Official Report: Minutes of Evidence

The Chairperson (Mr Brett): I welcome colleagues to the Committee and thank them for coming along. We have Alan Hegan, director of the Renewable Heat Association Northern Ireland (RHANI); John McLenaghan, deputy president of the Ulster Farmers' Union (UFU); and Denzil Cluff. My eyesight is so bad that I cannot see what your position is, but you are very welcome, sir.

With that, I hand over to you, colleagues, to make an opening statement.

Mr John McLenaghan (Ulster Farmers' Union): Thanks very much for the invitation to be here. We very much welcome the opportunity. I am one of the deputy presidents of the Ulster Farmers' Union.

Mr Alan Hegan (Renewable Heat Association Northern Ireland): Good morning, everyone. I am a director in the Renewable Heat Association, and I am here today, along with John from the UFU and Denzil from Ecoerne, to answer any questions that you may have about the closure Bill and the associated public consultation.

Our association has in the region of 300 to 400 current members, and it represents the interests of manufacturing, hospitality, retail, agribusiness, the care sector, housing associations, public authorities, charities and businesses that own and operate renewable energy equipment for their heating needs, as well as being a voice for the businesses that operate in the commercial and industrial renewable heating sphere here, such as wood pellet and chip suppliers, equipment installers, biomass equipment service providers, mechanical consultants, energy consultants, academia and others.

For the most part, RHANI accepts that the consultation on the Bill provides a pathway forward. The revised administrative arrangements and the banding proposals represent, under the circumstances, a prospective solution that will provide genuine benefits for the next 10 years, helping businesses' competitiveness in relation to their counterparts in GB and Ireland and benefiting the local economy through good skilled jobs in the locally based biomass fuel production and maintenance sectors, as well as making a significant and positive contribution towards meeting current greenhouse gas reduction targets. Notwithstanding backdating issues, as outlined in our consultation response, we feel that the banding proposals deliver a fair prospect of balance for participants and taxpayers.

We do, however, have concerns about certain technical and legal aspects of proposals in the Bill. First, separating the legal from the technical and speaking to the legal aspects at a high level, we have concerns that the Bill, as currently drafted, is too broad in scope and potentially takes away all future democratic scrutiny from the Committee and the Assembly. The Bill should be amended to put democratic safeguards in place. In principle, the Bill allows free rein and creates a large element of legal uncertainty for participants. Essential safeguards in the Bill should include putting in place democratic scrutiny controls against the downward revision of tariffs and in relation to the duration of the support cycle. There should also be safeguards in place to prevent ad hoc, unforeseen solo runs of any kind, now or in future.

For participants who were encouraged by Departments to invest in renewable heat infrastructure and participate in the scheme, naively bought into a Stormont departmental guarantee, lived through the media frenzy of 2016 to 2018, on many occasions suffered false demonisation and suffered the crippling effects of the 2019 Westminster tariff revision, which is now widely accepted to have been fundamentally flawed, certainty for the next 10 years is critical, as is local democratic accountability in order to provide genuine legacy closure for them.

I will speak now to the technical side. RHANI commissioned an independent technical report on the closure consultation by Ecoerne Ltd, which is widely regarded as the foremost independent technical authority on the NI renewable heat incentive (RHI) scheme and, more widely, on renewable energy consultancy in NI. I hope that Denzil will be able to answer some technical questions on that report.

Before I hand over to Denzil, I will cover the report's key recommendations at a high level. They are that we retain the option to transfer ownership and to relocate; include replacement of installations, as in GB, to avoid legal and economic impacts as well as attrition; emphasise the importance of supporting and utilising energy sources that are available to rural economies and, critically, maintain highly skilled jobs; and advocate alternative inflationary tariff adjustments — that is, an RPI-CPI mix — to align with GB budgets. In conclusion, the report makes the point that the proposed closure model should be seen as an opportunity to revive renewable energy usage, reduce carbon emissions and sustain industry viability in Northern Ireland. There is an opportunity to get it right for everyone; let us not miss it.

Mr Denzil Cluff (Ecoerne): Good afternoon. I am a chartered mechanical engineer based in County Fermanagh. I operate a renewable energy and engineering consultancy business. We specialise in all aspects of renewable energy. I have been heavily involved with government schemes, such as the Northern Ireland RHI scheme and the scheme in GB. I am also heavily involved with the support scheme for renewable heat in Southern Ireland. We began in 2013, and I have probably been involved in a range of capacities with over 50% of the installations with the Northern Ireland renewable heat incentive scheme. I have extensive experience that ranges from the basics, such as heat meter readings, to judicial reviews and challenging Ofgem on non-compliance issues. I am quite experienced in RHI matters, so, hopefully, I can answer any of your technical questions on RHI and the proposed closure programme.

