A number of "shortcomings" in the design of Northern Ireland’s Renewable Obligation scheme (NIRO) have been identified, allowing the rate of return to be in excess of 20% for some generators.
Generators had been able to access higher levels of financial support for small-scale standalone wind turbines through the scheme than elsewhere in the UK between 2014 and 2016, helping to bring down the payback period to less than four years.
This is one of a number of concerns about the scheme identified by the Northern Ireland Audit Office (NIAO) in a new report looking into onshore wind and anaerobic digestion (AD) as part of NIRO.
It stated there is also the potential for "gaming" the scheme, whereby two small turbines for example are built close to each other, but generate as two separate units in order to claim a higher number of Renewable Obligation Certificates (ROCs). Ofgem has concluded that these ought to be reclassified and accredited as a single station.
There is a lack of "joined-up thinking between departments and agencies" that has allowed environmental and planning risks to be missed rather than managed, the report continued.
For example, there is no requirement for investors and operators to comply with planning and environmental regulations within the NIRO legislations. As such, there is a "significant number" of wind turbines and AD plants that either don’t have planning permission or had not complied with planning restrictions.
Accredited renewable generation stations do not have to be connected to the grid, but the legislation was found to be "vague and non-specific" in relation to the uses of the electricity generated. In the future this needs to be clearer in that it must show it is replacing fossil fuel generation.
With regards to AD, the modelling used to set the level of support for these stations – set by the former Department for Enterprise, Trade and Investment – is also too high. The vast majority of AD generation is small-scale, with 91 of the 110 generating stations small-scale in order to achieve the maximum level of income from NIRO.
The criticism of the NIRO may hit particularly hard, as renewable schemes in Northern Ireland are under particular scrutiny given the botched Renewable Heat Incentive (RHI) scheme, which saw many claiming money for renewable heating units that were not replacing fossil fuel alternatives and which were unnecessary, in order to profit.
But NIRO has been key in incentivising renewables in Northern Ireland according to the report’s author, comptroller and auditor general Kieran Donnelly CB.
“This report does not criticise the use of renewable sources as a means of electricity generation as this undoubtedly produces significant benefits for the environment and society as a whole.
“However, I have found a number of strategic shortcomings in the design of the NIRO. This report has been published at a time of significantly reduced public confidence in renewable energy schemes. It is crucial that the recommendations I have made here are followed up, and that lessons are learned to ensure future schemes are more robust and efficient.”
The NIRO scheme and growing renewables
Northern Ireland has now exceeded its target of 40% of its electricity consumption coming from renewable sources by 2020, with onshore wind and anaerobic digestion (AD) accounting for 91% of this consumption.
Approximately 85% of all electricity produced from renewable sources in Northern Ireland comes from onshore wind, with 1,282 generating stations. The vast majority of these - 94% or 1,209 - are small-scale standalone turbines, with the country boasting three times the number of the units per square kilometre compared to Great Britain.
The NIRO scheme is dominated by these small-scale onshore wind turbines despite accounting for just 13% of wind generated electricity.
Wind farms account for 81% of generation within the NIRO scheme, but are accredited as single generating stations despite having multiple turbines.
The NIAO forecasts that the total maximum cost of to all UK suppliers for purchasing ROCs generated in the country will be £5 billion. This is across the whole period of the scheme, which began in 2005 and is expected to end in 2037.
Northern Irish suppliers are forecast to purchase £1.25 billion worth to meet their obligations. Regardless of origin, the cost of ROCs is passed on to consumers as part of their electricity bills. As such, overpaying generators is likely to be particularly criticised.
At the beginning of October, Ofgem announced it was consulting on issuing seven suppliers final orders over £34 million in outstanding Renewable Obligation fees.