Renewable Heat Incentive Inquiry examining botched energy scheme
Ofgem technical expert Dr Edmund Ward returns for further session of questions
Inquiry set up after public concern over scheme's huge projected overspend
Retired Court of Appeal judge Sir Patrick Coghlin chairing inquiry at Stormont
Public evidence sessions expected to last into autumn 2018
After a third day facing "robust" questioning in the witness chair, Dr Ward can finally "leave the arena with a sigh of relief", says Sir Patrick.
Tomorrow morning we'll see DETI's former RHI scheme manager Stuart Wightman resume his evidence.
Join us from 09:45 and have a lovely evening in the meantime.
BBC News NI
The level of audits of RHI scheme boilers was insufficient to show what was really happening on the ground, the inquiry heard.
Just 31 installations were checked in Northern Ireland in the first three years of the scheme out of 2,120 applications.
Image source, RHI InquiryIn Great Britain, 7.5% of boilers in the scheme were being checked.
In Northern Ireland, even though the intention was to mirror the inspection rate in Great Britain, it was just 1.46%.
He says Ofgem has "taken independent advice" on the number of inspections that are needed to give a "degree of statistical significance" on how the RHI scheme is running and given advice that to DETI.
But he adds that the department hasn't taken that advice.
Inspections that Ofgem have commissioned of RHI scheme installations now cover much broader issues, including whether the heating systems are being used within the spirit of the initiative.
Dr Ward can't give an exact figure about how many site audits were carried out in the most recent full year - 2017-18 - but he says it's a "significant sample" of between 50 and 100.
DETI has ordered extra audits of RHI scheme boilers in addition to those that Ofgem has commissioned and it is using the same contractor - Ricardo-AEA - that Ofgem has used from the outset of the scheme.
An Ofgem director drew up a presentation on the lessons that were to be learned from the administrator's running of the RHI scheme.
One of the points raised was that there should've been "more transparency on sharing site audit reports".
Image source, RHI InquiryIt was also determined that in future there should be a "transparent and consistent approach" to sharing data with the department for which Ofgem was carrying out the work.
Mr Lunny interprets that as "an attempt to avoid the several-year-long debacle that existed between DETI and Ofgem about the sharing of information".
Agreeing, Dr Ward says Ofgem is now taking a "more clear approach" than it did when it was operating the RHI scheme.
Ofgem should've done more to tell DETI if and when it spotted problems and risks in the RHI scheme, accepts Dr Ward.
He denies that there was a "reluctance" on the part of the administrator to wave a "red flag" when issues arose.
Image source, Getty ImagesInquiry chair Sir Patrick Coghlin says Ofgem and the inspectors it contracted to audit biomass boilers had the view of how the scheme was running "on the ground".
Therefore, he adds, it was Ofgem's "clear obligation" to advise the department if it "saw something of significance in terms of this new, volatile scheme".
Mr Lunny questions whether there was any conversation between Ofgem and DETI about carrying out more audits as a result of the high level of non-complainces tht had been identified in the initial inspections.
Dr Ward says that's what happened - there were eight more audits and he says both DETI and Ofgem would've liked to have done more.
That was the number they could fit in before the end of the financial year and they embarked on a much bigger audit programme in 2016-17.
Time was not on their side "alongside a wider emerging crisis", says Dr Ward.
Cases in which the RHI scheme was being gamed by claimants to maximise their subsidy returns would've been spotted if more audits had been carried out, accepts Dr Ward.
He also says that a portion of the audits at the time did identify gaming but it wasn't reported to DETI.
Image source, RHI InquiryRecords from August 2015 show that about nine of the 12 installations that were inspected in 2014-15 were not being used in line with the rules of the scheme.
But the themes spotted in the inspections weren't shared with DETI, although Dr Ward claims there was a discussion between Ofgem and the department in November 2015.
The RHI scheme audits carried out in Northern Ireland by Ricardo-AEA were identical to those carried out for the similar scheme in GB and there were no unannounced audits until 2016-17.
Auditors filled out a form and Mr Lunny takes the inquiry through one of them from August 2014 that was for a single 99kW boiler heating seven mushroom houses and a canteen.
Image source, Getty ImagesThe form includes details such as a description of the buildings, the insulation and air circulation, and the temperatures they are kept at - there are also photographs from the site.
it's notable that in the example an issue about the system's heat meters was raised and advice was given on how to rectify the issue.
The auditors' point of reference is the Ofgem guidance - a hefty document of two volumes.
Each RHI scheme audit only applied to single biomass boiler at any given site.
Even if there were multiple boilers at a site, all heating the same space, only one would be inspected.
Dr Ward says there was a inspection cost discount on offer from Ricardo-AEA if Ofgem decided that more than one of the boilers at a site should also be examined.
Dr MacLean asks if the inspectors became "desensitised" to the issue of multiple boilers "because nothing was happening" to claimants who were using them when it was raised with Ofgem.
"There is an element of truth in that," says Dr Ward and it was "accepted that there would be no action on the back of" the auditors informing Ofgem of what might've once been viewed as "novel" installations.
"There are only so many times that... one raised the same issue if they don't see any action," he adds.
Dr MacLean says that looking at some of the installations that were approved on the RHI scheme raises a major question.
That, he says, is: "How on earth did that get through the front door, let alone establish itself and go on for years?"
Image source, Getty ImagesDr MacLean points out that the RHI scheme had been closed by the time the complaint had been raised about three boilers being used to hea an empty space and says it's "incredible" that it wasn't taken more seriously.
There was an "incredibly lack of sensitivity" in dealing with the issue of boilers being used to heat empty spaces, he adds, especially at a time when there was much talk about potential abuses of the scheme.
