by Sam McBride
DETI was unhappy at what Ofgem was doing – not least because it was embarrassed at having passed on Ofgem’s initial advice to claimants who now were complaining that they had been turned down for RHI. DETI decided that it would attempt to allow the individuals to enter the scheme under the de minimis rule. But in order to prove that the arrangement would not breach the €200,000 over three years, it needed to do some detailed calculations as to how much each individual would receive from RHI. To do so, DETI obtained the application forms for those who already had Carbon Trust loans for biomass boilers – some of which showed eye-wateringly high payments.
Each form asked the applicant to estimate the proportion of the year the boiler would be in use. On one claimant’s form, 8,640 hours was typed – meaning that it would be running for all but 120 hours in the year. But this was scored out by hand and 6,000 hours was written in – equating to the boiler running for almost 70% of the hours in a year. Based on 6,000 hours, the individual had then calculated that the 99 kW boiler would secure an annual RHI payment of £36,234, amounting to £108,702 over a three-year period. A simple calculation would have shown that this would be almost three quarters of a million pounds over the 20 years of the scheme.
By July 2014, the scheme had been open for almost two years and there had been 216 applications. But within six months that figure had almost doubled, and by the end of December 409 applications had been received. Hughes, now the main person overseeing the scheme, said that as applications poured in and it is now known that firms were openly marketing the scheme as ‘cash for ash’, he and his colleagues believed that the growing interest in RHI showed ‘this was starting to work the way it was meant to work’. It may have been that the consultation on cost controls had actually contributed to that increased demand. Although few claimants would have read the consultation, it would have been read by many in the green energy industry, and they were now aware that the ‘too good to be true’ tariffs could soon be coming to an end. Waving that consultation document under the nose of a dithering potential customer would have would have been a potent marketing tool.
Now less than two years into the scheme, DETI had a huge body of evidence about the problems with how RHI was running. A paper prepared for a heads of branch meeting within DETI in May 2014 referred to the ‘potential need for [a] review of tariffs (particularly for biomass less than 99kw) … a system of tiered tariffs might be appropriate’. It added that uptake of the scheme ‘remains positive in comparison to GB figures’, again contradicting the defence later offered by Foster and her officials for not acting sooner.
Yet that same month a submission from Mills to Foster referred to cost controls not as an urgent priority to prevent financial disaster but as ‘technical changes to the scheme’, which he now said were to be addressed after RHI had been expanded.
The previous year DETI had received correspondence from the representative body for the biomass industry in Northern Ireland in which it specifically warned about the problems with the tariffs, with people deliberately installing multiple 99 kW boilers to get the most lucrative subsidy.
Throughout this period DETI was continuing to heavily market the scheme and was cannily using EU funding to do so, meaning that the money for the scheme itself was coming from the Treasury while the marketing of it was being funded from Brussels. The advertising blitz included TV ads, promotions emblazoned on the side of buses, billboards, newspaper adverts and online advertising. But if the marketing was to suddenly get through to the public, there was going to be a problem. The way in which the legislation had been drafted made it almost impossible to turn down a valid application. At the point when the scandal erupted in December 2016, just 12 of the 1,958 applications had been rejected – a 99.4% success rate. That made it difficult to predict future applications. People simply installed a boiler, filled in the application form and waited for the money to arrive. There was no need to give DETI warning or seek pre-approval. If cost controls were not going to be introduced to allow for an emergency brake then the only other defence against a run on the scheme was vigilant monitoring of what was happening.
DETI was receiving weekly updates from Ofgem on projected usage, based on applicants’ application forms. Had these been monitored to any extent they would have shown that by mid-2014 some 63% of all applications were for a 99 kW biomass boiler, which was expected to run for 45% of the year – double the average boiler size anticipated by CEPA and running for more than two and a half times longer than expected. Basic calculations would have shown that these people were in line to get annual payments of £22,900 when CEPA had expected that the average claimant would be getting £4,500.