Mr McLenaghan: Unfortunately, our database does not allow us to see information on how many UFU members are still participants in the scheme, but we had a brief chat downstairs before we came in. We reckon that we probably have a few hundred such members. Alan, they number in the hundreds in your organisation, and it is similar for Denzil. There is a bit of crossover, of course, but, if we add up all those participants, we can be pretty sure that we represent the vast majority of boiler operators. That, hopefully, gives you a bit of reassurance as to why we can provide you with useful information.

The Chairperson (Mr Brett): Thank you for that. For the public watching at home and perhaps some Committee members, it is important to distinguish between the Bill and the regulations that will flow from it. We are carrying out the Committee Stage on a very tight and small Bill. At this stage, it empowers the Department to make regulations to move towards managed closures and make payments in that regard. Before I move on to the regulations, which will probably attract more public commentary, I will ask about the Bill as it is currently drafted. Notwithstanding the discussions that we will have on the regulations and their outworkings, do you have any concerns about the Bill as drafted?

Mr McLenaghan: Thank you for bringing that up, because you are right: the Bill is what we want to get right in the first instance. Yes, we have concerns. Alan touched on them and will probably come in on them again. We want there to be full and proper accountability in whatever happens. We see a critical role for the Committee to perform in providing checks and balances. We want to avoid a situation in which a Department — DFE, in this instance — has the facility to amend or change any of it in the future without an element of scrutiny. We would like to see the Committee empowered in the Bill to have the ability to do that.

The Chairperson (Mr Brett): I have not fully looked at the regulations yet because they are not finalised, but I imagine that they will be subject to negative resolution, which means that any uplift, down-lift or changes to the initial proposals will be subject to formal approval by the Assembly. That usually comes through the Committee in the first instance. However, when concluding its report, the Committee will probably want to look at the role that the Committee may or may not play in that. Given the fact that RHI is both cross-cutting and controversial, those regulations or changes to the outworkings of them will be subject to approval by the Executive as well. Does that give you any reassurance that there will be Assembly and Executive oversight of the regulations?

Mr McLenaghan: Yes, to an extent, and thanks for that.

The Chairperson (Mr Brett): Apologies, the Clerk has just corrected me; they are draft affirmative, so they will definitely be subject to the expressed will of the Assembly.

Mr Hegan: Our concern, from reading the Bill, was its broadness and scope and the potential powers that it gave. In discussions that we have had with the UFU, we came to a unanimous conclusion that we would like to see future changes, especially the larger ones, such as tariff or payment duration, being subject to public consultation and, after that, full scrutiny at the Committee and affirmative resolution of the Assembly. We would like those safeguards to be in place.

The Chairperson (Mr Brett): Moving to the regulations, one of the issues that has attracted substantial public commentary is the moving away, in some aspects, of the investigations/visits by the Department. The Department will take over the administration of the scheme, and Ofgem has the expertise in doing that. Do you have confidence that the Department for the Economy has the capability to carry out the administration of the scheme from 1 April 2026?

Mr McLenaghan: It is regrettable that Ofgem will no longer be available to perform the role that it performed previously. It is critical that we have, within DFE, the capacity and capability to perform the role that was previously undertaken by others. In our consultation response, as in others, we made suggestions of potential additional safeguards that we would like to see brought in around how DFE performs that role.

There will be a need for a good level of communication as we go through the transfer in April next year. The experience that we have from the wider agricultural sphere is that, once you introduce a new programme, a new piece of IT or whatever it is, there are inevitably flaws, because it does not get fully tested until it is on the ground. We will be encouraging DFE to stress-test as much as possible in advance of the changeover to avoid any problems during the initial period. There will need to be good communication from DFE back to boiler operators, so that they are aware of what is required. That could be at the very practical level of organised webinars for operators and that type of stuff, with recognition of the fact that some of our operators may be older and may have difficulty with those communication technologies. Building all that into the transition to DFE and the extra responsibility that it will be taking on from April is important. We will be encouraging DFE, and, as organisations, we are happy to work with DFE and to give our advice at a practical level. Some of that comes from areas outside this; we mentioned other agricultural stuff that we have been involved with. We are happy to sit with DFE officials and plot a way through that, because we can see the potential for a few issues. It happens, and we know that it can happen. The more that we can do in advance to avoid that by collaborating and working together, the more likely we are to avoid all of that.

