It was far more profitable to burn a ton of oats than to use them for food, the Ulster Farmers’ Union was privately told at the point where we now know that the RHI scheme was starting to run out of control.
Yesterday the RHI Inquiry heard evidence about an extreme example of the perverse incentive at the heart of the RHI scheme – that the cost of fuel was cheaper than the level of uncapped subsidy.
It is not clear whether oats were actually being used to fuel a heating system or whether the example was just being cited to drive home just how lucrative RHI was.
Inquiry barrister Donal Lunny read from the minutes of a meeting of the UFU’s rural enterprise committee on March 26 2015 which said: “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.”
Mr 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 advisor, said: “Yes it was. And had I had the opportunity I would have factored that into my written statement [to the inquiry].
“It was only recently that I was reminded of this. This was the end of March [or] beginning of April 2015. Now, it’s not specifically referring to wood pellets because obviously I don’t think oats can be used to basically fuel a boiler as such, but it was definitely a conversation along the lines of what people were hearing in terms of feedstock prices.”
Mr Lunny said that while oats would be “an unusual biomass fuel, it probably qualifies as biomass under the regulations from 2012”.
Mr Osborne said that he did not believe that there was any discussion about the more relevant financial information – the cost of wood pellets or wood chip.
He said that the information was never passed on to civil servants at Stormont because the UFU had not known the cost of wood fuel.