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Summary

  1. Design of botched scheme outlined to Renewable Heat Incentive Inquiry
  2. Economist Sam Connolly who worked on RHI scheme gives evidence
  3. Inquiry set up after public concern over scheme's huge projected overspend
  4. Retired Court of Appeal judge Sir Patrick Coghlin chairing inquiry at Stormont
  5. Public evidence sessions expected to last until well into 2018

Live Reporting

By Robin Sheeran and Iain McDowell

All times stated are UK

That's all for now...

Carson's statue at Stormont
Getty Images

Mr Connolly has endured a long day in the hotseat but he'll have to return tomorrow because he has more questions to answer, so join us from 09:45 GMT.

Bye for now!

What happened today at the RHI Inquiry?

BBC News Northern Ireland

An economist who signed off on the RHI scheme accepted that he was "relatively inexperienced" and a more senior person should have been given the job.

The RHI Inquiry
RHI Inquiry

Samuel Connolly said he had done his best with the complex and novel scheme.

But he conceded to the inquiry that he had limited experience in dealing with such incentive projects.

'I may have skimmed over inaccurate statement'

Examining one final point today, Mr Lunny raises the regulatory impact assessment for the RHI scheme from the end of June 2011, which Mr Connolly was given y DETI's energy team to review and comment on.

In it, it says the ongoing subsidy option "is the preferred approach, and offers the highest potential heat output at the best value".

Green tickes in boxes
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Mr Lunny describes that as a "totally inaccurate statement" and "totally at odds" with what CEPA had said it its report, points that Mr Connolly agrees with.

Asked why he didn't notice it when he read the document, Mr Connolly says he "there's a possibility that I skimmed over" it.

'Time will tell if CEPA knew what they were doing'

CEPA had constructed a fiendishly complicated financial model for use in the economic appraisal, which Mr Connolly attempted to use it but it defeated him.

Did that concern him? "I probably was a bit too impressed at the time," he says.

Dame Una O'Brien
RHI Inquiry

"Did you you think it was impressive because it was so complicated?" asks Dame Una.

"I think I did," he replies. "It took a fine mind to put that together in my view.

"Whoever did it knew what they were doing... or time will tell."

'You seem to have stopped being interested'

Inquiry panellist Dame Una O'Brien notes that from his evidence today, Mr Connolly had been was "very engaged" and in the RHI scheme up until the publication of the final CEPA report.

"Something seems to have happened," she says, "that you somehow stopped being interested.

"Did you feel that if you raised anything nobody would listen?"

Men talking in a room
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Mr Connolly accepts Dame Una's point, and says that when the report was published there was "very little I could do to influence it".

"Maybe I have to accept some responsibility - maybe I didn't try hard enough," he adds, also suggesting that DETI's energy team had got ahead of themselves in taking the proposals for the scheme to the minister.

"There comes a point," he says, when if the energy team "don't want to take advice on board there's not much more we can do as economists".

'I simply didn't do it'

Mr Lunny asks why Mr Connolly did not make an issue of the fact that he was not happy with the way CEPA had phrased its conclusion in the appraisal for the RHI scheme.

"I simply didn't do it at that time," he replies.

Mr Lunny gestures
RHI Inquiry

Dr MacLean refers once again to the massive differences in the costs indicated in the May draft and the final CEPA report:

"Was there no discusion at all between you and energy personnel about the fact that 'My God, the value for money really must have changed now?'"

Mr Connolly says he doesn't recall any specific conversation, and there were policy changes that had been introduced by DETI's energy division.

'Only so much challenge you can apply'

CEPA had been asked to produce a "recommendation on the most cost-effective option" for the RHI scheme in its economic appraisal.

Mr Lunny puts it to Mr Connolly that he thought CEPA was being equivocal in not indicating a preferred option, and asks him what he did when he saw the final report.

Samuel Connolly
RHI Inquiry

"There was nothing I could do," he says.

Mr Lunny puts it to him that his job was to quality assure the appraisal.

"Yeah, but there's only so much challenge and scrutiny you can apply," Mr Connolly says.

'Stark differences in costs of scheme options'

As we've heard several times during the course of this inquiry, there were significant cost differences between the two options for the RHI scheme... and DETI plumped for one that was much more expensive.

Mr Lunny outlines how the up-front grants option was estimated by CEPA in June 2011 to cost £212m, while the subsidy scheme was projected to run to £405m, a difference that was described as "pretty stark".

An abacus
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Those figures had changed significantly on calculations that CEPA had made the previous month, when the grant fund was put at £311m and the subsidy offer was thought to cost £257m.

In the conclusion of CEPA's final report, it said the grants option was offering "the best value for money".

'Twice as much value for money'

The up-front grants option "trumps" the ongoing subsidy model for the RHI scheme "on most, if not all" of the comparisons in CEPA's economic report, says Mr Lunny, and Mr Connolly agrees.

