In June 2011, Peter Hutchinson of DETI's renewable heat branch emailed a finance official at DECC to ask about some of the finer details of how the RHI scheme in Great Britain was being funded.

He was told that the potential of an overspend on the RHI scheme was considered to be a "large financial risk" to DECC.

Image source, Getty Images

Therefore, its policy team was looking at a digression system for the tariffs on offer that would help to contain that risk.

He also asked about whether the scheme would continue beyond 2015, but was not give a clear answer.

Sir Patrick Coghlin, the inquiry chair, expresses concern that some of those answers were not - at that time - sought directly from the Treasury, the department that was actually providing the money to DETI.

Mr Lunny turns to at the witness statement from Bernie Brankin, the head of DETI's finance branch.

She raised concerns with her superiors in April and May 2011 as she had "no experience of non-standard AME".

Image source, RHI Inquiry

In reply to further questions put by her the inquiry team, Ms Brankin says in her statement that she expected her superiors to act on her advice.

She adds that she also expected them to consider her view in order to "build budgetary controls into any proposed scheme because without budgetary controls there was potential for overspending".

DETI was allocated £25m over four years by the Treasury for the RHI scheme, and Mr Lunny picks up on emails exchanged between the departments in 2011.

In April of that year, Treasury official John Parker explained to DETI how the Great Britain RHI scheme worked.

He said the government was not footing any overspend - instead there was a "risk-sharing arrangement" between it and the Department of Energy & Climate Change (DECC), which set up the Great Britain initiative.

Any overspend would need to be met by DECC in future years, he said, the same arrangement would be applied in Northern Ireland, Mr Barker added.

Mr Lunny moves on to the funding of the RHI scheme in the next part of his presentation on its creation.

The inquiry's technical assessor Dr Keith MacLean (below) is interested to know what experience DETI has in dealing with the funding model used for the RHI scheme.

Image source, RHI Inquiry

Mr Lunny says the inquiry has asked the question of a number of witnesses "what prior did DETI have of dealing with AME, external (funding for demand-led programmes) budgets".

"We have the answer, which is that they dealt with the Presbyterian Mutual Society. Full stop."

Dipping into another witness statement - this time Mark Cockburn (below) of CEPA, who said it was ultimately DETI that decided to go with a continuing subsidy scheme rather than an up-front grant competition.

"The latter would've avoided the need to second-guess beneficiaries' costs and the ultimate uses of renewable heat," he says.

Mr Cockburn's understanding is that DETI rejected the up-front scheme because it would've been "so different" to the Great Britain RHI scheme and "stakeholders would have struggled to accept it".

"Northern Ireland would not be facing the problems it is now if a challenge fund approach had been pursued."

In contrast to Mr Morrow's view, DETI's head of analytical services Shane Murphy has told the inquiry that his "overriding impression" from the CEPA's report was one of "mixed or inconclusive messages".

Image source, Getty Images

He acknowledges that the body of CEPA's report appears to favour the challenge fund model.

But he adds that its conclusion is "much less clear-cut" and left "the door open" for a continuing subsidy model, as was eventually selected.

Mr Lunny turns to the witness statements given to the inquiry by CEPA's employees, and quotes Ian Morrow, one of those who carried out CEPA's 2011 work.

Image source, Tchara

"CEPA's analysis noted that a challenge fund was a better option" than an RHI-type scheme "because it had a lower cost per unit of renewable heat," says Mr Morrow.

"It was also much less exposed to some of the risks associated with an RHI."

CEPA included a complex RHI spreadsheet in its report, which provided a model of which its variables could be changed to illustrate varying outcomes.

Image source, RHI Inquiry

In reply to a question from inquiry panel member Dame Una O'Brien, Mr Lunny explains that "the model in this format was provided to DETI in July 2011" along with a guide to its operation.

He says he will return to this document to consider whether it is easily understood "or whether there's a certain degree of impenetrability about parts of it".

