Closure of RHI scheme to cost £196 million over next decade

Compensation and closure costs in the troubled renewable heat incentive (RHI) scheme will cost up to £196 million over the next decade, Economy Minister Caoimhe Archibald has told MLAs.

The minister announced that the Executive had formally agreed a pathway to closing the scheme.

Ms Archibald said the proposed way forward would be fair to scheme participants and protect public funds.

The closure arrangements will see an uplift in the tariff rate for those using the boilers this winter.

The RHI scheme, set up in the region in 2012, incentivised businesses and farmers to switch to eco-friendly boilers by paying them a subsidy for the wood pellet fuel needed to run them.

But mistakes in its designs meant the subsidy rates were set higher than the actual cost of the wood pellets, and applicants found themselves able to burn to earn.

The scandal contributed to the collapse of devolved government in Northern Ireland in January 2017, when former deputy first minister Martin McGuinness took issue with the DUP’s handling of the scheme.

With Stormont facing an overspend bill of hundreds of millions of pounds, cost-control steps were taken in 2019.

The New Decade, New Approach agreement, which restored the Stormont institutions in 2020, included a commitment that RHI would be closed down and replaced by another scheme to reduce carbon emissions.

The same year a public inquiry identified a multiplicity of mistakes in the running of the RHI scheme.

The inquiry, chaired by retired judge Sir Patrick Coghlin, produced a 656-page, three-volume report containing 319 findings and a number of recommendations.

There are currently 1,100 participants in the RHI scheme, with just under 2,000 boilers in Northern Ireland.

Ms Archibald told the Assembly that legislation would be introduced after a public consultation to “legally and administratively” wind down the scheme.

She said a failure to close the scheme in the previous Assembly mandate meant more than £100 million of funding for renewable heat had not been utilised since 2020.

She told MLAs: “Instead of receiving a single one-off payment, compensation to participants will be staggered over a period of 10 years for the typical participant.”

Asked how much would be paid in compensation, Ms Archibald said: “The closure arrangements that have been designed to stay within the budget that we have.

“Up to £196 million over the next 10 years is what the scheme is expected to cost.”

She said the RHI tariff would be revised upwards from November 1, subject to the agreement of the Assembly.

She said: “A tariff uplift has been agreed for this coming winter to support scheme participants as work to implement closure is progressed.

“Today marks a significant step forward for participants who joined the scheme in good faith and sets out a clear path to fulfilling the New Decade, New Approach commitment to close the RHI scheme.

“In providing this pathway toward closure, I must strike a fair and responsible balance, recognising the genuine expectations of those participants who entered the scheme in good faith, while safeguarding the interests of the taxpayer.”

The minister told MLAs: “At the earliest opportunity my department will introduce to the Assembly a Bill which clarifies the department’s powers to close the scheme.

“It would be my intention to then bring a paper to the Executive in December 2025 to confirm the closure regulations.

“Subject to passage through the Assembly it is my intention that the new regulations take effect by April 2026.”

Ms Archibald said that the tariff rate used to calculate closure payments has been approved by the Department of Finance.

She said: “With closure, and with Ofgem no longer administering the scheme, meters will no longer be monitored for usage.

“With Ofgem stepping away from the administration of the scheme by April next year, time is running out.

“The launch of the consultation will represent a significant step forward.

“Closure of the RHI scheme will allow my department to focus efforts on developing alternative support measures.

“We now have a clear path to fulfilling the NDNA commitment and delivering a solution that is fair to participants and taxpayers alike.”