Dr MacLean queries what value for money and cost effectiveness means.

A man pointing at numbers on a screen
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He asks whether Mr Connolly agrees that "it is quite clearly the case that the challenge fund offers twice as much value for money, or cost effectiveness on the basis of cost per kWh of renewable heat".

"Yeah, on the face of it," says Mr Connolly.

'Cost figures presented were always misleading'

DETI sought approval from Stormont's finance department for £25m for the RHI scheme over four years, up until 2015.

But the scheme was offering ongoing subsidies over 20 years, which Mr Connolly says he estimated would amount to at least £160m.

A man with a calculator
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Dr Keith MacLean suggests the £25m figure that was put to the finance department was "always misleading", a point that Mr Connolly accepts.

"The approach was that if we take care of the £25m the rest takes care of itself," says the witness.

It "should have been brought out clearer" that there would be a much bigger cost over the long-term, he adds.

'DETI should have waited for CEPA's economic appraisal'

Mr Connolly was one of the recipients of a draft consultation document for the proposed RHI scheme, sent by DETI official Peter Hutchinson in June 2011, which was issued before CEPA's final economic report was published.

Did Mr Connolly think it was "fair or appropriate" that the up-front grants option appears to have been discarded at a point when the CEPA report is still at the draft stage?

"I don't - I think the best approach would have been to wait to get the final CEPA report," he says.

Samuel Connolly
RHI Inquiry

Asked whether he should've intervened to suggest that the energy team should hold off on the consultation until the final report had been received, he says that probably crossed his mind.

But as far as he was concerned the minister had already decided about what option to pursue, and he adds: "Who am I to argue with that?"

Inquiry chair Sir Patrick Coghlin points out that it appears that the minister's decision was based on incorrect information.

'Reality dawned about grants option difficulties'

The better-value up-front grants model option for the RHI scheme got a "fair hearing" from DETI's energy team, says Mr Connolly.

But he says that "reality dawned that there would be difficulties around administering it".

A biomass boiler
BBC

Mr Lunny asks whether sending a submission to the minister with "potentially misleading information" about the options equates to giving the up-front grants option "a fair hearing".

He says his view is that the energy team had a "genuine interest in it" but the ongoing subsidy scheme later emerged as a favourite for practical reasons.

'No excuse for giving minister inaccurate information'

With the inquiry back in session after lunch, matters turn the two options that were considered for the RHI scheme.

One was an up-front grants model - known as a challenge fund - and an ongoing subsidy offer that would run for over 20 years, which was ultimately chosen even though it was projected to cost hundreds of millions of pounds more.

A document that reads: Strictly confidential
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In June 2011, DETI's energy team made a submission to the then minister Arlene Foster, outlining the options and claimed that a subsidy scheme was projected would be the best value, even though that was clearly not the case.

The submission was based on CEPA's draft economic appraisal for the scheme rather than its final one, which came a few weeks later.

Mr Connolly says he would have waited for the final report before making such a submission, and he tells the inquiry: "There's no excuse for not presenting accurate information to the minister."

'Complex scheme needed experienced economists'

Economists with more experience should have been working on the RHI scheme, Mr Connolly tells the inquiry.

"I think it's hard to sit here today and suggest otherwise," he says, accepting that he was relatively inexperienced and had little energy expertise at the time when he was put to work on it, aged 30.

Charts viewed through a magnifying glass
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"This was a very complex scheme... and I did what I could to challenge it and scrutinise it.

"It was involving concepts and sums of money that were beyond me."

'Naively assumed scheme could be easily stopped'

Mr Connolly says he "naively assumed" that the RHI scheme would've been closed to new applicants once its budget had been allocated to claimants.

He acknowledges that he didn't know what legal mechanism would've been used to do that and he "wouldn't have had the experience to understand that".

A finger on an emergency stop button
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"I assumed that this could be stopped relatively straightforwardly," he adds, saying that he did not ask any detailed questions about how the cost of the scheme could be controlled.

Pressed on why he didn't ask questions, he accepts that he should've done more but he again points to his lack of experience at the time, saying that he may not have appreciated the risks involved in the scheme.

'I didn't know what scheme funding type was'

Mr Connolly is asked about his knowledge of the funding for the RHI scheme, with Mr Lunny referring to a series of emails between DETI and the Treasury in spring 2011.

They refer to the differences between two types of government funding - DEL (Departmental Expenditure Limits) and AME (Annually Managed Expenditure).

Sterling banknotes
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The initiative was funded on a hybrid arrangement using capped AME funding, which we've heard during the inquiry was unusual.

Mr Lunny asks the witness if he would have had any focus on the type of funding.

"No. I would just have been treating it as the same, and I doubt even at that time if i had known what AME was," he replies.

