Northern Ireland Paid Businesses More per Unit of Renewable Heat Than the Fuel Cost to Make It, With No Limit, for 20 Years. When a Businesswoman Warned Officials in 2013, She Was Told People Would Not Do That.

In 2008 Stormont decided not to join the Renewable Heat Incentive being designed at Westminster and to build its own instead. The Department of Enterprise, Trade and Investment (DETI), whose minister was the DUP's Arlene Foster, launched the non-domestic scheme in November 2012. It paid businesses a subsidy for every unit of heat they produced from renewable sources such as wood-pellet boilers, and it promised to keep paying for 20 years. The tariff for medium biomass boilers was 5.9p per kilowatt-hour. The cost of the fuel, according to the tables annexed to the European Commission's approval of the scheme, was 4.39p per kilowatt-hour.

The arithmetic needed no consultant, although it had one. Every additional unit of heat earned more than it cost to make, and there was no point at which the payments stopped rising. The public inquiry that eventually examined the scheme, chaired by the retired judge Sir Patrick Coghlin, described the general hazard of paying for heat in its first chapter: an incentive "to produce heat simply for the purpose of receiving payments and to 'open the windows' to get rid of the excess heat, there being no widespread means of transporting it to others or any market for it." Its final conclusion was that "the Northern Ireland stand-alone scheme should never have been adopted."

The Tier

The scheme in Great Britain had the same problem and a solution for it. In a March 2011 consultation, the Department of Energy and Climate Change had warned that its tariffs could create a "perverse incentive" to generate "(useless) heat" and had dealt with it by tiering. The higher rate was paid for the first 1,314 hours of a boiler's output each year, 15 per cent of the maximum possible, and a lower rate after that. Northern Ireland's consultants, CEPA, recommended a tariff above the cost of heat production without recommending a second tier. The inquiry found that this error "was not picked up or corrected by DETI and created a perverse incentive to produce excess heat, whether there was a need for it or not, in order to profit from subsidy payments."

Great Britain also used degression, cutting tariffs as demand rose. According to the Northern Ireland Audit Office, between 2012 and 2016 the rates paid in Great Britain fell by 50 per cent while the rates in Northern Ireland increased. Ofgem, which administered both schemes, never produced the Northern Ireland-specific fraud prevention strategy it had promised. When Northern Ireland was added to the GB strategy in 2014, the inquiry found, the document "erroneously said that the NI RHI scheme had the protection of tiering when it did not." DETI officials first had the perverse incentive highlighted to them by the Audit Office in July 2016, four months after the scheme closed.

People Would Not Do This

Janette O'Hagan co-founded a company selling heating controls that cut energy use. In August 2013 she emailed Foster's department and her constituency office asking for a meeting. On 3 September she wrote again: "Given the benefits of RHI we find that many of our potential customers are no longer worried about becoming more efficient, in fact it pays them to use as much as they can – in fact the incentive to use more is leading to misuse in some cases." Foster received that email on her iPad. She told the inquiry that she assumed it was a reminder, scanned it rather than reading it in detail, and did not forward it to officials.

O'Hagan was offered a meeting with officials instead, on 8 October 2013. No minute was taken. By her account, when she explained that the flat rate meant heating would be left on all year with the windows open, she was told "people would not do this." The main action point, as the head of Energy Division recalled it, was to send her a link to a consultation document. In May 2014 she wrote again: "When we had spoken, you did not believe that people would do this, but please believe me that it is happening with almost everyone that we approached." The official she wrote to put her email in his handover note and left DETI a few days later without replying. In June 2014 his successor told her the issues were "on our radar." In March 2015 she described a company advising a client to run a boiler 168 hours a week rather than the 40 it needed. An official replied that tiering "may be introduced at a later date as a budgetary control measure." She heard nothing further. The abuse, she told the inquiry, would have been apparent to a "blind man on a galloping horse".

The Spike

DETI's senior management grasped the budget problem in late May 2015. A submission proposing GB-style tiering was sent on 8 July to Timothy Cairns, special adviser to the new minister, Jonathan Bell. Cairns forwarded it to Andrew Crawford, Foster's adviser, who replied that "The word on the street is that there is going to be changes made in October and you are going to get a massive spike in applications before this date." He added that, since the money came from the Treasury, exceeding the target would simply mean "we will get more than our fair share of the UK pot." Crawford later admitted to the inquiry that he had passed information about the scheme to relatives. His brother and two cousins, living within ten miles of him, had installed 11 boilers to heat chicken houses supplying Moy Park. When Cairns asked whether the tier threshold could be raised to 3,000 hours, an official replied that 1,314 hours could be defended for poultry farms. "Obviously, suggestions of heating empty sheds cannot."

