RHI: What is the non-domestic Renewable Heat Incentive scheme?

It is an energy scheme launched in Northern Ireland in 2012 designed to help businesses move away from using traditional fossil fuel heating systems by helping them to pay for installing ‘greener’ technologies.

These include biomass boilers, burning wood chip or wood pellets.

It was hoped the RHI scheme would contribute towards the government’s aim of having 4% of Northern Ireland’s heat generated by renewable energy by 2015, rising to 10% by 2020.

Applicants would install a boiler, approved by Ofgem which oversaw RHI on behalf of the Department for Enterprise, Trade and Investment (DETI).

With Arlene Foster as Minister, DETI (which later became the Department for the Economy (DfE) in 2016) introduced the non-domestic RHI scheme in November 2012.

Then First Minister Peter Robinson (left) and Arlene Foster (right) when she was Enterprise Minister. Credit: PA Images

In 2008 the Executive had been offered the option of joining the scheme in Great Britain. This was rejected on the grounds that Stormont should take control of devolved matters.

While Northern Ireland’s scheme shared many similarities with the one in GB, a key difference was that controls designed to limit its cost were not copied.

Firstly, the subsidy for participants in the scheme dropped if their boiler was used for more than 1314 hours in a year - as can be seen in the 2012 legislation.

Secondly, in GB, costs were kept down by implementing ‘digression’ – a measure that saw the tariff decrease if there was an increase in demand.

But in Northern Ireland a single flat-rate subsidy (set to rise with inflation) was offered with a 20-year guarantee, allowing the scheme’s cost to quickly grow out of control when there was a spike in applications in 2015.

Pellets burning inside a biomass boiler purchased with the aid of the Renewable Heat Incentive. Credit: PA Images

There was also a major issue with the rate of the tariff in Northern Ireland.

In 2012 owners of biomass boilers of up to 100kw (by far the most popular means of generating heat) would receive 5.9p per kilowatt of heat produced – rising to 6.4p by 2015.

The cost of fuel however was 4.39p, meaning boiler owners could make a profit of 1.51p (to 2.01p) for every kilowatt of heat produced.

The scheme became something of a perverse incentive.

The terms ‘Burn-to-earn’ and ‘Cash-for-ash’ were soon attached to the scheme.

Boiler owners were set to make profit from RHI simply by using more energy to heat their premises, contrary to the ‘green’ intentions behind it.

An example was highlighted in the 2016 NI Audit Office report into the non-domestic RHI scheme showed a firm on the GB initiative could earn £192,000 over 20 years by using a boiler around the clock, while a Northern Ireland business would collect £860,000.

Two biomass boilers installed at a Co Down farm. Credit: PA Images

DETI tried to control the spiralling cost of the scheme by introducing ‘tiering’.

This would see the value of the tariff drop well below the cost of fuel after a boiler was used for 15% of the year.

This was announced in September 2015 but not introduced until November.

There was a large spike in applications to the RHI scheme before the changes were brought in.

The RHI scheme was finally shut down in February 2016 by the then DETI minister Jonathan Bell, who claimed it was a “significant financial risk” to Northern Ireland’s budget.

Former DETI minister Jonathan Bell shut down the scheme in February 2016. Credit: Pacemaker

The Treasury had originally budgeted the scheme at £25 million for a period of four years between 2011 and 2015. But the lack of cost controls exposed Stormont to a huge overspend which would have to be covered by Northern Ireland's block grant from Westminster.

It had previously been estimated by the NI Audit Office that the RHI scheme would cost over £1 billion over 20 years, with almost half of that being funded by the taxpayer. However a number of retrospective measures have been taken since its closure to significantly cut costs.

The Department for the Economy paid £21m to boiler owners 2018-2019, compared to £42m in 2016-2017.

Former NI Secretary Karen Bradley fast-tracked legislation through Westminster in March 2019 that would see average payments to boiler owners decrease on average from £13,000 a year to around £2,000.

A poultry farmer is challenging the tariff cuts in court, but the case has been delayed until after the RHI Inquiry publishes its report.

  • WATCH: Sir Patrick Coghlin's statement on the findings of the RHI inquiry