'I had no background knowledge of tiering'

Dr MacLean asks why Mr Connolly raised the issue of tiering with CEPA in April 2011, when he says he didn't see it as a way of preventing overcompensation.

"I could see that it was being implemented in GB," he replies.

Samuel Connolly
RHI Inquiry

"Literally, there was no background knowledge. It was a key difference that was oblivious in the tariff tables, essentially," he adds.

"They had this thing called tiering, we didn't."

'Consultants' job was to do scheme calculatons'

The lack of tiering of the subsidy tariffs on offer through the RHI scheme is next on the agenda.

Tiering is a key way of controlling the cost of the scheme and works by dropping the tariff on offer once a certain limit of usage has been reached - that prevents claimants from abusing the scheme by overusing their heating system to harvest more cash, effectively burning to earn.

But it wasn't included in the scheme and that is one of the main reasons why the budget blew up.

Burning £20 notes
BBC

Analysis of how longer use of heating systems would affect the rate of subsidy returns for claimants wasn't carried out, and Mr Connolly has told the inquiry that doing so would've been relatively straightforward.

Asked if he had done the analysis he would've noticed that adding tiering to the scheme would prevent profitable returns for claimants, he says he doesn't believe so.

"I wasn't there to come up with my own sensitivities - that was the role of the expert consultants," he says, adding that CEPA advised that claimants would not be overcompensated.

'Odd for minister to be sent unchecked business case'

Dame Una picks up on an email concerning the business case, which indicates that it had been sent to the DETI permanent secretary David Sterling (below) - now the head of the civil service - before "going to the minister", without being checked by the department's economists.

She asks whether that was normal procedure, adding: "I would have thought those people might have benefited from your input."

David Sterling
BBC

"I see your point there - that is quite odd," says Mr Connolly.

He explains that usually the business case would be sent to the economists for review and for them to suggest any improvements before it was sent to senior officials and the minister.

'Renewable technologies were alien to me'

Part of Mr Connolly's role in the RHI scheme was to assess CEPA's economic appraisal for the project.

CEPA had energy expertise and their work formed the basis for the scheme, but part of it contained a critical flaw that was missed by DETI and later ended up being one of the key factors in the scheme running up a huge overspend.

A man operating a biomass boiler
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Mr Lunny questions whether Mr Connolly was the right person to review CEPA's work, given that he had little specialist knowledge on energy matters.

Mr Connolly explains that the types of renewable energy technology that would be subsidised by the scheme were "absolutely alien to me" and he was limited in how he could challenge CEPA's appraisal.

'I was under time pressure on RHI scheme'

Inquiry panellist Dame Una O'Brien asks Mr Connolly whether he ever felt "under pressure to sign these (projects) off, or an expectation that you would sign off the value for money at the end".

Mr Conolly says no - he felt that if ever there was a problem "usually the approach was to sort it out".

Dame Una O'Brien
RHI Inquiry

Dr MacLean says it appears from Mr Connolly's written evidence that he was working under an "inappropriate or insufficient" time pressure at times.

"I certainly did work under a time pressure for this project," he replies, adding that with the benefit of hindsight he would have asked for longer to work on it.

'Struggle to see how dual role complies with guidance'

Inquiry panel member Dr Keith MacClean also picks up on the seeming contradiction in the economists' dual role in DETI, adding: "I struggle to see how that is compliant."

Mr Lunny asks how many times Mr Connolly refused to sign off on a project during the four years he was performing this role.

Wide shot of the inquiry
RHI Inquiry

"I don't think, from recollection, it happened ever," he replies.

Mr Lunny says that could mean either the system worked very well, or that the value-for-money assurance role lacks independence "and as we all know that if you're marking your own homework you're not going to give yourself a bad mark".

"Potentially yes, Mr Connolly replies.

'Economist was marking his own homework'

Mr Connolly helped DETI's energy team to develop the RHI scheme and he also later checked that the policy provided value for money.

That could be viewed as a case of "marking your own homework", says Mr Lunny, and he "may be perceived to lack a bit of independence".

A man making calculations
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The guidance in the NIGEAE is that it is "important that the role of the economist was independent of the advice" provided to the policymakers.

The witness accepts that there are risks in one economist being involved in both aspects, but he says the "normal working practice" was that the economist who began working on a project would see it right through and his view is that he was independent of the DETI energy team.

'Points of challenge must be raised'

Mr Connolly's work was carried out under a standard guide for executive departments known as the Northern Ireland Guide to Expenditure Appraisal and Evaluation (NIGEAE).

His role included the provision of independent quality assurance and advice; another role was the provision of a value-for-money sign-off.

Mr Lunny questions Mr Connolly's involvement in the drafting of the economic appraisal carried out by CEPA in 2011, saying that the witness notes there are potentially two roles.

