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Northern Ireland Renewable Heat Incentive scheme - what now?

The Renewable Heat Incentive (RHI) scheme and cost overruns, which could cost Northern Ireland taxpayers an estimated £490 million, has dominated the headlines in recent weeks.

The fallout from RHI has led to the resignation of Martin McGuinness as Deputy First Minister and the Stormont power-sharing arrangements mean that Arlene Foster will also lose her office as First Minister.

Unless the parties can reach a resolution to the issue and nominate a new Deputy First Minister there is likely to be a snap election within the next 6 to 7 weeks.

What does this mean for those affected by RHI issues?

Participants in the scheme have been concerned that, in an effort to deal with the budget deficit for the scheme, and to quell public concern, Stormont would seek to retrospectively amend or alter the scheme to reduce incentives paid to participants. This will reduce the financial benefit to the participants in the scheme.

Martin McGuinness' resignation and the likely subsequent election mean that it is now unlikely any decision will be taken imminently by Stormont in relation to the scheme. Participants must continue to wait and see what proposals are produced by Stormont to deal with the deficit issue.

In the meantime the threat of 'naming and shaming' participants in the scheme remains. The Department for the Economy wrote to RHI participants in December seeking consent to publish details of each beneficiary. Whether any steps will be taken in that regard pending either a negotiated resolution between the DUP and Sinn Fein or the outcome of an election remains to be seen.

Background to the RHI scheme 

For those who are not familiar with the RHI scheme, it was set up in November 2012 by the Northern Ireland Executive to help increase consumption of heat from renewable sources. 

It was run by the Department of Enterprise, Trade and Investment (DETI), and the DETI minister at the time was former First Minister Arlene Foster.

The scheme offered long-term financial incentives for participants to install renewable heat systems on their premises, which included biomass boilers, most of which burned wood pellets.

Unlike the equivalent GB scheme, no cap was implemented on the payments that participants could receive, meaning that the more fuel that was burned, the more income could be generated with no upper limit – so called 'cash for ash'.

Although take-up of the scheme was initially slow, a significant spike in applications in and around September to November 2015 meant that overall the scheme is close to £500 million over budget.

The impact on the local public purse is such that there has been a public outcry and significant pressure on Stormont to produce a solution to reduce the cost to the taxpayer.

Participants who have invested significantly in the biomass boilers are concerned that the payments that they had anticipated over the next 20 years are threatened.  
Arlene Foster's DUP party has also pushed for participants to be publically identified – a significant cause for concern among participants given public perception of users of the scheme.

Whilst the lack of a cap on RHI payments creates a perverse incentive to produce more heat than is needed, it would be fair to say that the vast majority of RHI participants entered the scheme for perfectly valid reasons in the same way as their counterparts in the GB scheme. The government has renewable heat generation targets to meet and many businesses made substantial investments in new biomass boilers to meet genuine heating needs (often replacing oil fired heating) in good faith.

Public sympathy may be lacking but many RHI participants are rightly aggrieved that their significant capital outlays in new equipment were based on investment decisions arising from a scheme which, unknown to them, was fundamentally flawed. Whilst renewables incentive programmes for wind and solar have been cut short in recent years, no government department in NI or GB has ever contemplated a retrospective penalty on existing participants in any scheme. Such action is without precedent and the lawfulness of any such approach will need to be carefully scrutinised.

What happens next?

We are advising a number of participants in the scheme who are concerned about the potential proposals which will be put forward by Stormont in due course.  It is important that the interests of businesses that entered the scheme in good faith are protected and the impacts on legitimate participants are properly taken into consideration in any new proposals, whatever form these might take.

If you are affected by these issues and would like some confidential advice, do get in touch with either litigation partner, Frances Thompson or energy and renewables partner, Andrew Ryan.

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