What does the RHI scandal mean for UK energy policy?

Northern Ireland’s government has been toppled by a scandal over its Renewable Heat Incentive. But will the furore contaminate efforts to decarbonise energy in the UK more broadly? Jane Gray reports.

This time last year, which of the following might you have thought would be least likely to happen within twelve months? The UK voting to leave the EU, Donald Trump being elected President of the USA, or that the Renewable Heat Incentive (RHI) would topple a government?

Preposterous though the first two events would have seemed to many at the start of 2016, for many the latter would have been the most laughable. And yet, that is exactly what we have seen happen in Northern Ireland (NI).

Over the past year, accumulating evidence of drastic overspends on the renewable heat scheme in NI has led to a toxic scandal. Following the resignation of deputy first minister Martin McGuiness on 10 January, it brought an end to the reign of first minister Arlene Foster. Indeed, it seems likely that the affair will terminate her political career.

The NI Department for Economic Affairs now believes that NI RHI scheme, which originally had projected costs of £660m over 20 years, has overspent by around £490m due to some oversights within the mechanism’s tariff details which seem frankly incomprehensible to many. These allow RHI users to “burn to earn” as the scheme had no cap in place to stop incentive payments after a certain threshold of biomass output had been reached. In one infamous case, it is thought a NI farmer earned £1m by heating an empty barn.

For Northern Ireland, this piece of incompetent policy handling will no doubt stall the deployment of renewable heat and taint discussion around how to tackle the wider decarbonisation of heat – which is now acknowledged to be a missing link within energy policy – for some time.

But does the scandal have broader implications for the UK RHI scheme, the renewable heat industry and energy policy makers?

Happily, those in the know are very clear that the problems encountered in NI will not be repeated in the UK. This is because – “to its credit” – government “foresaw this issue and introduced the ‘biomass stepdown’ to avoid the risk of heat dumping,” explains Tim Rotheray, chief executive of the Association for decentralised Energy.

So, while Rotheray believes it is “inevitable” that questions will be asked in government as to whether the NI scandal impacts on the rest of the RHI system, he is also confident that concerned MPs will be satisfied by the “safeguards” in place.

Other bodies close to this issue agree. The Renewable Energy Association’s head of policy and external affairs, James Court says there are “clear cost controls in place” for the RHI outside NI.

Court is less enthusiastic about the Whitehall administered RHI more generally however. While he welcomes the fact that, over the past five years it has “supported the first steps towards the hugely challenging task of decarbonising the heating system”, he also feels that recent reforms to the RHI which come into effect this spring are a “mixed bag”.

Gas network operators will have been pleased that these reforms seem to support growth in the biogas and biomethane industry – with which they are increasingly closely involved as they seek to decarbonise the gas grid. But Court says other changes proposed by government “mean that biomass heating is set to enter a very difficult period.”

Of course, the RHI only addresses a fraction of the wider energy system challenge of decarbonising heat in the UK – being primarily a mechanism designed to support the deployment of renewables. The bigger decarbonisation of heat agenda was set to be a focal point for energy policy makers this year following acknowledgements in a range of influential reports in 2016 that this is critical to meeting the UK’s carbon emissions reduction targets. Does the NI RHI scandal change or undermine this?

Again, experts are clear that it should not. Keith McLean, chair of the UK Energy Research Council, reflects that 2017 the “steady as she goes” approach of government to exploring heat decarbonisation pathways is unlikely to be derailed. “2017 will be an evidence gathering year,” he says, and a year for the launch of key live research and innovation projects – like those at National Grid Gas Distribution which won funding in the most recent round of the Network Innovation Competition (an Ofgem administered scheme).

That said, it is clear the RHI scandal has cast a shadow over the integrity of energy policy and its costs to consumers, just at a time when this topic is hotting up in the UK with a range of government and independent investigations into the economics of energy policy due to report this year. They will now do so under heightened sensitivity and suspicion that that decarbonisation is not being conducted cost effectively.