The Chairperson (Mr Brett): What is your view on the proposed move away from metering?

Mr McLenaghan: We said in our consultation response that we would prefer metering to remain. We are aware of why it cannot remain in place. The reason is basically an instruction from Ofgem, as we all know.

We contacted Ofgem about that specifically to get its perspective on the metering, but it referred us back to DFE, so we were not able to have a direct conversation with Ofgem about metering. I do not think that, in our consultation responses, any of our organisations ever called for metering to be removed, but that is the situation in which we find ourselves. It is a case of asking what we can do and identifying the best option that we can take forward.

Mr Hegan: I will echo John's comment. We are where we are, in the sense that Ofgem is going. It is extraordinary. There are positives and negatives to be taken out of that. One of the positives is that the scheme will move to be managed more locally. Historically, there have been issues with its being administered from Cardiff or London, so that move is a positive. One of the negatives is the experience over the past 10 years. Members of the association have extensive experience of the NI scheme, the GB scheme and the Southern scheme, so we would give DFE every encouragement to engage broadly with the wealth of expertise that exists in the private sector to help to make this scheme work.

Where the banding proposals are concerned, the association has never been against metering. However, metering is not the be-all and end-all of each and every scheme. We came to the conclusion internally that the period from 2017 to 2019 represented the best usage of banding. I think that Denzil came to that conclusion independently of us.

Mr Cluff: I come at it from a more practical position. I deal with Ofgem, the Sustainable Energy Authority of Ireland (SEAI) and the likes of those departments every day. Ofgem and the likes of SEAI are facilitating the scheme, but services such as ours, with our consultants out in the field, are doing quite a lot of work to make it easy for Ofgem to make decisions. It is similar for the Department. It is about bringing in the correct people to sign off on things and make sure that everything is done correctly. It is very similar to our building control, where you need somebody to sign off on work. The SEAI scheme in particular is very much orientated around somebody's being responsible for all elements, and, if anything goes wrong, it is that person's responsibility. I deal with Ofgem every day. Ofgem is, to a certain extent, marking my homework: it looks at what we provide to it. Once it accepts that, it makes the process very straightforward.

Heat metering seems to be the biggest and most difficult issue to overcome from an administrative point of view. Ofgem would probably echo that. That is not so much because it is a difficult process or anything like that; it is probably more because of the fact that, if a heat meter goes down and somebody is owed money on it, you have to prove how they used that fuel. Ironically, it goes back to the point where you have to analyse the fuel usage. The difficulty is that, when multiple boilers on one site are using the same fuel, you have to split it up. That is why it becomes a wee bit more complex. Heat metering gives you a solution, but fuel analysis is probably the ultimate solution to get to the bottom of the issue.

The Chairperson (Mr Brett): OK. That is useful.

This is my final question before I open it up to colleagues. The Assembly took a decision on Monday on a winter uplift to the tariffs. I am keen to get your view on that. Was that the correct decision?

Mr Hegan: I will be very brief. The association issued a short update to its members to notify them of the change. The final line of the update stated that the association welcomed the development.

Mr McLenaghan: Our guys will be content. They are farmers. We always believe that there is room for a bit more, but we are content with what is being proposed. We see it as moving forward, which is important to us. I think that everybody recognises at this stage that we need to move forward. We are content to accept what has been proposed and what is being introduced.

The Chairperson (Mr Brett): Thank you.

Mr Honeyford: Thank you, guys, for coming in, and for your submission. This is about fairness to the people who invested and operate in good faith. It is also about public trust and confidence for everybody moving forward. You talked about the abuse that was seen back at that time. This scheme is about moving forward and wrapping this all up. Going back to metering, are you saying that fuel records, not meters, are the best indicator of what is used?

Mr Cluff: Ultimately, everything goes back to the fuel that is going through. That becomes slightly complicated by the calorific value that you are operating to. With wood pellets, calorific value is pretty standard and straightforward. The boilers have an efficiency, so that also has to be taken into consideration. I always go back to the fuel to work out what has gone through, but metering is there. Metering can be difficult from the practical point of view of keeping them going.

The other thing to point out in the Northern Ireland renewable heat incentive scheme is that a lot of the meters have now gone beyond the 10-year period when calibration was due. Quite a lot of meters in the installations are no longer calibrated. The Department sent out a notification to say that it was fine and that we did not need to change the meters, but a lot of heat meters are out there that are probably not calibrated at this stage.

Mr Honeyford: The Department said that it is not metering them. I have a difficulty with the three bands. If I have 51% and I raised that the year before, I get 100% of the payment. Are you content that the Department is taking that forward in the best interests of spending public money?