In November 2014, Wightman emailed senior Ofgem manager Teri Clifton to warn her that there was renewed pressure to cut budgets at DETI and scrutiny was turning to the £211,000 a year paid to Ofgem to run the scheme. In a remarkable false economy, DETI was haggling with Ofgem over a relatively small sum while well over a hundred million pounds was being committed for expenditure. DETI was consistently exercised about comparatively small amounts coming from its budget but relatively relaxed about huge sums, which it thought were being funded directly by the Treasury.
Clifton’s response shows that DETI was by this stage well aware of the fact that its scheme was taking off in a way which the GB scheme had not. Defending Ofgem’s fees, she said that ‘applications are coming in above the expected 3% [Northern Ireland’s share of the UK population] as you know’. But DETI still seemed to be fixated on spending the money available from the Treasury for the first four years of the scheme, and there was still an underspend. From ministerial level down, the underspend was viewed as the key problem and therefore the focus was on expanding and marketing a scheme, which even a few hours of concerted thought would have revealed to be a disaster waiting to happen.
CHAPTER 8
BURNING FOOD
Though it would have startled the small number of MLAs in the largely empty Stormont Assembly chamber on 8 December 2014, what they were about to do would stand out as one of the starkest examples of their inability to perform their legislative roles.
It was the penultimate Assembly sitting before the Christmas recess – RHI had been going for just over two years – when they gathered in Parliament Buildings that Monday. Unusually for an Assembly which often struggled to fill its order paper with serious business, there were seven pieces of legislation on the order paper when the Speaker called MLAs to order at noon. But items such as the Food Hygiene Rating Bill and the Modern Slavery Bill weren’t the sort of topics that filled the Assembly chamber or excited the passions of many MLAs. Nor was the legislation being brought by Arlene Foster. Stormont was good at having sectarian rows and the chamber would be filled for arguments over tribal disputes. But there were only a few MLAs who showed either aptitude or interest in the boring business of being a legislator – scrutinising tedious legislation line by dreary line. To many MLAs, the Domestic Renewable Heat Incentive Scheme Regulations (Northern Ireland) 2014 looked like another dry and uncontroversial piece of legislation, which extended the existing non-domestic scheme to private homes. There was no time limit on speaking about legislation and any one of the 108 MLAs could ask anything they liked about the scheme. But there was limited interest. Between Foster getting to her feet to open the debate and sitting down again some 40 minutes later at its close, no MLA had come close to raising the fundamental flaw with a scheme that had already committed vast sums of taxpayers’ money some 20 years into the future – and, even as they spoke, was running out of control.
Reading from a speech in front of her on the ministerial lectern, Foster extolled her department’s record, telling MLAs that ‘we already have a very successful non-domestic RHI’, with applications ‘currently running at 4% of all UK applications, well ahead of the expected 3%’. That was a significant figure because the GB scheme was a year older than Stormont’s. The information available to Foster showed that her scheme was
not only well ahead of the GB scheme – at a comparable point in each scheme’s life – but Northern Ireland’s scheme, which was supposed to be less generous, had now overtaken the level of applications to a larger and more established scheme.
As well as extending RHI to domestic homes, Foster also asked the Assembly to amend the rules of the existing non-domestic scheme to clarify that those in receipt of Carbon Trust loans could enter the scheme by paying back their loans. Responding to Foster’s speech, the DUP arch-sceptic of green energy, Sammy Wilson, spoke from the back benches. Although he reminded the Assembly of his general opposition to green incentives, he welcomed what Foster was doing. In what is now an example of how political arguments can wither with age, he said:
In closing, I will mention that many people ask what use the Assembly is and what is done. The minutiae of government, which can have a huge impact on businesses, individuals and employment, can often be easily overlooked when it comes to the kind of reporting that goes on. I would like to congratulate the minister. The issue was brought to her attention … she has responded quickly. That is the kind of fleet-footedness that we want to see in government here … that has illustrated, once again, the value of having this place.
