Arlene Foster was told of RHI fears 10 weeks into scheme

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Arlene Foster, her special adviser and her officials were explicitly warned that the RHI scheme contained a “perverse incentive” just 10 weeks into the scheme, it has been revealed.

In evidence which adds to an already grim picture of a department which had been warned time and time again about what would become ‘cash for ash’, the public inquiry was yesterday told that the message which could have saved taxpayers a fortune was brushed off at a point when there was just one claimant.

Mrs Foster’s private secretary then wrote on her behalf to give an assurance to the firm which had warned of the perverse incentive, telling the company: “I can assure that this is not the case.”

The correspondence adds to the picture of what Mrs Foster and her officials should have known about the scheme’s flaws from early in its life.

It has already emerged that a businesswoman – who will give evidence in public for the first time on Friday – contacted Mrs Foster personally 10 months into the scheme to warn: “It pays them to use as much as they can ... the incentive to use more is leading to misuse in some cases.”

And the inquiry has already revealed how regulator Ofgem warned the department on multiple occasions prior to the scheme even being opened that it should wait and implement cost controls, although it is not yet clear whether those messages got to Mrs Foster.

As the inquiry yesterday moved into phase two of its four-part investigation, inquiry counsel Joseph Aiken revealed that a company called Renewable Energy Manufacturing Ltd (REM) had written to the then environment minister, Alex Attwood, to express environmental concerns.

That January 2013 letter from the company which used poultry manure to create heat was passed to Mrs Foster’s Department of Enterprise, Trade and Investment (DETI).

The firm complained that efforts to meet the EU’s Nitrates Directive by reducing the practice of spreading poultry manure on fields were being hampered because of RHI.

It wrote: “The current NI RHI tariffs act as a deterrent for farmers to employ our poultry manure to energy system ... currently the incentives provided by the RHI scheme in England and Wales make the economic viability of using poultry manure in a modern on-farm energy system by poultry farmers there decisively more attractive in terms of commercial return.

“How the RHI scheme is structured in Northern Ireland has the directly opposite effect.”

Highlighting the absence of tiering – a crude form of cost control – in Stormont’s scheme, the letter said that a farmer who installed two 99kwth biomass boilers would receive “nearly four times more in incentives” than a farmer who installed a single 200kwh energy system fuelled by poultry manure, adding that “the result is ‘perverse incentive’ for farmers needing more heat than a 198kwh unit will produce to install a number of small wood chip boilers rather than one larger PMtoE system”.

The company said there was an “evident absence of joined-up thinking” between Stormont departments seeking to meet nitrates directive and the department running the RHI scheme. It asked for the issue to be “urgently” examined “with some rebalancing by the responsible minister, Arlene Foster”.

Mr Aiken told the inquiry that in a draft submission to Mrs Foster’s private office, officials said that DETI’s “renewable heat branch did not accept the company’s concerns about multiple boilers”.

Mrs Foster’s private secretary was advised to write on her behalf: “I can assure you that this is not the case.” It is now clear that there was widespread use of multiple small boilers to attract the most lucrative tariff.

Mr Aiken said that the firm’s argument “just wasn’t engaged with” by DETI and asked why no one had asked “what if it’s not like that?”

He also said that the inquiry would be wanting to examine the issue in the context of the poultry sector later being identified as the key reason for the scheme bursting its budget in 2015.

And the barrister said that REM was providing an ultra early warning to the department because they were “in fact telling you before these people are scheme members this is what they’re doing ... they’re installing two boilers ... at this point, these people he’s talking about are not members of the scheme”.