Mr Hegan: There have been extensive discussions about that behind the scenes. There have been discussions directly with DFE. There have also been discussions with the Centre for Advanced Sustainable Energy (CASE). We are taking the lead on this from the independent model that David Rooney produced that says that a 12% internal rate of return (IRR) will be delivered prospectively. A move to a banding scheme that is based on historical usage probably represents where it will realistically be.

We have asked for additional safeguards, for additional fuel records to be kept and for increased surveillance. You are asking a broad question about metering. Metering helps, but it is not everything. Fuel records provide much more confidence than metering.

Mr McLenaghan: A couple of words in your opening statement — fairness and trust — are critical, and we have got back from our membership that that is very much what they want from the scheme. That is important, and we took that on board in our consultation response. Similar to Alan and his association, we asked DFE to beef up that part of the process. We are encouraging the Department to ask for more records and to carry out more inspection to reassure the public. All our people who are using the scheme have continued to use it because they have a genuine requirement for the heat. They see the benefits that the heat brings to their enterprises. They also like the idea that it is offsetting the use of a fossil fuel and that they are using a renewable fuel that is produced locally. They want to feel that they are part of a scheme that is delivering exactly what you describe in terms of fairness and accountability.

Mr Honeyford: At the minute, there is one inspection over the 10-year period.

Talk us through what that would look like if you did what you just described.

Mr McLenaghan: It is in our response, and we would encourage there to be more than that.

Mr Honeyford: What does "more" look like?

Mr McLenaghan: That is maybe a question for you to ask of the Department, because there is a balance between what is achievable, what is necessary, what gives the desired result and what gives sufficient security to the public in knowing that the funds will be used appropriately. There should be more than one, and we have suggested how fuel records could be further improved to provide supporting evidence. We have encouraged that. If there is anybody who thinks that they can use the scheme to defraud public money, we do not want them in the scheme — nobody does. We want to give a very clear message that the scheme is not for them; it is for genuine users, such as farmers, small businesses and hoteliers, who use the scheme effectively and even continued to use it through the downturn in tariffs.

Mr Hegan: I will comment on a couple of points. First, we need to be cognisant of the fact that there have been 100% audits and that everyone in the scheme has passed at least one and maybe two or three audits.

Specifically on the safeguards, we have made suggestions, and we certainly have no objection to reasonable, desk-based annual records being sought. We also have no objection to the increase in physical visits. We think that those are two separate things. The previous model of 100% inspections used an external contract, which was a significant cost for each installation. An idea that has been bandied about is having a similar set-up to that of the Northern Ireland Housing Executive, whereby a clerk of works moves between the sites in a van, or there could even be somebody knocking about who building control employs who has long-term, on-the-ground knowledge and could take a risk-based approach.

Mr Honeyford: Finally, I will go back to the bands. We are talking about public money, and there is a 51% band. You have said that bands are a better way to go than metering, so would you look at having more bands? Do you agree with the idea that there should be more bands?

Mr Hegan: In essence, there are two sides to that — a yes and a no. In principle, we have no overt objection to moving from three to four or five bands, but you will get to a point where it becomes very complicated. It is about having a balance to make sure that there is ease of use for participants. Let us be realistic, and I take on board what you have said, but we do not think that the majority of participants will be in the 51% band. We think they will use the scheme as they did from 2017 to 2019, which will give a broad range of inputs.

Mr McLenaghan: Denzil, you operate on the ground.

Mr Cluff: It is probably very apt for me to respond to this, as I do quite a lot of heat-usage analysis in Northern Ireland and Southern Ireland. I find that, if you set somebody a goal of using, for example, 48 tons to achieve the 51%, most of the participants, particularly poultry growers, would struggle to know when they had hit that target. Again, if you need the heat, you need the heat.

My view of the banding is that the upper band, or the standard operational band, will encourage more energy efficiency, which it has done in the SEAI model of the support scheme for renewable heat (SSRH) model, where people are given an energy cap to work towards. They have been very successful in the SEAI scheme at reducing usage and improving energy efficiency on their plant. I see no reason why that will not be the case in this scheme. The SEAI scheme has an annual inspection, so somebody comes out to inspect the plant annually. They have all the information and all the fuel records, so the inspection is more about making sure that they are eligible and that nobody has added any fossil fuel elements or ineligible heat usage etc. That probably is an element to the closure programme and closure model. I think that it will be very difficult for somebody to try to "game" this scheme, because I do not think that there is enough in it to enable somebody to say, "I am going to use only 51%, and then I will move on to fossil fuels".

