Burned

by Sam McBride

  The failure to review the scheme meant that civil servants were in breach not only of the conditional authorisation, which RHI had been given by the Department of Finance, but also in breach of the assurance they had given to their minister. For all that Foster would later unfairly blame her civil servants for, some of what had transpired, this was one of the clear areas in which she had reason for righteous anger. Her officials had on multiple occasions given her – and others – written assurances that reviews would take place and explained that this was not some administrative nuisance, but a crucial mechanism to protect public money. The minister had a right to expect that such a review was going to be done. But John Mills, who took over from Hepper, questioned the later assumption that a review would have led to the perverse incentive being ended. Mills – whose evidence to the inquiry has to be seen in the context of him defending the failure of his team to instigate such a review – questioned the view that it would have been transformative. That belief, he said, ‘ignores the “political saleability” of such action’. He said in 2014 the scheme ‘appeared to be experiencing low uptake, money was being returned to Treasury and the tariff levels were lower than the GB scheme’ – as the previous chapters have demonstrated, at least two of those assertions are incorrect. He said that in 2014 the priority was to expand and advertise RHI. He added: ‘In this context, it may be wondered how likely that the following message would have been embraced: “This scheme is under-performing and we’re returning money to Treasury so what we really need to do is introduce urgent legislation for cost control measures to dampen down demand.”’

  Mills’s argument suggests that Stormont’s political climate was such that even if there was a perverse incentive it was unlikely that there would be much urgency about ending it. Others who worked with Mills are sceptical about that claim, seeing it as an attempt to shift the blame for what was a basic bureaucratic failure.

  However, there is an intriguing caveat to the idea that the review was ‘missed’ and that this was an accident by a chaotic department. In February 2013, just three months after RHI launched, the Assembly debated sustainable energy. During a fairly low-key debate, the DUP MLA Gordon Dunne made an intriguing comment about green energy schemes. Dunne was a member of the Assembly committee that scrutinised DETI, and for that reason Foster and Andrew Crawford were in regular contact with him and the three other DUP MLAs on the committee. During his speech, Dunne, a backbench MLA who had only been in the Assembly for two years at that point, said renewable energy was ‘by far one of Northern Ireland’s biggest economic opportunities’. He cautioned that ‘if we are to secure major investment … the Executive must address a number of issues’. He said that DETI had to ensure ‘that the incentives offered remain at a level that will continue to make renewable energy schemes financially viable and attractive for would-be investors’. He then explicitly opposed the idea of regular reviews of such lucrative subsidies: ‘Long-term stability around policies and avoiding regular reviews of the level of incentives offered will strengthen investor confidence and encourage investments in the types of scheme required to reach the 2020 targets, such as small-scale single wind turbines.’ Was this view of a junior DUP MLA entirely his own, or did it reflect the views of others within the party? When approached about the issue for this book, Dunne did not respond.

  Dunne’s was not the only intriguing DUP move during the early years of RHI. Foster’s spad was involved in planting a public question to his own minister about whether RHI was likely to become less lucrative.

  Late on the night of 19 September 2014, Andrew Crawford emailed DUP MLA William Irwin. His terse email – perhaps suggesting that they had discussed the issue by phone – had the subject ‘Written question’. The email said: ‘Question for deti [sic] … Does DETI have any plans to reduce the level of Renewable Heat Incentive (RHI) for new commercial biomass boilers?’ Crawford’s email to the MLA came a day after the spad had sought assurance from Mills about the level of tariffs and Mills had assured him that biomass tariffs had not been cut, but had in fact risen with inflation. Three days after Crawford’s request, Irwin tabled the written Assembly question – and requested a priority response. The answer, prepared by officials and issued by Foster, came back to say that ‘there are no proposals in the [then recent] consultation to reduce incentives.’ When the scandal emerged publicly, the DUP eventually clarified that Irwin’s son-in-law was an RHI claimant. Irwin said that he had never lobbied on his behalf.

  That was not the last time Irwin was involved in RHI. In February 2015 – just as the scheme was running out of control – Irwin’s assistant emailed Crawford. The email by Lavelle McIlwrath, a former DUP councillor, was sent from Irwin’s email address. McIlrath sought confirmation on behalf of an unnamed constituent that DETI ‘has no immediate plans to change the Biomass Boiler scheme for agriculture users? (heating poultry houses etc)’. Crawford did not reply by email, so his response was not recorded. However, he phoned McIlrath because in a second email a week later the DUP man referred to their phone conversation and then alluded to what they had discussed by adding: ‘Saw another piece scaremongering about the biomass scheme in the paper last week.’ As so often in his evidence to the inquiry, Crawford said that he could not remember what had transpired.