An anonymous member pf the public wrote to Ofgem in 2016 complaining about someone who was said to be fraudulently claiming RHI scheme payments by using three boilers to heat an empty space.
The informant said the claimant was intending to transfer the boilers into poultry sheds that had yet to be built.
An internal Ofgem email noted that all three installations had been approved but a member of the administrator's audit team advised that there was no capacity for more Northern Ireland audits and the case was closed.
Image source, Getty ImagesDr Ward says he remembers speaking to one of Ofgem's RHI scheme managers "because I don't think that's an appropriate course of action".
They subsequently ensured there was capacity to carry out targeted inspections to follow up allegations of fraud.
He's unable to tell the inquiry whether an inspection was been carried out in the case.
Back at 14:00 for much more audit talk.
It is "bizarre" and "incomprehensible" why Ofgem did not routinely share data about RHI scheme installations with DETI, says Sir Patrick.
He wants to find out a good reason why inspections - paid for by DETI - of boilers were being carried out but the results weren't being given to the department.
It wasn't until July 2016 that the audit reports from the RHI scheme were finally shared with DETI.
Image source, Getty ImagesThe administrator has said that data wasn't shared before then because it had concerns about revealing private information about applicants.
But the inquiry chair says a "primary school approach" could've been for Ofgem to give DETI details about what had been found in inspections but redact some of the sensitive personal information of the claimants.
He also suggests that in the case of a dispute between the two bodies they could've gone to the Information Commissioner's Office in order to find a solution.
In April 2015, a Ricardo-AEA representative emailed Ofgem with a query about an installation accredited under the RHI scheme.
It was described as a shed used for drying woodchip, open at one end, and that had been evident from a photo supplied by the applicant.
The Ricardo-AEA employee's understanding was that the installation was not eligible and that was confirmed by Ofgem.
"It throws up the possibility that other installations in other not-wholly-enclosed buildings, other drying operations, have been accredited that ought not to have been accredited," Mr Lunny says.
Heating system inspectors from Ricardo-AEA ave a presentation to Ofgem's RHI scheme team in November 2013 in which they gave an example of an installation in England of multiple biomass boilers heating the same space.
The building that the system was heating had large vents and a large open door.
Image source, Getty ImagesThe inspectors said the system was "designed to maximise RHI benefits" and "would not have been designed this way" if the scheme didn't exist, with the installer having identified a loophole in the rules.
Sir Patrick Coghlin establishes that the example wasn't passed on to DETI and in a distinctly unimpressed tone he says there "couldn't be a better example of material that ought" to have been shared with the department.
Dr Ward says he can't explain why and agrees that it should've been done at the time: "This would've been helpful to DETI."
The inspectors who carried out the first five audits of biomass boilers on the RHI scheme warned that the sample size was "very small".
In a report after the audits, the firm Ricardo-AEA, which carried out the work, said it found no major issues with the five installations it looked at.
But it added that it was "difficult to comment on whether these findings are representative of the installations" across Northern Ireland.
In spite of that warning, the small number of audits continued across the next three years.
In October 2013, Ofgem's audit manager Robert Reid questioned a colleague about whether the five audits that were carried out for te RHI scheme that year was satisfactory for DETI.
He pointed out that the "small sample size" was "unlikely to identify any possible trends in non-compliances or observations".
Asked if DETI was ever alerted to that, Dr Wards says he doesn't know although it's worth remembering that he wasn't responsible for audits at that time.
Image source, Getty ImagesInquiry panel member Dr Keith MacLean asks whether "low-cost or no-cost" research could have been done to discover trends that didn't actually require a site visit, such as the high number of multiple boilers.
In reply to a further question, from Sir Patrick this time, Dr Ward says that in terms of spreadsheets analysing trends "I'm not sure whether those were shared with DETI".
It doesn't seem that Ofgem did enough to outline the risk to DETI of not carrying out more audits of RHI scheme installations, according to Mr Lunny.
Dr Ward says Ofgem told DETI during a meeting in Belfast that more audits might be needed for the RHI scheme and the extra £30,000 referred to in Mr Poulton's evidence would've covered about 24 inspections.
Image source, PABut he adds that DETI's energy boss John Mills told Ofgem at the time that the money wasn't available and "the conversation stopped there".
Asked if Ofgem gave DETI any reason why there should be more audits, Dr Ward says the department was told that applications to the scheme were increasing and therefore more audits could be required.
He can't remember if Ofgem made it clear to DETI that by not doing more audits those that had already been carried out could prove be too small a sample to be relied on as a guide to how the scheme was operating.
The Stormont department that was running the RHI scheme refused to give Ofgem extra money to carry out more audits of biomass boilers installations, a witness has told the inquiry.
Mr Lunny refers to the evidence of former Ofgem director Chris Poulton, who said that the team at the Department of Enterprise, Trade and Investment (DETI) was "under-resourced in terms of administrative costs" and that "impacted" on the funding that Ofgem was given to administer the scheme.
Image source, Getty ImagesMr Poulton went on to say that it was agreed with DETI that the "3% funding assumption was difficult to adhere to as the scheme grew".
He said that in 2014 Ofgem requested £30,000 to fund more audits as the scheme grew but was told by DETI that no more money would be available.
Image source, RHI InquiryOfgem's chief executive Dermot Nolan has told the inquiry that neither his organisation nor the Stormont department that was running the RHI scheme appears to have checked whether the assumptions they used to judge the appropriate the number of audits that would be carried out were correct.
That is a "fairly frank concession", according to inquiry chair Sir Patrick Coghlin.
"I have to confess it's one I would've welcomed some time ago," he adds.
Mr Lunny suggests that the lack of checks on whether the calculations were correct is a likely reason why the number of audits was so low.