Major payouts to heat empty NI buildings, say auditors

A Northern Ireland farmer is allegedly in line to receive £1 million (€1.19 million) of public money over the next 20 years for heating an empty shed due to a Stormont failure to control a renewable energy scheme, auditors have revealed.

The claim of a burning-ash-for-cash racket was made by a whistleblower and outlined in a damning Northern Ireland Audit Office report on the running of the Renewable Heat Incentive (RHI) scheme.

Large factories in Northern Ireland are also allegedly on course to pocket £1.5 million over two decades for running incentivised biomass boilers all year round in premises that previously were not heated.

More than £1 billion of public money is to be paid to Northern Ireland-based businesses by 2036 after they installed new appliances under the RHI scheme, which is now closed.

The RHI encouraged the installation of costly eco-friendly heating systems by paying a tariff per kilowatt of heat burned over a 20-year period.

Auditor general Kieran Donnelly has questioned the level of expenditure and claimed major design and operation errors left the initiative exposed to abuse.

Mr Donnelly said: “This scheme has had serious systemic weaknesses from the start.”

He has qualified the 2015/16 accounts of Stormont’s Department of Enterprise, Trade and Investment (DETI) in relation to that year’s £30.5 million spend on RHI.

Anonymous whistleblower

The anonymous whistleblower contacted the Office of the First Minister and Deputy First Minister earlier this year. The claims are being investigated by the DETI’s successor, the Department of the Economy.

Mr Donnelly’s report revealed the allegations as he outlined the RHI scheme’s weaknesses, but it did not look into the accuracy of the specific claims.

Aside from the concerns of abuse, auditors discovered an administrative oversight let the scheme operate without the approval of the Department of Finance for seven months last year - during which almost £12 million was spent on RHI.

Thousands signed up to the RHI scheme, which started in 2012 and was extended to domestic customers in 2014. It was administered on behalf of DETI by the Office of Gas and Electricity Markets.

However, unlike in the rest of the UK, in Northern Ireland no cap or payment tier system was placed on the money that could be claimed in proportion to the size of boiler. In effect, that enabled a business to produce unnecessary heat just to make money.

Mr Donnelly described this as a “critical mistake”.

He said a business operating a biomass boiler 24/7 in Northern Ireland could make around £864,000 profit in the next 20 years.

“The fact that the department decided not to mirror the spending controls in Great Britain has led to a very serious ongoing impact on the NI budget, and the lack of controls over the funding has meant that value for money has not been achieved and facilitated spending which was potentially vulnerable to abuse,” he added.

The scheme was tightened up in November with the introduction of tiered payments, but before the change came into effect there was a surge in applications to sign up to the RHI on the pre-existing no-cap tariff system.

There were 923 non-domestic applications under the RHI scheme in its first 34 months, before an announcement in September 2015 that the scheme would be tightened up with the introduction of tiered payments.

It took two months for the change to come into effect, and in that time 881 applications were made to sign up to it on the pre-existing no-cap tariff system.

Huge overspend

The surge left DETI exposed to a huge overspend if it was to continue to run the scheme.

The announcement of the closure of the RHI to new applicants came only three months later. The Department of the Economy is to undertake an audit exercise to establish the bona fides of many of those who rushed to apply before the deadline.

It was envisaged the UK government would fund most of the RHI scheme, but the expenditure commitment in Northern Ireland over the next 20 years is well above a Treasury funding cap, meaning Stormont will need to find hundreds of millions to make up the shortfall.

“Over the next five years, this additional cost to the NI block is estimated to be £140 million and significant costs will continue to be incurred until 2036,” said Mr Donnelly.

Press Association