“offering hard-pressed businesses the chance of zero cost heat for 20 years”

You spend £1 to buy some wood pellets. And I’ll give you £1.60 as a thank you. Perhaps if someone had boldly used this in their advertising, the flaws in the Renewable Heating Incentive scheme would have developed greater prominence much faster!

The headline RHI figure is £400 million over twenty years; £20 million a year. Huge sums. For some businesses with modest heating costs – offices or car show rooms – the it might amount to £5-10,000 a year. But for a small number, the figures are much larger.

How huge?

Back in August 2014 the case study of a Tyrone poultry farmer was published in the Farming Life It’s an interesting insight into how the scheme was portrayed and promoted before the spike in applications

“he expects his costs to have been reduced by around £40,000 in a full year”

The paper explains:

The forward-thinking firms are proving the value of turning green ambitions into on-farm realities, saving money and reducing their carbon footprint by tapping into the Renewable Heat Incentive (RHI), which offers hard-pressed farm businesses the chance to benefit from zero cost heat for the next 20 years. [emphasis added]

With promotion like that, you can see how easily a spike in interest and applications was produced.

The case study farmer’s reduction in energy costs accumulates to around £800,000 over twenty years for his heat intensive business, entirely above board and using the Renewable Heat Incentive scheme as intended. Those figures are certainly not “chicken feed” and are in line with an example given in this summer’s NI Audit Office report (page 110) which explains:

“very large profits could be realised, even though the use of the biomass boiler would still be in line with the spirit of the scheme”

Normally, Northern Ireland businesses suffer from increased travel costs when shipping produce to Great Britain or beyond. This level of state intervention could make a previously gloomy business plan turn viable (for twenty years).

Brites are a Fermanagh-based manufacturer of wood pellets (a common renewable heat source). Their website includes case studies of large buildings like Skainos in East Belfast (which was designed to have a range of sustainable features including solar thermal panels to heat water) and the Manor House Hotel in Co. Fermanagh, some of whom may have installed their wood pellet boilers before the RHI scheme was launched.

Paula Keelagher is brites’ Market Development Manager. Back in 2014 she told the Farming Life (quite possibly through a press release given how the article reads) about the background to the RHI scheme:

“Our government is tasked with achieving a target where 12% of all heating comes from renewable sources by 2020. To assist in achieving this, the Department of Enterprise, Trade and Investment (DETI) launched the Renewable Heat Incentive (RHI) in 2011, the world’s first long-term financial support programme for renewable heat that provides payments to commercial users.”

As Peter Doran posted last week, the EU State Aid decision terms may have been broken given the design and execution of the scheme. Though the EC seems to think the scheme is complaint based on available information.

Aside from the lack of tiering, and the enormous sums that benefit the largest energy consumers, the RHI scheme must surely have skewed the local energy market. Old suppliers of heating oil to rural businesses would have lost considerable custom from canny poultry farmers, as sources of fuel swapped over in this annual £20 million state-sponsored intervention in the local energy market.

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  • Angry Mob

    “Old suppliers of heating oil to rural businesses would have lost considerable custom from canny poultry farmers, as sources of fuel swapped over in this annual £20 million state-sponsored intervention in the local energy market.”

    Most, if not all as far as I am aware run/ran on LPG in which case there are only a few suppliers in NI such as Calor and Flogas.

    I spotted this old press release from Moy Park which shows just how aware they were of it and the scale they went in order to replace the LPG boilers with Biomass https://www.moypark.com/en/news/major-investment-in-biomass-technology

    “This announcement adds to the significant on-going investment in biomass by Moy Park suppliers. In recent months 68 biomass boilers have been installed by farm owners on Moy Park’s managed farms in GB with more planned for the rest of the year and in Northern Ireland 280 poultry houses will have biomass heating systems installed by our growers by the first quarter of 2015, with 105 currently in place.”

  • ted hagan

    There may well be a few ‘rogue’ RHI operators abusing the system but I suspect this is a red herring being used by the DUP to deflect blame for a massive cock-up in introducing a set-up that is being used quite legitimately by people who knew a good thing when they saw it, spike or no spike, and that most of the 400 million is now irretrievable.

  • Alan

    “…the RHI scheme must surely have skewed the local energy market. Old suppliers of heating oil to rural businesses would have lost considerable custom from canny poultry farmers, as sources of fuel swapped over in this annual £20 million state-sponsored intervention in the local energy market.”

    That’s what it was designed to do.

    As you quoted,

    “Our government is tasked with achieving a target where 12% of all heating comes from renewable sources by 2020. To assist in achieving this, the Department of Enterprise, Trade and Investment (DETI) launched the Renewable Heat Incentive (RHI) in 2011, the world’s first long-term financial support programme for renewable heat that provides payments to commercial users.”

    What you’ve missed is that, at the time, if we failed to hit that target we, as in the NI Executive’s available budget, would be hit with fines from the EU.

  • Mark Anderson

    This is Moy Park saying there is a peak of applications on the way.

  • John Collins

    Google Jack O’Connor BHSL Kantoher for an interesting article relevant to this topic.

  • Which have gone some way to amending the scheme as in its first months it wasn’t drawing in enough users. The point of the scheme was to spend. Same as all enviro-energy schemes. Otherwise we’d have no wind-farms. Enviro-energy is an industry entirely at the expense of the taxpayer.

  • Ben De Hellenbacque

    Interesting indeed, but do you know of the environmental impact of burning manure (of any farm animal) apart from decreasing dependency on fossil fuel?

  • Angry Mob

    I assume it was written in late 2014 however.

  • John Collins

    Well there was a massive problem with water contamination in parts of the USA, where broiler production was very intense and this company has secured quite lucrative contracts for using their skills to alleviate the problems there.

  • Calor – as well as Invest NI – are shareholders in Balcas!

  • Fidellum

    Alan – I’m puzzled as to why you cite this August 2014 promotion as explaining a spike in applications. Were there two (or more) spikes? The only spike I have heard of is the September to November 2015 spike which was more than a year after this article appeared and followed Minister Bell’s announcement of a reduced tariff. I’m not saying that a promotion like this didn’t resurrect itself in the minds of the Sep-Nov 16 applicants when they heard the Bell announcement – but all 900+ of them? The key question for me is ‘Who were they in terms of proximity to the DUP?’ If I were an applicant without baggage I’d say ‘Publish (my name) and be damned’. Which brings me nicely on to the subject of political donor transparency in Northern Ireland. It’s time to end this charade that Northern Ireland is a special case compared to the rest of the UK because of security issues.

  • William Kinmont

    The majority of the trees converted to pellets belong to daera the rest to dukes and lords living in fermanagh