Northern Ireland and its RHI scheme controversy

RHI (Renewable Heat Incentive) schemes are something I’ve long supported. In many countries the winter heating load can represent a significant proportion of carbon emissions. Recall only 20% of the UK’s final energy consumption is electricity, while 36% is heating. So such schemes can go a long way towards reducing carbon emissions.

So its a little worrying how such a scheme is causing major political problems in Northern Ireland. First Minster Martin Mc Guinness has resigned over the crisis, in an effort to unseat DUP leader Arlene Foster (who set up the flawed scheme). Early elections have now been called. This could potentially lead to the situation where the unionists lose their majority, meaning a breakdown of powersharing. While Sinn Fein would still need the support of smaller parties to rule, it could lead to a border poll in Northern Ireland. And post-brexit, its very difficult to predict the outcome of such a poll, nor the consequences regardless of who wins.

So, how can a scheme to encourage renewable energy run that far out of control? Stories abound of people being paid to heat an empty shed. Of subsides that paid out more than the cost of the wood that they burn, cash for ash the papers call it. Of whistleblowers who warned of the dangers being silenced.

Well firstly there’s nothing unusual about an RHI subsidy that pays more than the cost of the wood. Keep in mind a householder has to pay for the boiler in the first place. Most RHI schemes, the English or Scottish systems being good examples, stipulate that a building must be brought up to a good environmental standard. If you’ve got an EPC certificate, that means the building has to meet the recommendations it stipulates. As some RHI applicants will have been using electricity to heat their home prior to switching to biomass (the RHI is primarily targeted at rural dwelling off the gas grid who often have to pay through the nose for winter heating), they might have had to have had new radiators and plumbing fitted. All of this could add up to a bill in the tens of thousands of pounds. The point of the subsidy paying out more than the cost of wood, is that over the 20 years that the subsidy lasts for, all of those costs have to be paid off. So the point of the scheme is to give a useful payback period for the householder.

Also wood prices can vary depending on who you are. If you can your own fuel from your own land then it will be cheap (it will have some cost in terms of your labour thought). If you can buy it in locally it won’t be that expensive. But if it has to be delivered over a long distance, or you can only burn certain types of fuel (smokeless zone and all that), or you’ve limited storage capacity for fuel (so more frequent deliveries) all of these factors will push up fuel costs. Thus the subsidy has to account for the fact that some will be paying a lot more than others.

It’s also been generally assumed that wood prices would go up as these schemes became more popular, but this hasn’t quite transpired. This of course contradicts one of the arguments against biomass fuel, that there’s a limited supply. Instead, necessity being the mother of invention, some enterprising types have gone off and developed new wood supplies. For example, I’ve heard of some going around and collecting all of those discarded Christmas trees and chopping them up for fuel.

 

Also most RHI schemes include a tier break (the Northern Ireland system doesn’t seem to include this). This means that the subsidy rate drops if the boiler is run for more than a certain period of time, typically 1,314 hrs at full boiler rating (about the average winter heating load in this part of the world). After this the subsidy paid is a lot lower, generally a good deal less (I seem to remember the old UK system used to drop from 8p/kWh to 2p/kWh). The idea of this is to encourage energy conservation. I would note that the Tories recently dropped the tier break from the domestic UK scheme, although they kept it for the non-domestic scheme. I think this was a bad idea and the reports from NI prove why. I’m all for subsidies, but not for wasting energy.

As for a shed, well if these media reports are true that’s a major flaw in the system. Out buildings are generally exempt from a domestic RHI scheme (the usual practice in Ireland and the UK is to leave these buildings unheated). They might be eligible in some regions for the non-domestic scheme, but would in any event need an EPC and be brought up to the appropriate standards and would be subject to the aforementioned tier break. If the NI scheme ignores this obvious loopholes then it is seriously flawed.

Also there are recommended indoor temperatures for buildings. I don’t have a copy of the NI building codes to hand, but I’m guessing about 12 Celsius for an outhouse in active use, probably 5 degrees for an empty building (frost protection). Now you calculate the annual heating demand for any such building on either of those two figures and the number you come up with should be fairly low. This is important because in most RHI schemes you have to declare how much heat you expect the building to use as part of the application. The sorts of figures being talked, even if we consider a shed or an outhouse as eligible (which is dubious) should have raised red flags straight away. Which does lead one to wonder what the DUP were up too….or indeed whether they were running the whole thing as a scam from day one.

Overall I do feel the media are making hay out of this one without fully understanding how these schemes work or what the objective of these schemes is. But certainly there are dangerous flaws in the Northern Irish system. Properly monitored these should have been spotted and corrected. But this is always the problem with Northern Ireland. It’s a province run by ideologues and populists of the Trump variety who simply don’t understand how a government is supposed to work. They want to simplify things, failing to understand often government red tape is complicated for a reason. Namely to keep things fair and stop some cute hoor pulling a fast one.

In short, if you think regular politicians are bad, the populist types in Stormont have been consistently worse (and to be clear, I include both Sinn Fein & the unionist in that statement). Voting for populists is like someone who complaints that their doctor isn’t very good, but rather than going to a different doctor, they instead go to some woo pedalling quack.

There’s also an ideological issue when it comes to conservatives trying to implement a renewable energy scheme. Their heart just isn’t in it. Inevitably you leave people who think renewable energy subsidies are just a scam (which is not true btw, I debunked that in prior post, although I am worried about the UK government’s CfD scheme) in charge of such a system, they’ll come up with something that is a scam.

If anything this whole sorry saga says more about the failings of NI politics and populism than it does about RHI schemes. One hopes that such schemes won’t now be cancelled as that would be throwing out the baby with the bath water.