  The planted Assembly question was one of several curious examples of how hands-on Crawford was at various points in RHI, sometimes over seemingly small details. Why had he been keen to get the minister to publicly clarify that RHI rates would not be cut, and did Foster know the question she was answering was planted? We have an answer to at least the first of those questions and it is potentially significant, given what was to follow. Crawford told the inquiry in writing that he wanted Irwin to ask the question because he knew the answer would reveal that RHI cost controls were being delayed, and he wanted that publicised – especially to farmers. But when he appeared before the inquiry, Crawford said that he had limited recollection of what had gone on and sought to slightly row back on his initial written explanation. He instead said he wanted to publicise that tariffs would not be cut. The spad said that he felt it was simpler for the information to emerge through a written question rather than by Foster issuing a press release to explain that they had abandoned the original plan to introduce cost controls. But even that answer does not fully explain his actions. If he simply wanted to inform the public that cost controls on RHI as a whole – a scheme that encompassed all sorts of technologies, from air source heat pumps to solar panels – were being delayed, why did the question he drafted single out commercial biomass boilers? Did Foster’s spad at this point know more than he was letting on about a particular issue with biomass boilers – the very boilers that, on his watch, were running on a ‘burn to earn’ basis?

  Crawford’s interest in the level of the RHI subsidy for biomass later contributed to a belief from Andrew McCormick that the spad might have been acting in ways which were not clear to him at the time, and which on reflection caused him concern. McCormick told the inquiry that when looking back on events it appeared to him that ‘well before the problems with the scheme began to emerge (in March 2015), Crawford appeared to be interested specifically in the tariff. While the origin of the flaw with the tariff still appears to have been a genuine mistake, it is possible that, like many in the private sector, he became aware of the issue relatively quickly.’ He said that Crawford’s ‘early interest’ in the level of subsidy was evident on a number of occasions, including his planted question to Foster.

  Just over a month after his planted question was answered, Crawford sent a fascinating email to the huge poultry processor Moy Park, Northern Ireland’s biggest private sector employer and a major RHI beneficiary. Crawford, who had multiple links to the huge company, told it in November 2014 that the ‘changes (likely to apply from summer 2015) are not likely to have a negative impact on Moy Park growers’. McCormick later told the inquiry that he found that noteworthy because he did not believe the
re was any hint of retrospective changes to the scheme, which would have meant Moy Park required such reassurance. When asked at the inquiry if there was any reason why people should be suspicious of what he was doing in that period, and whether he may have known by late 2014 that the scheme was far too generous, Crawford said: ‘At this stage, I remain [sic] that I wasn’t clear about the tariff rate – the attractiveness, as you describe it, of the tariff. I can’t say more than that.’

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  By spring 2015, the riches available under RHI were widely known across Northern Ireland – especially in rural areas. Foster’s evidence to the inquiry was that although she represented one of Northern Ireland’s most rural constituencies, Fermanagh and South Tyrone, and although she had been the minister who was responsible for the scheme, she never became aware of just how financially rewarding RHI was. Whatever Foster knew, it is clear that many farmers were by now well acquainted with the nature of what something being openly marketed as ‘cash for ash’ entailed. But among vast evidence about what was known about the burn-to-earn nature of RHI, there is one situation which stands out.

  In an extreme example of the perverse incentive at the heart of the scheme, a meeting of the Ulster Farmers’ Union (UFU) Rural Enterprise Committee on 26 March 2015 recorded: ‘Ton of oats example – £130/ton at the market [value] and £300 to burn it. This obscures the market return when compared with conventional end use. The benefit to the poultry industry is apparent.’ When the document emerged at the inquiry, barrister Donal Lunny said: ‘That seems to be suggesting that you can sell a ton of oats to the market for use as food or feed at £130 a ton, but if you burn it you’ll earn £300, presumably under the RHI, and that is a potential illustration of the perverse incentive where the tariff income greatly exceeds the cost of the fuel. Is that what was being discussed at that point?’ Christopher Osborne, the UFU’s senior policy adviser, replied: ‘Yes it was.’ He went on to say that ‘obviously I don’t think oats can be used to basically fuel a boiler as such’. However, Lunny said that while oats would be ‘an unusual biomass fuel, it probably qualifies as biomass under the regulations from 2012’. Not only was Lunny right, but there is reason to believe that the practice set out in those minutes may have been more than hypothetical.

  Biomass was not defined in the regulations, meaning that oats were a legal fuel and corn was far cheaper at that point than wood pellets. There is less energy in oats, but not much less – about 4,800 kWh per ton in wood to about 4,000 kWh in oats. Biomass boilers, which were specifically designed to burn grain, were available on the market. For a hard-pressed farmer whose crop was fetching poor prices due to the global market, it was clear why it would be attractive to put it through an RHI boiler and substantially increase its value.

  The issue was explicitly discussed on an online agricultural forum in the month before the UFU meeting. Under the title ‘Wheat in a wood pellet boiler’, a farmer from Merseyside wrote on The Farming Forum: ‘Has any one try this with wheat been half what wood pellets are at the moment would it work or would 14% wheat be to damp or are there any other problems from trying this [sic].’ Another farmer replied to say: ‘Very intrigued by this, you could always dry below 14% and it’d still be cheaper than pellets.’ A Warwickshire farmer said: ‘I was looking at mixing oats 50/50 with the wood pellets.’ Another user said that there were boilers that specifically burned grains but that burning wheat in a standard boiler was unlikely to work because of heavy deposits, which would build up in the equipment. However, he added: ‘Oats works the best I am lead to belive [sic]’.

