Flawed renewable energy schemes have to change
The search has now begun for revised and more acceptable schemes for renewable energy supplies. The existing schemes are too expensive and are not value for money.
Northern Ireland, planning to increase renewable energy supplies, in parallel with policy developed in Great Britain, has operated two major policies to encourage more investment in renewable energy.
The planning of the incentives, through both the mechanism to underpin renewable electricity supplies (using Renewable Obligation Certificates) and also for the provision of heat from renewables (the Renewable Heat Incentives), are both costing consumers and the taxpayer more than was intended. Both schemes, in their current form, are now deeply flawed.
The hostile reaction by potential developers whose ambitions are to expand use of these rewarding schemes represents a misunderstanding of what has been happening backed by a flawed official decision-making process.
The need to withdraw from these renewable schemes does not mean that use of renewable energy sources should not be expanded. It does mean that belatedly and clumsily the imbalance of incentives and costs is now recognised. Yes, more investment in renewables continues as an objective but not backed by subsidies or market manipulation that goes well beyond achieving results at acceptable cost.
The existing schemes (soon to be constrained) attract two contrasting reactions. First, they have been more popular than expected and can be seen as too successful. Second, they have demonstrated that renewable energy usage or supply can potentially be expanded more cheaply than was forecast.
In the search for more renewables, there was no explicit motivation to offer a significant form of extra income support (or energy cost reduction) to unduly enhance some, or many, farm incomes or enhance poultry breeding profits. Taxpayers' costs and energy users bills must be a constraint.
The unintended 'success' of these renewable energy schemes was in evidence well before proposals to constrain their usage, or replace them, emerged.
The UK Department of Energy and Climate Change (DECC) recognised the imbalanced way in which, for example, the RoCs scheme was developing and made a major policy change shortly after the UK election. There has been some confusion about whether the change was a party political policy change by a new government or was an objectively determined change implemented by a new minister. This may have sidelined the appreciation in Northern Ireland of the serious nature of the policy change.
The case for changes in Great Britain, announced by DECC, was not immediately followed in Northern Ireland. This delay quickly converted into a threat to the postalisation (or cross-subsidy) of the costs of RoCs and even now the possible policy divergence, or difference in dating of policy changes, has not been finally resolved.
Enterprise Minister Jonathan Bell has had a sharp learning experience and is being lobbied by groups with vested interests to delay corrective measures. The minister has had little sympathy from DECC in efforts to delay the scaling back, or closure, of these much too expensive schemes.
The Renewable Heat Incentive will close to new applications on February 29. This is the earliest date now practicable, taking account of the industry concerns and practicalities.
The representations on behalf of potential applicants and installers should attract little sympathy. The potential applicants and their advisers realise that the existing arrangements were too generous to continue. The flaw has been that official decisions have been dilatory and fudged.
Poor decision-making does not, however, disguise the logic of a complete re-think, starting with a firm date for termination of the RHI and also guided with clear arrangements for the ending of the outgoing NIRO scheme along with clarity on the transition for incomplete installations and a statement on the 'grandfathering' commitments on existing schemes.
The unjustifiable schemes must end. Then replacement alternatives must be considered.