Unnoticed by everyone that day was the fact that this was the moment where, according to the department’s own consultation document, cost controls were meant to be introduced.
Wilson is not the only one who may now wish they had chosen their words more carefully. Patsy McGlone, the SDLP chairman of the cross-party committee charged with scrutinising DETI, assured the Assembly that since the launch of RHI in 2012 ‘the committee has closely scrutinised the development of the renewable heat incentive … and has requested and received regular updates from the department’.
When he appeared before the public inquiry, McGlone said that the department had not been candid with his committee. On that, he had a point. However, the impression he gave was that unless a department admitted to problems it was unlikely that a committee could do much to uncover them. That sense of docility was more widely reflected across the Stormont system where the legislature was generally tame in scrutinising the executive. The fact that in an Assembly of 108 MLAs the number of Assembly members who were not in governing parties could be counted on one hand added to the blurred lines between the role of government ministers and legislators.
MLAs often did not seem to realise the powers at their disposal. Assembly committees had sweeping statutory authority to compel witnesses and documents. At Westminster, near-identical powers had been used to force the appearance of media tycoon Rupert Murdoch over the phone-hacking scandal at the News of the World in 2011 – a dramatic example of how even a powerful mogul was accountable to the representatives of the public. But in almost a decade of devolution since 2007, Stormont committees never once used those powers – despite MLAs at points beating their chests and threatening to do so when facing uncooperative individuals or institutions.
McGlone was one of Stormont’s more independently minded and capable MLAs. Rigorous scrutiny by his committee – facilitated by a backbench DUP rebellion against the party leadership – helped to prevent a decision by Foster’s successor, Jonathan Bell, being slipped through at huge cost to energy users. Gareth Robinson, son of the then First Minister Peter Robinson, was working for two major renewables companies, which seemed set to gain from that decision. At the time, the First Minister’s son declined to say if he was lobbying the DUP-run department to pursue a policy favourable to his clients. The former DUP councillor’s lobbying activities were attracting increasing scrutiny in that period. In response to questions from the author at the time, Robinson had threatened to take legal action due to ‘your unhealthy fixation with me’, and he could count on some senior DUP figures to preferentially facilitate his business activities.
After the brief Assembly debate on 8 December, MLAs once more unanimously nodded through Foster’s legislation with not even a solitary voice of opposition. RHI was now being expanded at the very point where it was about to run over budget and there wasn’t any political debate about the issue.
***********
Politicians weren’t the only ones ignoring the growing problem. Invest NI was the biggest public body for which Foster’s department was responsible. The inward investment agency had an annual budget of about £100 million, much of which was handed out in grants to either indigenous Northern Ireland firms or used to entice foreign companies to set up in the province. Although the quango was an ‘arms’ length body’ and Foster was not responsible for its day-to-day management, she was the minister who was democratically accountable for what went on within its Belfast city centre headquarters.
In autumn 2014 – just a couple of months before Foster expanded the scheme – Invest NI employee Jim Clarke became aware of the central problem with RHI. Clarke, an experienced official who was nearing the end of his career, had learned of the scheme through an Invest NI programme, which funded energy efficiency advice for companies. He was effectively a middleman between each company and the expert consultant who would analyse and make energy efficiency suggestions.
But a pattern began to emerge when the consultants’ figures showed that RHI incentivised firms to install multiple small boilers, with no cap on their earnings. With a brief to give each business candid advice, they honestly set out the reality of the scheme – it was burn to earn – and submitted their reports to Invest NI.