  Although there is no evidence that this practice was going on within Northern Ireland on a large scale – and perhaps was not happening at all – the fact that it would be profitable was a measure of how wildly overgenerous RHI was. A scheme that had been set up with the intention of improving the environment was now so lavish and unregulated that it had become a perverse incentive to burn food.

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  On 26 February 2015, Seamus Hughes, an experienced civil servant with weathered features who would now be central to the unfolding disarray, despatched a series of proposals to Ofgem. One A4 sheet he sent to London was startling. DETI was proposing to double the size of boilers which could claim the most lucrative biomass tariff – but consciously not introduce tiering. It was the worst of both worlds. DETI was going to take the more generous part of the GB scheme – the fact that boilers up to 199 kW could avail of its top tariff – but not copy across the crude cost control that came with it. At best, this pointed to ineptitude within DETI; at worst, this was a conscious attempt to make an already lucrative scheme – and one Stormont thought was being paid for by ‘free money’ – far more generous.

  The document also made clear that DETI was not only aware of tiering in the GB scheme but was deliberately and explicitly choosing not to incorporate it into its own scheme – despite the mountain of evidence it had been given that its scheme was already overly generous. DETI set out a limp logic for what it was planning. The department said that the original policy intent had been for larger installations to receive lower tariffs. But that was not happening, it said, and multiple smaller boilers were being installed to get the most lucrative rate. However, what was being proposed would have directly contradicted what the department claimed was its policy – smaller subsidies for larger installations. The proposal was the opposite of that – extending the highest subsidy rate to much bigger boilers. Hughes, whose brow was often wrinkled in apparent bafflement as he tried to explain to the inquiry what had been going on in this period, was unable to provide any coherent explanation for what he had put to Ofgem. Asked to explain another part of the proposal, Hughes gave the sort of vague answer which peppered his evidence: ‘Yes. No, I honestly can’t recall what would’ve been behind that.’

  The entire episode undermines DETI’s claim that its staff were over-worked or overly focussed on launching the domestic RHI scheme to prioritise cost controls, which then innocently kept getting pushed back. Here was a proposal that had never been in the 2013 public consultation on phase two of the scheme, yet energy division staff had spent time drawing it up and putting it to Ofgem – which had repeatedly recommended existing cost control measures as the priority. Yet at the same time the cost control proposal on which DETI had consulted in 2013 was simply abandoned.

  DETI was also working on opening the scheme up to air source heat pumps, an extremely generous ‘district heating’ tariff for installations serving multiple properties, deep geothermal and large biomass over 1MW – a category CEPA originally said was economically viable in Northern Ireland without any subsidy. From the outset, phase two of RHI had meant to correct the failure to introduce cost controls at the outset. Now phase two was being presented by Hughes as nothing more than further expansion of the scheme – with a conscious decision to yet again remove cost controls from the equation.

  Just a fortnight later, having waited and waited for something to be done about the perverse incentive she could see all around her, Janette O’Hagan again contacted DETI. Emailing Davina McCay, who by then was temporarily looking after RHI, she warned that ‘potential clients which have moved to biomass are no longer interested in making any efficiencies’ and referred to an installer who had told her of an installation, which would see payback in two years ‘if he kept the heat on 24/7’ versus a three-year payback ‘if he kept the heat on the hours that it was needed (8 hours a day five days a week). In anyone’s eyes this is completely wrong and motivates further waste’. McCay replied to say that she no longer dealt with RHI but had copied the email to Hughes, who was now responsible. Hughes replied to tell O’Hagan that RHI was being expanded. But, in what was a dismaying message for O’Hagan to read, he told her that tiering now was not being proposed in the immediate future.

  O’Hagan was ‘raging’ when she read his email. Having spent almost two years repeatedly explaining to the various people running RHI how it was fundamenta
lly broken, she seemed to have gotten nowhere. The entrepreneur forthrightly wrote back that night to say:

  I believe that the tiered funding in NI needs to ensure that people who avail of non-domestic RHI don’t just waste fuel for the sake of earning money on the RHI repayments. I had spoken to Fiona Hepper and her team about this two years ago. She’d advised me then that they didn’t think that businesses would abuse the system, but we see it time and time again when out on client sites. To assume that this isn’t happening is not acceptable in my view. This doesn’t happen in GB as the higher rate RHI repayment only covers a certain amount (~around 75% of a 40 hr week) of their usage and the remainder of usage is at a lower rate – thus encouraging efficiencies.

  The email became plaintive:

  I’ve tried to speak to each person who has subsequently taken on the RHI role and Davina had acknowledged that when she was looking after Renewable Heat she intended to review elements of the non-domestic RHI, including tariffs. She had said that the issues that I was raising were on the RHI team’s radar and would be dealt with. It’s really disappointing to hear that that’s not the case any more, other than possibly in the future for budgetary controls. The rest of us, who are actually trying to save energy, money and the environment have an uphill struggle against such legislation. I understand that it is a renewable resource, if replanted, but really should it be being wasted for profit?