Donal Lunny
RHI Inquiry

"There's the role at the end when you look at it and say: 'Does this come up to scratch? Can I be assured? Do I say it's value for money?' There's that independent scrutiny or assurance role at the end".

But there was also the role where Mr Connolly was "involved in the production of the economic appraisal," he says.

Mr Connolly says the two are related as in order to be able to sign off on the economic appraisal "If there are points of challenge you have to be able to raise them".

'Far from an energy specialist'

Mr Connolly is an economics graduate and began working in at DETI as an economist in 2008, where he remained until 2014, when he moved to Stormont's finance department.

Asked if he considers himself an "energy specialist", he says: "No, far from it."

Samuel Connolly
RHI Inquiry

His role at DETI was to review business cases and economic appraisals, as well as providing support to other civil servants working on policy projects.

He says he believes he spent about 80 hours working on the development of the RHI scheme, including considering reports by the consultants at Cambridge Economic Policy Associates (CEPA) and giving the project a value-for-money sign-off.

New witness Samuel Connolly sworn in

Mr Connolly takes the oath and he confirms his written evidence to the inquiry's junior counsel Donal Lunny, as is usual with new witnesses.

Sam Connolly takes the oath
RHI Inquiry

Unfortunately, the inquiry has yet to publish Mr Connolly's written statements.

But inquiry chair Sir Patrick Coghlin has seen them and he raises a slight problem with them that could cause problems - there are six of them, and they are not signed or dated.

What happened yesterday at the RHI Inquiry?

BBC News Northern Ireland

There was something "fundamentally dangerous" about communication structures surrounding the set-up of the RHI scheme, the inquiry heard.

Burning wood pellets
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Inquiry panellist Dr Keith MacLean said more effort should have been made to find out how the £25m granted by the Treasury for the scheme in Northern Ireland would be used.

What is the RHI Inquiry?

BBC News Northern Ireland

An independent inquiry into the RHI scandal was established in January last year by the then finance minister Máirtín Ó Muilleoir.

He ordered it in the wake of the huge public concern and what was then a developing political crisis surrounding the scheme.

The RHI Inquiry began in November and Sir Patrick Coghlin (below, centre), a retired Court of Appeal judge, is its chair and has been given full control over how it will operate.

The RHI Inquiry panel
Press Eye

It will look at:

  • the design and introduction of the RHI scheme
  • the scheme's initial operation, administration, promotion and supervision
  • the introduction of revised subsidies and a usage cap for new scheme claimants in 2015
  • the scheme's closure

For more information on the RHI Inquiry, you can read our handy Q&A.

RHI scheme - the fallout

When the scale of the overspend emerged, public and political concern rocketed.

As the minister in charge of the Stormont department that set up the RHI scheme, the Democratic Unionist Party (DUP) leader Arlene Foster faced calls to resign from her role as Northern Ireland's first minister in December 2016.

Martin McGuinness and Arlene Foster
PA

She resisted, and Sinn Féin's Martin McGuinness then quit as deputy first minister in protest at the DUP's handling of what had by then become a full-blown political crisis.

That move brought about the collapse of the Northern Ireland Executive. Now, a full year on from that, Northern Ireland remains without a devolved administration.

You can find much more detail on the RHI scheme in our need-to-know guide.

RHI scheme - the flaws

Critical mistakes were made in the way the RHI scheme was set up that left it open to abuse and that later saw its budget spiral out of control.

Crucial cost curbs that existed in a similar scheme in Great Britain were not replicated and claimants could effectively earn more money the more fuel they burned.

Wood pellets
BBC

That was because the subsidies on offer for renewable fuels were far greater than the cost of the fuels themselves.

As a result, the scheme racked up a huge projected overspend - one recent estimate put the figure at £700m if permanent cost controls aren't introduced - and the bill will have to be picked up by the Northern Ireland taxpayer.

RHI scheme - what was it?

Before today's inquiry proceedings begin, a quick reminder of why we're here...

The Renewable Heat Incentive scheme - or RHI for short - came to the fore of the Northern Ireland public's knowledge in autumn last year, and few people, if anyone, would have expected it to have the consequences it has done in the months that followed.

A biomass boiler
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It was set up by the Northern Ireland Executive in 2012, as a way of encouraging businesses to switch from using fossil fuels to renewable sources for generating their heat.

Those who signed up were offered financial incentives to buy new heating systems and the fuel to run them.

Good morning

It's another nice blue-skied morning up here at Stormont as politicians gather for the second day of their talks to restore power-sharing and lawyers pile in to the Senate chamber for the RHI Inquiry.

Parliament Buildings at Stormont
AFP

Today we'll be hearing from Samuel Connolly, an economist at the Department of Enterprise, Trade and Investment at the time the RHI scheme was being set up.

We've heard a lot about Mr Connolly's role in the proceedings so far, so this is likely to be an intriguing session - stick with us for our live video stream and text commentary.