Policy background Renewable Heat Incentive Scheme
These sections provide for a long-term tariff structure for all small and medium biomass installations accredited under the Non-Domestic Renewable Heat Incentive (RHI) Scheme in Northern Ireland. These installations previously had the capacity to generate costs far beyond projected levels, placing public finances at risk. Interim cost control measures were introduced on 1 April 2017 for one year, to allow for the development of the long-term solution. These interim measures were then extended for a further year and are due to expire on 31 March 2019 beyond which there will be no legal basis for making payments for approximately 1,800 small and medium biomass installations. The long-term tariff structure ensures that costs are controlled for the remainder of the Scheme’s life and protects the Northern Ireland budget from potentially very significant overspends.
	A further key consideration in the development of the long-term tariff has been compliance with State aid rules. Engagement with the European Commission has clarified that its State aid decisions adopted for the Scheme to date provided approval for an average 12% rate of return. The long-term tariff structure has been developed with independent, expert advice to achieve a prospective rate of return of 12% for typical installations and is considered compliant with the extant State aid decisions for the Scheme.
	Recognising that the new tariffs may mean participants with lower usage needs could see returns below 12%, the Act also makes provision for the Department to prepare and publish voluntary "buy-out" arrangements in respect of the financial year beginning on 1 April 2019 and each of the two financial years immediately following. These arrangements allow participants to receive a payment equivalent to a 12% rate of return after which the installation is withdrawn from the Scheme.
	The voluntary buy-out provision is exercisable only in the absence of a Northern Ireland Executive. When an Executive is formed, it will have the ability to legislate for any future voluntary buy-out arrangements.
	On completion of each financial year’s voluntary buy-out arrangements, the Department for the Economy (DfE) is required to report on the number of participants who have withdrawn from the Scheme under those arrangements, and the total cost of the payments made to those participants by DfE. In the absence of a Northern Ireland Executive, this report will be provided to the Secretary of State for laying before Parliament. When an Executive is formed, any subsequent reports will be provided to the Economy Minister for laying before the NI Assembly.