The cost controls took effect on 18 November 2015. In the three months from September to November, 984 applications arrived. In refusing retrospective approval for the spending, the Department of Finance and Personnel noted that the applications received in October alone were double those received in the scheme's first 20 months. The inquiry found that the November changes made "virtually no difference in the subsidy paid for each unit of heat," and the market quickly adapted. The scheme was finally closed on 29 February 2016, after a two-week reprieve during which 298 more applications came in, worth about £91.5 million over 20 years.

The Shed

In late January 2016 Foster, now First Minister, was handed an anonymous letter in her constituency office alleging widespread abuse. Among its claims, in the inquiry's summary, was a local farmer with no need for heat who intended to install biomass boilers "in order to heat an empty shed over the next 20 years." In July 2016 the Comptroller and Auditor General, Kieran Donnelly, qualified the department's accounts and found that commitments had exceeded what the Treasury would fund, leaving the Northern Ireland block grant to cover an estimated £140 million over five years, with costs continuing until 2036. The figure later attached to the potential cost to Northern Ireland's taxpayers over 20 years was £490 million.

On 15 December 2016 Bell alleged to Stephen Nolan on the BBC that two DUP special advisers had intervened to delay the cost controls in 2015. O'Hagan gave an interview to the same programme. Afterwards, her original 2013 email to Foster, which contained no criticism of the scheme, was supplied by officials to the First Minister's office without effective redaction and published on a DUP Twitter account. On 19 December Foster told the Assembly that O'Hagan "deserves our highest respect and a sincere apology on behalf of my former Department which should not have dismissed her claims with disbelief, but examined them with diligence." Foster declined to step aside while the scheme was investigated. On 9 January 2017 Martin McGuinness of Sinn Féin resigned, citing her "clear conflict of interest", and the Executive collapsed. Power-sharing was not restored until 11 January 2020.

The Report

The inquiry reported on 13 March 2020 in three volumes, 56 chapters and 276,000 words, with 319 findings and 44 recommendations. It found no corruption. What went wrong was "an accumulation and compounding of errors and omissions over time and a failure of attention." Foster had been told, incorrectly, that the scheme offered the best value, and had been given an impact assessment without all the cost information to sign; she "should not have been presented with" it, and "she equally should not have signed it in those circumstances." The treatment of O'Hagan "fell well below the standard that she was entitled to expect." The report added that there was "no guarantee" the same weaknesses "could not combine again to undermine some future initiative."

From 1 April 2017 the Department for the Economy imposed a tiered tariff and a cap on heat output on everyone admitted before 18 November 2015. In its next report the Audit Office recorded that the amount of heat generated by scheme members had fallen by 33 per cent in a year, and that the number of boilers running for more than half of all available hours had dropped from 659 to 118. It suggested this may have been because there was no longer any incentive to generate heat if this was only being done in order to claim additional subsidies.

Filed from public reporting:

• Independent Public Inquiry into the Non-domestic RHI Scheme — "Report, Volume 3, Chapter 56: Summary and Recommendations"
• Independent Public Inquiry into the Non-domestic RHI Scheme — "Report, Volume 1, Chapters 1-19"
• Independent Public Inquiry into the Non-domestic RHI Scheme — "Report, Volume 2, Chapters 20-41"
• Northern Ireland Audit Office — "Media Release: Department of Enterprise, Trade and Investment 2015-16 accounts" (5 July 2016)
• Northern Ireland Audit Office — "Media Release: Department for the Economy – Audit of Annual Financial Statements" (5 July 2018)
• The Irish Times — "Cash-for-ash report finds no evidence of corrupt or malicious activity"
• The Irish Times — "Cash for ash inquiry hears evidence of failure, fury and farce"
• The Irish Times — "Relatives of Arlene Foster adviser had 11 boilers in RHI scheme"
• The Irish News — "Sinn Féin Deputy First Minister Martin McGuinness resigns"
• The Irish News — "Timeline of the RHI scandal"