. They are not good enough, but they are the reasons that were given to me.