So, the subsidy on offer through the RHI scheme was 5.9p per kW/h for small biomass, but the cost of the fuel was 4.39p.

In spite of that, Mr Hutchinson wrote in a synopsis of the scheme for DETI's casework committee that there was no need for tiering of tariff because "the subsidy rate is lower than the incremental fuel cost".

Image source, Getty Images

That clearly wasn't the case, though, and Mr Lunny asks how officials missed that fact.

The department, Mr Hutchinson says, had been relying on CEPA to point it out and had "incorrectly" accepted its advice.

He accepts that he gave "too much credence" to CEPA's recommendations.

Mr Lunny asks about the use of tiering to guard against the "perverse incentive" - the running of boilers around the clock to earn more money - and that one of the triggers for tiering was when the tariff was above the cost of fuel.

Tiering is a way of controlling the cost of the scheme - it works by dropping the tariff on offer once a certain limit of usage has been reached.

"Did you just not notice that at several points in that report the proposed tariff is above the cost of the fuel, or even the cost of the production of the unit of heat?" asks Mr Lunny.

"I'm not sure if the issue of the trigger for tiering was described as simply as if the tariff is above the cost of fuel," replies Mr Hutchinson.

Mr Hutchinson is questioned about the setting of the tariff for biomass boilers on the RHI scheme.

One of the key flaws in the scheme was that the subsidy on offer was higher than the cost of the fuel used to produce heat, and CEPA's addendum report had calculated that 5.9p per kW/h should be offered for small boilers.

Image source, Tchara

Mr Hutchinson says his calculations differed - they were generally about 5p per kW/h - but CEPA provided a "perfectly rational explanation" about why he was were wide of the mark, and he therefore accepted its view.

"I definitely viewed them as expert economists," he adds, and he accepts that there was a "level of assumption" at DETI that CEPA was "correct".

He says he did do checks, but adds: "Ultimately, I was always going to defer to who I saw were the experts in this when I was certainly not."

Discussion moves to CEPA's addendum report from February 2012 (click to download), external, which looked in further detail at how the RHI scheme would operate and the subsidies it would offer.

The report was drawn up at DETI's request after new evidence became available about the sizes of boiler installations and costs of fuel, which would affect the overall cost projection of the scheme.

Image source, CEPA

A table (above) in the report shows that the overall cost of subsidies in the RHI scheme was projected to increase by £111m to £445m as a result of changes to the tariff that were required on the basis on the new evidence.

Mr Lunny points out that the increase is "obviously substantial" and he asks if it would've alerted Mr Hutchinson to the fact that "changes in some of the variables can have a significant impact on scheme costs".

"Yes, I think that's fair enough - I agree with you," replies Mr Hutchinson.

The inquiry turns to a spreadsheet that Mr Hutchinson believes he created in early 2012 in an attempt to gain a better understanding of the tariff on offer through the RHI scheme "and trying in my mind to work out how CEPA were doing their calculations".

He says he had in the back in his mind that CEPA "aren't going to be around forever so we're going to have to understand this ourselves".

Image source, RHI Inquiry

Mr Lunny demonstrates that the spreadsheet can be used to show the potential sensitivity of the tariff to variations in the figures, and asks whether Mr Hutchinson would have carried out any testing like that in 2011 or 2012.

"If I did I wouldn't have trusted it," Mr Hutchinson says.

Quick look at the figures...

In CEPA's June 2011 report the projected cost for an up-front grants initiative was £212m and the ongoing subsidy offer that was ultimately selected for the RHI scheme was £405m.

Mr Lunny described that as a "very, very substantial difference" and wonders why that wasn't "seen as enough of a factor" for the grants scheme to become the frontrunner and why the figures weren't outlined "in clear terms to the minister".

He asks Mr Hutchinson how big the cost difference would've had to have been for there to have been a change in approach and the grants scheme to be selected as the preferred model.

"I don't know," replies Mr Hutchinson.

Inquiry panel member Dr Keith MacLean is concerned about the volatility in the projected costs, saying the numbers were "bouncing around".

"Costs were plummeting for one thing, were shooting up for another," he says.

Image source, RHI Inquiry

Dr MacLean asks what sort of "tyre-kicking" was done concerning CEPA's figures.

Mr Hutchinson said it would probably have been left to him and DETI economist Sam Connolly to ask the necessary questions of CEPA.

He says there was "no critical friend" or someone coming from outside the department to look over the work.

Inquiry chair Sir Patrick Coghlin intervenes to ask Mr Hutchinson whether he had "any strong reaction" when he saw the changes to projected cost figures between the draft and final CEPA reports.

Mr Hutchinson says he's "not sure if we would have had a strong reaction", and that he and the other officials would have been querying why the figures were so different "all of a sudden".

Image source, RHI Inquiry

Sir Patrick asks is there was not a reaction of: "Oh my goodness, look at that!"

He ask whether Mr Hutchinson's view was that DETI was "committed" to the ongoing subsidy scheme on the basis of that a public consultation had been drawn up for it.

"Possibly yes," he replies, adding that there was probably a feeling that "we've got the direction of travel if you like, and we'll continue on that path".

The projected costs of the two options for the RHI scheme in the two CEPA reports in May and June 2011 changed dramatically over the course of a month.

The cost of the ongoing subsidy scheme - which was eventually adopted - was estimated to cost more than £100m more than it had done in the report the previous month.

Image source, RHI Inquiry

That meant it cost significantly more than the other option, the up-front grant scheme.

But Mr Hutchinson says he doesn't remember whether the DETI minister Arlene Foster was told of the changes in cost.

He says that it would've been a "prudent approach" to have told the minister about the changes but there had been an "expectation" that the ongoing subsidy scheme was going to be selected regardless of the cost.

We're straight into business with inquiry counsel Donal Lunny (below) asking questions of witness Peter Hutchinson, who was an official in the Renewable heat Branch of DETI when the RHI scheme was set up.

He takes Mr Hutchinson back to 2011 and the Cambridge Economic Policy Associates (CEPA) economic appraisal on the possible options for the scheme.

Image source, RHI Inquiry

Mr Lunny draws attention to the financial predictions made for the two alternative schemes - an up-front grants scheme and an ongoing subsidy offer - that were considered in the report.

He points out some pronounced differences in the figures offered in CEPA's draft final report of 31 May 2011 and the final report of 28 June that year.

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.

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

Image source, Pacemaker

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.

Before we start into today's inquiry proceedings, 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.

Image source, Getty Images

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.

It's a crisp, chilly day up at Stormont's Parliament Buildings but it's nice and bright, too.

We're back here for the final week of the RHI Inquiry before Christmas, and there's lots to get through between today and Thursday.

Image source, AFP

Returning to the witness chair today is civil servant Peter Hutchinson, who played a key role in the set-up of the initiative.

We'll have a live video stream and text coverage through the day, so stick with us and we'll keep you updated.