Believe it or not, what I saw, especially in and around 2017 to 2019, was that the scheme introduced energy efficiency, whether we like it or not. It actually introduced energy efficiency from the point of view that people were optimising their usage of biomass and then using fossil fuels for ends that were maybe not as desirable. Again, that was all cost driven, because the price of pellets rose around the same period, and that had a major impact.

It is no different from heating your own home. Whenever the price of oil or kerosene goes through the roof, you become more frugal and start to become a bit more energy efficient. The closure model should bolster that.

Mr Honeyford: It would be useful to get the details of that.

Mr Cluff: No problem at all.

Mr Honeyford: Brilliant. Thank you.

Mr Buckley: A lot of the questions have been asked. We do not have to go into the detail of the history of the scheme, why we are here today and the experience that, as organisations, you guys and your membership have been through. I look at this entire process now as very much being about balancing safeguards. It is about ensuring that we can safeguard the genuine participants of the scheme and safeguard the taxpayer from abuse. If we adopt that as a first principle, there is a way forward that everybody can buy into.

First, I will talk about the Bill. Alan, you mentioned the "broadness and scope of it". The Chair made a suggestion about draft affirmative resolution, which would mean that any change would ultimately have to come to the Assembly for a vote. Is it your fear that you do not trust the Department, given your previous experience with it on the matter such that the rate could change, and, therefore, put your members at an economic disadvantage? What is the concern?

Mr Hegan: Simply put, the phrase "fool me once" comes to mind. We would go further and say that, if there were a proposal to change either tariff levels or the length of the annual payments, which are to run for the original duration of the scheme, that should go out to public consultation first and then come to the Committee.

Mr Buckley: The Clerk can keep me right, but, with draft affirmative resolution in any two of the circumstances that have been mentioned, there would be a formal vote in the Assembly via draft affirmative resolution. You are saying that that would not satisfy you. You think that the Bill could be made stronger by adding a consultation exercise before that process.

Mr Hegan: Specifically in those two scenarios.

Mr Buckley: OK. That is useful to know.

The next part of safeguarding, bearing in mind the first principle that I talked about, is safeguards for inspections. You mentioned going from Ofgem to the Department. Will you talk me through how that safeguards genuine participants? An incident has been mentioned, so I want to mention it here today. Participants will be notified in advance if they have been selected for inspection. Will you clarify how you believe that also gives an adequate safeguard to the Northern Ireland taxpayer such that a potential system could not be abused or altered in a way that would produce a false result?

Mr McLenaghan: As we said in our earlier response, it was about beefing up those protections and levels of inspections. To specifically address your question about inspections being completely ad hoc, with inspectors just calling in, that can be difficult in a farming context. There can be biosecurity issues and issues around poultry housing, where a lot of those boilers are located. There is nothing that anybody will do in a 24-hour period that will change what they have been doing. If we were looking at that issue very specifically, we would be in favour of more inspections. However, an acceptable amount of notice would be a good way forward for biosecurity reasons and even to make sure that there is somebody there and nobody is wasting their time.

Mr Buckley: I ask that question purely because I know that that point has been speculated on. The information that we received from the Department at the time was exactly as you said: it would not be possible to manipulate a result in such a short period of time to make it that no physical change could be detected. I am right in saying that, but I want to give you an opportunity to respond.

Mr Hegan: Certainly, as an association, we take the position that, on the whole, an average, standard inspection should be notice-based.

Mr Buckley: Adding to that, Alan, did you mention that any optimal model that you would look to would be hybrid by being both desktop-based and physical? Is there a balance to be struck to ensure that we meet that requirement while allowing for a bit of ingenuity in the costs that are associated with physical inspection?

Mr Hegan: I will defer to Denzil on that.

Mr Cluff: The hybrid approach would be very good. As of today, there is no reason why Ofgem could not send out a letter to any of the participants to say that it will inspect and that, whether it is in 24 hours or in one week, its people are coming to visit your site.

Ofgem has all its application and installation data, but when its people arrive on site, the only thing that they can confirm is the schematic and what is known as the independent metering report. Those two documents record everything that is going on on that site. There is no reason why that is not adopted in the new model. They are two very straightforward pieces of information.

Again, from the point of view of inspection in the new model, the inspector would want to go out to see whether the system is exactly the same as it was when it transitioned. Therefore, there has to be some form of consistency to say what somebody has transitioned into the new scheme. It needs to be confirmed that the system is still there and they have not made any dramatic changes or added anything that should not be there.

