'Cash for Ash' Scheme Closure and Compensation Set to Cost £196m
The closure of the controversial Renewable Heat Incentive (RHI) scheme in Northern Ireland, coupled with compensation for participants, is projected to cost £196 million over the next decade. Stormont's Economy Minister Caoimhe Archibald announced plans to introduce new legislation to formally wind down the scheme by next April.
Background of the RHI Scheme
The RHI scheme was designed to encourage businesses to switch from oil and gas to environmentally-friendly heating sources, primarily wood pellet boilers. However, the subsidy payments were set higher than the cost of the fuel, creating a "cash-for-ash" incentive. Some businesses heavily invested and installed multiple boilers to profit from the 20-year subsidy offer. Due to its popularity and lack of cost controls, the scheme became oversubscribed, leading to a significant overspend by 2016.
The 'Cash-for-Ash' Scandal and Political Fallout
The RHI scandal triggered a political crisis, resulting in the collapse of Northern Ireland's devolved government in January 2017. Initial projections estimated the overspend could reach as high as £700 million. However, reforms and subsidy rate cuts reduced the actual overspend to approximately £30 million. A public inquiry into the scheme's management, costing taxpayers an additional £13 million, concluded that design flaws and oversight failures, rather than corruption, were to blame.
Closure Plan and Compensation Details
The decision to close the RHI scheme was initially agreed upon in 2020 as part of the New Decade, New Approach deal but was delayed due to the Covid-19 pandemic and disagreements on implementation. Minister Archibald stated that compensation will be distributed to approximately 1,200 participants in the non-domestic scheme in staggered payments over a 10-year period, instead of a single lump sum. The Department for the Economy (DfE) previously estimated buying out these businesses would cost £68 million.
Uplift in Tariffs and Future Support
An uplift in tariffs for participants will take effect this winter, as closure plans progress. While the exact increase is not yet known, estimates suggest participants could receive between £6,000 and £8,000 annually, depending on their boiler usage. The Stormont Executive believes this plan balances the interests of participants who entered the scheme in good faith with the need to safeguard taxpayer funds. The department is exploring "alternative support measures" for renewable heating following the scheme's closure.
Industry Reaction and Future Outlook
Andrew Trimble, chair of the Renewable Heat Association, welcomed Monday's developments as positive. He stated that there is a growing appetite across political parties to resolve the issue.
"We've now got some confidence and there seems to be an appetite across all political parties to resolve this once and for all,"Trimble said, adding, "These are first steps, let's hope that the momentum can be sustained."