Wrapping up his detailed analysis of the CEPA economic appraisal, Mr Lunny says an up-front grant scheme, which was rejected in favour of an ongoing subsidy initiative, would have:

• delivered the most renewable heat by a small margin
• been better value for money by £200m or more

He also says the report shows that there is "always a risk" with continuing subsidy schemes that the tariff has been set either too high or too low.

Therefore, such a scheme would need constant monitoring and review.

Mr Lunny turns to part of the CEPA report covering the danger of incorrect subsidy levels.

If the level is too high those installing renewable heat would be oversubsidised and less heat would be produced per pound, but if it is too low less renewable heat will be produced than expected.

Image source, RHI Inquiry

CEPA says in its report that that type of risk is normally dealt with by regular reviews of subsidy levels, and it advises that a challenge fund model would be much less exposed to that danger.

"You can't overspend in the sense of going over your budget with a challenge fund," Mr Lunny says.

He gives the example of a fund with a £2m budget, with a department possibly running two competitions of £1m each, and he says: "You can't spend more than your £2m."

More than one option for a renewable heat initiative in Northern Ireland was considered, as we heard from Mr Lunny yesterday.

Projections made in CEPA's economic appraisal in May 2011 showed that an up-front capital grant scheme, with the grants awarded on a competitive basis - known as a challenge fund - offered the lowest cost and better environmental benefits.

Image source, RHI Inquiry

Mr Lunny says the figures in the report show a "stark cost difference" between an up-front grant scheme and the ongoing subsidy model that was eventually chosen for the RHI scheme.

Inquiry chair Sir Patrick Coghlin (above) observes that an up-front grant scheme at £161m would have been half the initial £334m cost projection of the scheme that was put into effect and would've produced more renewable heat.

Mr Lunny says that's "absolutely correct", and the rejected model was "cheaper, by the projected cost, by a whole other" grant scheme fund.

There is no evidence in the CEPA's economic appraisal that it was aware that any overspend in the budget for an RHI scheme would "may have to be met" by DETI, says Mr Lunny.

Image source, Reuters

In other words, the Northern Ireland Executive would have to pick up the tab if spending on the scheme went beyond what was allocated for it.

The scheme was to be funded primarily by the Treasury, with an initial £25m set aside.

Junior counsel to the inquiry Donal Lunny picks up where he left off yesterday, examining the approach taken by civil servants at Stormont's Department for Enterprise, Trade and Investment (DETI) in setting up the RHI scheme.

Image source, RHI Inquiry

He took the inquiry through, in detail, policy documents and records of meetings from 2011.

He returns to the economic appraisal of a potential renewable heat initiative scheme in 2011 by the consultancy firm Cambridge Economic Policy Associates (CEPA), which was contracted by DETI, and exchanges of emails between staff in the two organisations.

BBC News Northern Ireland

Only five civil servants were working on the RHI scheme in 2014, a critical time in its lifespan, the inquiry heard.

Image source, Pacemaker

Inquiry chair Sir Patrick Coghlin said it was "hard to swallow" the contention that that number was adequate to run what was a highly complex and ultimately flawed project.

Read our summary from yesterday here, or you can go back over our live updates from that session here.

BBC News Northern Ireland

An independent inquiry into the RHI scandal was established in January 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.

Image source, Pacemaker

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

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.

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 last year.

Image source, 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, and as we near a 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.

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.

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 - £700m at the most recent estimate - and the bill will have to be picked up by the Northern Ireland taxpayer.

The Renewable Heat Incentive scheme - or RHI for short - came to the fore of the Northern Ireland public's knowledge in autumn last year.

Few people, if anyone, would have expected it to have the consequences it has done in the months that followed.

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.

What a wonderful morning it is up here at Stormont - bright sunshine, blue skies and we're treated to a terrific panorama of Belfast from the top of the hill.

We're back here for more from the RHI Inquiry, with its penultimate session for this week starting shortly.

Image source, PA

Yesterday, inquiry counsel Donal Lunny began his presentation on the design and implementation of the RHI scheme and we'll hear him pick that up this morning.

Stick with us throughout the day for live video stream and text updates.