The other aspect is whether the correct amount of fuel has been used. The only way that I can see to safeguard that information so that there are no doubts whatsoever is to provide invoices for your fuel and proof that you have paid for it. If anybody wants to take a step to fraudulently try to do something about that, this is not the scheme for that. They are in a different game. With those safeguards, it will be very difficult for anybody to hide the truth once somebody arrives on their site.

Mr Hegan: Just to set it in context, in the business that I am a director of outside of RHANI, we supply biomass fuel into the Republic. It would not be the first occasion that people from SEAI have phoned our office and asked us about invoice 10056 and what can we tell them about it. They spot-check the invoices that they receive at the other side. We have absolutely no issue in telling them who that invoice was for and the amount of fuel that was delivered. That does not happen with every invoice; it might happen with one in 100, where it actually goes back to the supplier. I say that to compare with what is happening in the Republic as a safeguard.

Mr Buckley: I will move on to annual payments. If everything goes according to plan, those will end in 2036. I want to talk about the costs that are associated with the repair and upkeep of such facilities, particularly in the later stages of their lives and based on tiers of usage. Are you satisfied that the tier rate takes the associated costs into account? It was a concern previously that, essentially, you were running at a loss because of the costs that are associated with upkeep. Have we got the balance right?

Mr Cluff: I can answer that from a practical and experiential point of view. I would say yes. I find that, with a lot of the participants for whom I work, people who have looked after and maintained their boilers have been consistently paying annually, regardless of tariff cuts and whatever the price of pellets or fuel may be. They have been maintaining their equipment. With this new scheme, there will be no difference. They will continue to maintain their equipment.

The people who have not maintained their equipment will probably not transition to the new scheme, because so much investment will be required to get their equipment back up to speed. Even if they could sell their accreditation or do a change of ownership, having to replace the components is not an attractive prospect. The price of components and spares for biomass boilers, in particular, can be extortionate.

Mr Buckley: Do you have a breakdown of the numbers so that we can see how many people fall into the category of having boilers that are not functional?

Mr Cluff: I do not have that statistic. The majority of people —.

Mr Buckley: Are we talking about a minority, though?

Mr Cluff: It is a minority. To be honest, some of people involved have probably changed business or changed industry, so the transition would probably not be viable for them.

Mr Hegan: On a side note, we were talking about the fuel supply and the checks. As with the schemes in GB and ROI, there are allowances for those who grow their own fuel. Those people can sign a declaration on that.

Mr Buckley: We always heard from the Department that it wanted to strike a fair balance between the genuine participants and the ratepayer. Time and time again, that has proven to not be the case: the balance has not been right. That is what has struck me in all of this, particularly in the proposed tariff rates. You have been at the point of debating, arguing and legally challenging that for some time. We now have Professor Rooney's tariff rate. Have we now got the fair balance?

Mr McLenaghan: I will start on that one. A tariff uplift was proposed just over a year ago, which we jointly rejected. We took that proposal to our membership and asked what they thought. There was a bit of surprise from DFE that they rejected it, because why would you reject an uplift? However, it was not fair or reflective of some of the things that you have talked about, such as maintenance costs and everything else. When the Department came back with a new figure, which came into place just this week, we put it to our membership, who said, "We will accept that". That is not to say that they were content — that was the word used earlier — and that they could not have made an argument for it being a little bit higher. They could have made a legitimate argument for that, but there was recognition that the new proposal would allow them to move on, put the matter behind us to an extent and get on with doing what they want to do, which is mainly broiler production. The new tariffs are OK, and we are content with them. The previous proposal was not OK, and we rejected it. This time, we have accepted the tariffs, and, hopefully, as I said, that will allows us all to move on.

Mr Hegan: The association welcomes the new tariff levels in the sense that they are a move back towards the position in the period 2017-19. We regard the 2019 Westminster legislation as being deeply flawed and a fundamental error. Are the proposed levels where we were in 2017-19? No, but they are a lot closer than they have been for the past five years. In particular, the upper medium tariff band for those with 199 kW installations has some way to go. In our consultation responses, we have asked that that be further reviewed to get a fair balance for taxpayers and participants.

Mr Cluff: I take more of a holistic view. From an energy point of view, I hope to see the closure model and the transition to it helping to bolster the Department's key energy strategies. We hope to improve energy efficiency and reduce carbon emissions, and, probably most importantly, we are trying to improve the green economy. There has been a major impact on the green economy here. I have seen a demise in the biomass industry: a lot of companies are out of business and a lot people and technicians who used to work on heat meters have gone or are in a different industry. Like a lot of the trades that we have, trades in the industry will eventually die out, which means we will not have anybody to work on biomass boilers regardless of the schemes we have. The balance is fair. The new tariffs will help to grow the green economy, which will have an impact on the likes of logistics companies and food suppliers such as Moy Park.

