Annual return for Northern Ireland RHI users could be massive 82% compared to 7% in GB
The installation of a biomass boiler does not come cheap, but the financial return on an investment of £45,000 is almost beyond belief.
When former Economy Minister Jonathan Bell decided to close the RHI scheme in the autumn of 2015, more people applied within ten weeks than in the previous 34 months.
In the words of the permanent secretary, Dr Andrew McCormick, the message was 'Get in quick'.
No wonder. The potential to earn an 82% annual return over the next 20 years was simply too good to miss. The flawed RHI scheme is a licence to print money for those lucky enough to join, but conversely a licence to burn it for the taxpayer. The mathematics of installing a biomass boiler show how that could be achieved.
The epicentre of boiler installation is south Tyrone, where posters are around virtually every corner exhorting support in the forthcoming election for the DUP leader Arlene Foster and the chairman of the party, Lord Maurice Morrow. It remains to be seen whether the RHI scandal will have any significant impact on their personal support in an area where the politics of Orange and Green tend to override all other issues.
Of 2,178 biomass installations in Northern Ireland, one in six is located in the south Tyrone area, many of them installed by poultry farmers supplying the Moy Park chicken plant at Dungannon.
So what are the economics of owning a biomass boiler? The tables published here come from the Northern Ireland Comptroller and Auditor-General's report and show the returns for burning wood pellets over 12 or 24 hours a day.
If someone had decided to abuse the scheme by simply installing a 99kw boiler and running it in an empty shed for 24 hours a day, seven days a week, the profit per year would be £19,000 or £383,000 over 20 years. However, assuming the boiler needed replacement every five years, the cost of installation over 20 years would be £135,000, leaving a net profit of around a quarter of a million pounds, or an annual return of 27% on the investment.
It is worth noting that if anyone had tried this fraudulent operation in Britain, the much lower tariff there would have resulted in a loss of more than £400,000.
So, what of the legitimate users of biomass boilers, scattered across Northern Ireland?
What level of return do they get for their investment? And how does it compare to their counterparts in Great Britain?
In the first example, a 99kw boiler is operating 12 hrs a day, over five working days per week. The annual profit in Northern Ireland is £15,000, compared to under £7,000 in Britain. Assuming the boiler costs £45,000 to install, the net profit over 20 years is £264,000, representing an annual return of 30%, three times as much as in Britain.
In the second example, the boiler operates round the clock, seven days a week and produces a staggering £737,000 net profit or 82% annual return over 20 years, compared to £66,000 or only 7% in Britain.
Given the extraordinary financial benefits in Northern Ireland, it is little wonder that those who joined the RHI scheme are challenging the attempt by the current DUP Economy Minister Simon Hamilton to cut the rewards.