Around October 2014 Clarke said that he was also ‘aware through conversations, anecdote and rumour that some unnamed RHI accredited businesses had adopted inefficient practices to maximise RHI tariff returns’. When asked at the inquiry why he did not alert DETI, he said that he was new to the job and had significant responsibilities. But he later added: ‘To be honest about it now on reflection, that isn’t an excuse; I should have been aware of that and I should have flagged it up with the relevant people in DETI.’ When asked if officials talked about the RHI issues among themselves, he said: ‘Yes … we were aware of issues … we were all aware … to be frank, everybody in our team was aware of these issues.’ He said that he discussed it with his manager, Peter Larmour, but ‘his opinion was it was DETI policy; so why would we question DETI policy?’ In written evidence to the inquiry, Larmour denied that he was ever aware of the problems with RHI. But when that was put to Clarke he said: ‘I was aware, and I told him, and he knew.’
Clarke was one of a handful of witnesses to the inquiry who stood out because although he clearly had not done enough to raise the alarm, he later faced up to what he had done, rather than seeking to pass the blame to others or deny the obvious. For that he was commended by inquiry chairman Sir Patrick Coghlin, who said to him: ‘Can I just say that it is enormously refreshing to have someone like you approach the questions which we ask – which I recognise may be difficult – with an impressive degree of honesty.’
One of those who prepared the reports, which went to people like Clarke, was Alastair Nicol, an experienced energy expert. Within two months of RHI launching, he had seen the potential for major problems. He attempted to alert Ofgem that it was ‘rumoured in the marketplace’ that by altering the density of the liquid in heating systems, scheme applicants could achieve higher meter readings and therefore increase the payments they received.
In January 2015, just over two years into the scheme, Nicol emailed Invest NI official John Batch about a report he had written about a hotel that wanted to install four smaller RHI boilers rather than one or two larger units, ‘so as to generate the maximum’ RHI income’. Nicol felt that in engineering terms the idea was ‘ludicrous’ – but that it was what RHI was pushing people towards. Nicol said that he expected to get ‘real stick’ from the hotel owner because his report advised that the hotel should install a ‘technically appropriate solution rather than an RHI-driven solution’. Showing extraordinary awareness within Invest NI of how RHI was operating, Batch replied: ‘As you know sometimes the hot
els just see the cash cow called pellets!!’
Nicol later told the public inquiry that he discussed the issue with the hotel owner and found him ‘absolutely adamant [that he] wanted to go after this RHI money’ even though it meant that a large part of the car park would have to be lost to accommodate so many boilers.
That was not the first time the issue had been raised explicitly with Invest NI. In a 2014 report on a commercial wood-drying business, Nicol told it that what was being proposed would give ‘absolutely no incentive to dry the wood efficiently’. In another report, he said: ‘Unfortunately the RHI payments are so large in Northern Ireland that it pays to waste heat – in other words the RHI payment is larger than the fuel cost. Economically and environmentally this is a very undesirable situation.’ During years of doing reports about biomass installations, Invest NI never queried anything Nicol said about RHI. However, he knew they were reading his reports because they would correct his grammatical errors.
***********
Most of those involved in setting up RHI – including CEPA, Hepper and Foster – later argued that they believed they had a key defence against the tariffs being set at the wrong level in that the scheme was meant to be regularly reviewed. Such reviews were expected to entail detailed analysis of how the scheme was operating and in particular would focus on how much was being paid to each claimant. That in itself was a remarkably relaxed approach for someone like Hepper to take and – if Hepper’s account of having passed on to the minister Ofgem’s warnings about tiering is accurate – for Foster to explicitly approve.
Hepper, who had been warned that the scheme was flawed from the outset, would have known that even if a review, after a year or two, realised that the scheme was wildly over-generous and the review rectified that, it would make no difference to those already claiming. Each claimant who got in while RHI was flawed was guaranteed to not only keep their current levels of subsidy for 20 years, but to see those payments rise with inflation each year. However, even that limited safeguard was soon forsaken. Although the reviews were mentioned in the internal departmental documentation when the scheme was set up, and also referred to publicly by Foster at that time, there was no timetabled date when the first review was set to begin. That meant that the reviews – if indeed they would ever have happened, given the dysfunctionality of the department – became much less likely once the wholesale changeover of the key RHI staff was allowed to take place over the first half of 2014.