I am heavily involved in not only the poultry industry but the hotel industry. I see the benefits for hotels in the Republic of Ireland, compared with those for hotels in County Fermanagh, because they receive subsidies. As a result, they are growing and improving their facilities and are reducing their carbon emissions, whereas similar hotels in County Fermanagh are struggling to pay for energy. Again, that is not helping our tourism industry or our green economy.

Ms McLaughlin: Thank you very much. A lot of ground has been covered. Colleagues across the Committee have landed in the one space. In Northern Ireland, we want to and must support the renewable generation of heat and honour the commitments that were made in good faith. As Denzil said, we need it to be balanced and fair and to support the green economy. Those are all things on which we can land and agree. Most Committee members have said, however, that doubt remains over how the system will be monitored and verified and how the rules can be enforced. I am still not totally confident that we will tick all those boxes.

As I said, most of my questions have been answered, but I will just throw this out: what is your view on having a one-off payment rather than ongoing payments over 10 years? I feel that you, too, have concerns about how those payments can be maintained, particularly, as Jonathan alluded to, at the latter end of that period. How would you feel if more consideration was given to a one-off payment?

Mr Hegan: Although we have not calculated an exact figure, there was an exact figure in the Grant Thornton report from a few years ago. Our position is that we do not favour that model. We think that it would be the death knell for the industry and that it would not recover from it. It would also be a bad use of taxpayers' money in that it would lead to a reversion to fossil fuels. We think that what is being proposed is the best solution, given the current circumstances.

Mr McLenaghan: I 100% agree with that. I know that you have thrown that out as a possibility for discussion purposes, Sinéad, but it would not represent fairness. We have talked a lot about fairness in this discussion. I do not think that it would represent fairness for taxpayers' money, and we have not advocated for it.

Ms McLaughlin: OK. I thought that that would be your answer. You said that you understand the concerns about the inspection regime that is suggested in the Bill, and you have indicated that you are supportive of additional efforts to bolster proper value for money for both participants and taxpayers. We all want to get to that space where everybody is comfortable, but, as I said, I do not think that we have landed there. What additionality could work? You said that metering is not the panacea and that there are other methods of monitoring usage, but are those other methods heavily bureaucratic, both for participants and those administering them? The cost of administration for those efforts has gone up substantially. I wonder about that, as value for money remains part and parcel of what we want to do.

Mr Cluff: I can start the answers to that question. Jonathan talked about the upkeep and maintenance costs, but there is also an associated cost for administration in paying the likes of ourselves to maintain systems, carry out meter readings, do amendments and carry out various relocations and transfers of ownership etc. A lot of the participants probably never include the detail of that in the evidence that they provide to the DFE, and a lot of them have been paying administration and consultancy services to maintain their systems in order to stay in the scheme. I do not see things being any different for the transition to the closure model, because those costs will be paid from the subsidy by the participant. With the proper due diligence — whatever that requires, be it templates or employing engineers to sign off on various aspects — there is no reason why the administrative process should be an expensive and bureaucratic one.

I refer back to Ofgem: a lot of its work is ticking boxes from the information that we send it. All the evidence is there, and it basically facilitates the approval of the evidence that has been provided by the customer, participant or qualified engineer.

As I said, I do not have any concerns about a new process being heavily bureaucratic. Once it has been set up, following a proper transition, and if the right paperwork is in place, inspections should be relatively straightforward. It could get to the point where someone with eight boilers on-site would be in the category that would mean them getting one inspection per annum. If you only have one biomass boiler, an annual desktop inspection with an on-site inspection maybe once every three or four years would suffice. The inspections could be weighted based on how many installations a person is involved with or how many boilers they have on-site. I do not see that being a major bureaucratic or administrative nightmare.

Mr Hegan: I will say two things. At the moment, participants are required to keep their fuel and maintenance records. A move to an annual submission of either a selection or all of those records at the point of the annual self-declaration will not add to the work involved; filing four separate meter readings would have a similar administrative burden. I do not think that that will be an issue. That allows the Department to take a risk-based approach, as it will be getting data annually.

