The government has failed to keep track of the sums paid out under the Renewable Heat Incentive (RHI) scheme to encourage the uptake of low carbon heating systems, the National Audit Office (NAO) has concluded.
The public spending watchdog’s progress report on the RHI also says the Business, Energy and Industrial Strategy (BEIS) department has failed to achieve value for money from the scheme, take-up of which has been lower than originally anticipated.
The scandal surrounding overpayments from the Northern Ireland version of the scheme triggered the collapse of the province’s power sharing executive a year ago.
The NAO report, which was published today (23 February), concludes: “It [BEIS] does not have a reliable estimate of the amount it has overpaid to participants that have not complied with the regulations, nor the impact of participants gaming them, which could accumulate to reduce the scheme’s value significantly.”
It says the department “cannot reliably estimate” the level of overpayments to participants in the RHI who have not complied with the scheme’s regulations, such as using it to heat domestic swimming pools.
According to an estimate, carried out by Ofgem last year, overpayments were worth 4.4 per cent and 2.5 per cent of non-domestic and domestic RHI expenditure respectively in 2016-17, equating to £3 million.
The report also accuses the department of not knowing the impact of “gaming” the RHI’s complex regulations, such as installing multiple boilers to take advantage of the higher tariff rate for smaller units.
And it says actions taken by Ofgem in line with its duty to tackle flouting of the RHI scheme’s rules have focused more on the most commonly occurring types of non-compliance, rather than those with the greatest financial impact.
The report also finds that take-up of the scheme has been “much lower than originally anticipated”.
At current rates of take-up, the NAO estimates the RHI will achieve around 111,000 new installations by March 2021, just 22 per cent of the original target of 513,000 by this date.
Meg Hillier MP, chair of the cross-party public accounts committee, said: “Given the scandal that engulfed a similar scheme in Northern Ireland, it is worrying that BEIS and Ofgem don’t know how much they are really getting out of this scheme in return for taxpayers’ cash.
“The government faces a huge challenge in cutting harmful carbon emissions. The NAO report shows how the government has massively cut back its ambitions for this scheme, and that as a result it will have to work even harder elsewhere.”
However the Renewable Energy Association highlighted the report’s finding that the RHI had supported the installation of 22.7TWh of renewable heat to date.
James Court, head of policy and external affairs at the Renewable Energy Association, said: “Britain’s Renewable Heat Incentive is a successful scheme that has supported the production of enough heat to date to warm over 1.8 million homes for a year. The scheme has been critical to the construction of over 78,000 renewable heat sites reaching from Cardiff to Glasgow which in turn has unlocked jobs growth, with the UK’s renewable heating industry employing 33,500 across the country.
“The RHI is an essential policy tool that is supporting the decarbonisation of Britain’s heating sector as necessitated by our climate targets.”
Lawrence Slade, Energy UK’s chief executive, added: “We welcome this report because it is vital that the renewable heat incentive’s estimated £23 billion expenditure up to 2041 is driven by specific targets and objectives which establish self-sufficient supply chains for a range of low carbon heating technologies.
“Transforming the way we heat our homes and businesses is the greatest challenge the UK faces in meeting its emission reduction targets over the coming decades. We cannot delay tackling this challenge any longer as we need heating to follow the lead of power generation in slashing emissions.
“If the UK is to meet the Clean Growth Strategy’s aim of setting out a comprehensive strategy for low carbon heating in the next parliament, the UK needs to make important decisions over the next five years – including on reform of the RHI and large-scale trials of low carbon heating solutions.”
Andrew Bradley, director at consultancy Delta-ee, said: “What the NAO has shown is that the RHI isn’t perfect, but we knew that already. However, at the moment, aside from obligations imposed on energy suppliers, it’s the only show in town when it comes to decarbonising heat, and there’s no time to wait for the ideal strategy to emerge.
“BEIS deserves credit for taking the scheme as far as it has and achieving the carbon savings which – even if not as high as hoped – are considerable and worthwhile. Upcoming adjustments to the scheme could also change things for the positive.
“A lot of people might take this as an opportunity to bang the drum for hydrogen as an alternative to natural gas, but without viable commercial [carbon capture and storage] that will only have a limited role to play.
“In many ways, we’re asking the wrong question by focusing on the RHI anyway: the biggest immediate opportunities are in building standards. Government has backed off imposing higher energy efficiency standards on buildings and that needs to be rectified. It’s a no regrets approach that – done right – can cost taxpayers nothing.”
A BEIS spokesperson, said: “The Renewable Heat Incentive is playing a crucial role in reducing carbon emissions from heat and helping to make progress towards our legally binding renewable energy and carbon targets with UK investment producing the fastest emissions reduction on a per person basis than any other G7 nation.
“We have already taken major steps to prevent people from cheating the system, and we now welcome this further advice from the National Audit Office to stamp out these practices.”