By Jonny Bell
11th August 2017
The projected £490m overspend in the Renewable Heating Incentive (RHI) scheme – which helped bring down the Northern Ireland Executive – was overestimated by at least £160m.
Sources in the renewables sector said Stormont included a major installation which was excluded from the RHI scheme because of EU rules in its calculations.
In a presentation seen by this newspaper delivered to government officials in January – just days before the Assembly voted through amendments on the scheme to curb payments – a projected cost of £160m was factored in for a combined heat and power (CHP) plant installation.
In farming, a CHP installation generates power while also using the heat produced for the likes of heating barns.
However, sources claim the department never included CHP installations in its original submission to the EU for state aid approval. But this was only realised when its amended regulations were sent off to Brussels for rubber stamping in March this year.
The department has confirmed the CHP installation was included in calculations for the RHI overspend but that it will in fact be separate to the scheme.
It has also been argued that the overspend figures should not have included inflationary estimates for the scheme’s 20-year duration, or assumed that each boiler would continue to last for the period of the scheme, as replacements were not allowed.
Industry insiders claim the true value of the overspend was under £100m for the 20-year period.
In a related development, it is understood the Department of Economy is facing another legal battle, its third, in connection with the RHI scheme.
It is believed a business is considering suing the department for costs it incurred after it was led to believe a CHP installation would be allowed under the RHI scheme.
It is thought to have invested heavily in equipment on the basis it would receive money back from the government.
Auditors found major flaws in the set-up of the RHI scheme established by the then Enterprise Minister Arlene Foster. A lack of caps on tariffs meant that those on the scheme could make a profit just for burning wood.
It has been reported that for every £1 spent on the fuel, £1.60 could be claimed back, something the Renewable Heat Association for NI (RHANI) strongly disputes.
It says the scheme only ever promised a 12% return on investment, which it says has been broken and is now “unattainable” under the amended scheme.
RHANI says its members, almost half of all those on the scheme, are facing financial ruin, with thousands of jobs in jeopardy, as they face mounting bills and difficulties paying off bank loans taken out on the basis of a government-guaranteed subsidy for two decades.
At the time, Mrs Foster wrote a letter “grand-fathering” the scheme – essentially guaranteeing a return – so that banks would approve loans, and to encourage business to take up the scheme.
RHANI is currently involved in legal action to force the government to reinstate the original tariffs. Earlier this year it lost a court action to prevent the department publishing the list of names of those claiming from the scheme, although it was awarded costs by the judge.
Andrew Trimble, chair of RHANI, said: “Our organisation was established to protect the interests of legitimate users of the RHI scheme and in accordance with our articles and principles are taking robust legal action.
“The Judicial Review of Department for Economy actions on behalf of RHANI members is scheduled for October and as such, I cannot comment upon the detail of the case or the evidence submitted to the court.”
In June 2015 the absence of caps on tariffs was spotted by civil servants; however, an amendment was not introduced until the following November by the then DUP Enterprise Minister Jonathan Bell.
During that time there was a spike of almost 900 applications, nearly as many as had been on the scheme in the three years prior. It was not until the following February that the scheme was completely shut down.
The late Martin McGuinness resigned over the debacle at the beginning of this year, triggering a collapse of the power sharing Executive. The issues have continued to dog the political talks process.
Retired judge Sir Patrick Coghlin is chair of the RHI Inquiry and is expected to hold public witness hearings in the autumn.
The Department for the Economy said no CHP installations would be accredited before March 2018 and would have to be separate to the RHI scheme and need EU approval.
It said the £490m figure was supplied to auditors and included a calculation based on CHP installations.
It would only confirm legal proceedings were active over the accreditation of CHP on the RHI scheme.
The RHI scheme is expected to cost £30m for the 17/18 financial year – £3m over budget. Officials are working on reducing the cost to keep the scheme within budget, it added.