I will clarify my thinking — it is only thinking — on the physical inspections. If you were to take a clerk-of-works approach whereby somebody — I will not say "pops in" — comes to take a look to see whether the boiler is there and what it is being used for, making observations on-site and focusing less on paperwork, even having 24 hours' notice of their coming out would be fine. Putting a burden on participants by giving them 24 hours' notice to have all their paperwork in order, however, is unduly strict when it can be done annually in an organised and orderly fashion, similar to a VAT return.

Another key thing is communication between the Department, participants and associations. Communication was one of the things that fell apart in 2016: the Department stopping talking to participants and organisations. We all understand why, but we have had more communication with the Department in the past 12 months than we had with it in the previous decade. There is something to be said for private-sector input in all of that.

The Chairperson (Mr Brett): Thank you very much for that.

Ms D Armstrong: Thank you for coming before the Committee this morning. The sensitivities remain. As I keep saying, it is about the public perception of the successor to RHI, and it is important to move towards the end point. Jonathan and Sinéad have covered quite a lot of what I was thinking about asking. A couple of minor points in your presentation relate to instances in which the Department is unhappy about funding installations that have been relocated. How many fall into the category of relocation?

Mr Hegan: Denzil will answer that, because he deals with the majority of those.

Mr Cluff: I do not have the statistics, but there seem to be a lot of boilers out there — there was talk of there being 600 — about which there is no contact with Ofgem. It is believed that those 600 boilers are gone. I have probably dealt with 150 to 200 of those boilers in the past couple of months. It is probably the case that, administration wise, people have let the thing fall apart and have not been inputting their readings. We have had situations in which the people who looked after the meter readings have died, the task has not been passed on and nobody has thought to submit the readings. There also seems to be a lack of communication from Ofgem: often, it is not sending out reminder emails or those emails are going to email folders that are not being reviewed on a regular basis.

Ms D Armstrong: Is that cohort big enough that it needs to be presented to the Department for the Economy for a solution?

Mr Cluff: The main thing that I see is that a lot of the boilers have accreditation. If they fall into the de minimis area or leave the scheme, their potential to produce renewable heat is decimated. A lot of those boilers will be of scrap value and will not get the opportunity to be brought to another business. For instance, a poultry business that has changed industry or moved to the egg sector will have a lower heat requirement. The boiler from that business could go to a care home or a hotel to displace fossil fuels. That would be a big bonus, especially from the energy strategy perspective. The process for doing that is a lot more straightforward than replacing a heat meter. Therefore there is an opportunity there. We have all of these accredited boilers, and we should be utilising them in other areas. That is not to say that a boiler will simply fit in another location. We will want to make sure that the business that the boiler is going to has an eligible amount heat use and that the boiler will replace the use of fossil fuels there. It should not be a case of replacing a biomass boiler with an accredited biomass boiler. With proper due diligence, that would be a straightforward process.

Ms D Armstrong: So, the reuse of those boilers cannot simply be ruled out. There are different environments in which they can be used. Thank you for that.

You mentioned an appeals process. How many biomass operators will challenge the use of 2017-19 as the reference period?

Mr Hegan: I defer to John on the appeals process as he has more knowledge on it.

Mr McLenaghan: It is hard to know how many there will be, but there will be some, and there will be reasons why they did not have a heat requirement during that reference period. There could have been all sorts of family events. We do not know how many will appeal, but experience tells us some will. One of the things that we have suggested is that a proper appeals process be set up. We suggest that DFE looks at the DAERA stage 2 model in which an independent appeals panel looks at each case and the evidence presented to it and gives a decision and recommendation to the Department. That model has worked fairly well for the agriculture sector, and we think that it would work in this instance. It is very hard to know how many there will be, but, inevitably, there will be some.

I want to go back to the previous question. Denzil mentioned this, but we have said that if there is going to be relocation, it is important that the relocation site is inspected to make sure that there is a genuine heat requirement there. That is something that we have added in the consultation. RHANI put it in as well.

Mr Hegan: Yes. Our consultation responses were independent, but they are almost identical. Our position on relocation is this: allow but control. Let us use some common sense. If a relocation is proposed that makes common sense — the boiler is going to a business that is using 10,000 or 15,000 litres of heating oil, gas or LPG a year — let us do that. However, if it does not make sense, say, "Let's forget about it". We are saying, "Let's regulate it".

Ms D Armstrong: Thank you very much.

The Chairperson (Mr Brett): Colleagues, that is all that we have for you at this stage. I thank you for fully giving of your time to help inform the Committee's deliberations on the Bill. This is a short, two-clause Bill. Ultimately, though, the regulations will be of most public interest and scrutiny, so it is a situation that we will need to continue to monitor, and we may bring you back. Thank you very much for your evidence.