Formal Closure of RHI Scheme Marks End of Devolution Crisis
The passing of legislation to formally close the flawed Renewable Heat Incentive (RHI) scheme signifies the conclusion of one of the "darkest" episodes in Northern Ireland's devolution history, the assembly has been informed.
The RHI scheme provided payments to approximately 1,200 businesses to encourage a transition from oil and gas to environmentally-friendly heating through the use of wood pellet boilers.
However, the subsidy paid exceeded the actual cost of the fuel, creating a financial incentive for participants to operate the boilers primarily to generate income rather than for environmental benefit.
This situation, widely known as the cash-for-ash scandal, precipitated the collapse of power-sharing in 2017, resulting in a three-year suspension of the devolved institutions.
Efforts to close the scheme were further delayed due to the Covid-19 pandemic and disagreements among political parties regarding the process for ending the arrangements.
On Tuesday, Economy Minister Caoimhe Archibald introduced the final stage of the legislation, which received unanimous approval from all parties in the assembly.
The Social Democratic and Labour Party (SDLP), serving as Stormont's official opposition, stated that the closure represents a definitive end to a past policy failure within the power-sharing institutions.
SDLP MLA Sinead McLaughlin described it as the closing chapter of one of the "darkest episodes in the history of devolution."
The legislation establishes the legal framework for the scheme's closure, with detailed operational arrangements to be outlined in subsequent technical regulations, subject to approval.
The Department for the Economy had previously estimated that the closure and compensation for participants would cost approximately £196 million over a ten-year period.
Minister Archibald noted that, for the first time, there was consensus among political parties, scheme participants, and the Treasury on managing the closure.
"This bill is vital as it lays the foundation for the closure of the scheme, reiterates the department's commitment to ensuring that this is achieved in a way that is fair to the participants and to the wider taxpayers," she said.
'Acknowledgement that this scheme failed'
Phillip Brett, chair of Stormont's Economy Committee and a DUP MLA, praised the consensus reached and the proposals for closing the scheme.
"The intent was that we achieved a fair and proportional outcome that benefited both the public but also respected and benefited genuine participants and I think the minister and the department has managed to achieve that," he added.
He further acknowledged the scheme's failure and the significant damage it caused.
"It is an acknowledgement that this scheme failed, that it caused enormous damage and that lessons must never again be ignored," he added.
Alliance MLA David Honeyford also welcomed the legislation, referring to the RHI as an "episode that will live long in the memory of this place, but something we can now put to bed."
Ulster Unionist deputy leader Diana Armstrong emphasized that while closing the scheme was necessary, it should be viewed as the first step in a broader process.
"Accepting closure is not an admission of defeat, it is an acceptance of reality and an opportunity to move forward."
The legislation will now proceed to receive royal assent before becoming law.
What was the RHI scandal?
The RHI scheme was designed to encourage businesses to switch from oil and gas to environmentally-friendly heating by using wood pellet boilers.
However, the subsidy payments exceeded the cost of the fuel, incentivizing participants to operate the boilers primarily to generate income.
Following the scheme's launch in 2012, some businesses heavily invested by installing multiple boilers on their properties to benefit from a lucrative 20-year subsidy offer.
The scheme became overd due to its popularity.
Combined with a lack of cost controls from the outset, by 2016 Stormont faced a multi-million pound overspend.
The revelations triggered a political crisis that led to the collapse of Northern Ireland's devolved government in January 2017.
At one point, the overspend was projected to reach as high as £700 million; however, after reforms and significant subsidy rate reductions, the actual overspend was approximately £30 million.
A public inquiry into the scheme's management was established in 2017, costing taxpayers an additional £13 million.
The inquiry concluded that the scheme's budgetary issues were not due to corruption but rather flaws in its design, errors, and lack of oversight by those responsible.
Three years after the collapse caused by the RHI controversy, Stormont was restored in January 2020 under the New Decade, New Approach agreement.
This 2020 agreement stipulated that the RHI scheme should be closed and replaced with a new scheme aimed at effectively reducing carbon emissions.
