Solar for Renters and Landlords – Does it Work?

Published on June 29, 2008 by David Llorens.
Categories: Solar Trends.

Update 3/3/2009 – One Block Off the Grid (1bog, not ibog), which organizes groups to get solar together, is working on turnkey solutions for solar on renters and landlords.

Invariably, when you see a solar array on a home, that house is owner occupied. Typically, when someone rents a home or an apartment, they pay for the electricity bill. That removes any incentive for the landlord to install solar.

If we want to open up a huge slice of pie for solar energy, this needs to change. For instance, about 40% of U.S. households rent their homes. There are about 130,000,000 households. So, we’re looking at an untapped market of roughly 52,000,000 homes! While this logistically isn’t easy, here are some of the big ways it could be possible:

1. Create a tenant/landlord relationship for solar so it becomes financially beneficial for both parties. We’re trying to pave the way for solar energy for renters here in San Francisco.

2. Put solar on a great big unshaded roof to power some of the neighbors with worse exposure.

3. Create incentives for people to install solar arrays larger than their power bill requires. This will require both a feed-in tariff (or some similar incentive) and upgrades to the grid infrastructure (if you have all the houses on the block generating more than they use, you’re gonna blow some transformers. We didn’t really build this grid thing to go both ways).

Anyway, I digress. Back to renters and landlords:

Solar energy, ironically, is way more lucrative for landlords than homeowners (at least until the end of the year). Why? The Federal Tax Credit for Solar Energy is capped for personal residences at $2000, but is uncapped if the property is an “investment” property. In addition, landlords can depreciate the value of the solar array over a shortened period of 5 years. Finally, landlords can take a 50% bonus depreciation for items purchased and placed in service during 08′ (the economic stimulus package). When you see this all on paper, it’s pretty mind blowing.

However, unless they’re into green charity, landlords are not going to put solar on their “business” unless they are saving money on energy somehow too. So, you need to be able to work that energy savings into the lease of the tenant, so that the tenant receives comparable or even cheaper energy costs with clean renewable energy instead of 100% grid power.

This requires a few ground breaking moves on the tenant law side. The tax law is pretty well covered, and we’ve gotten a recent opinion from a professional on this. In addition, I’ve sold a few systems to landowners with tenants recently, and some of them have some intelligent CPAs who have backed this up.

Surprisingly, with respect to the tenant/landlord lease arrangement side of things, we’re getting help from our utility, PG&E. They have offered some legal resources to help figure this out. They routinely surprise me with their facilitation of the solar industry. They understand that the future is distributed power generation. They’re not fighting it, they’re working with it. They are a unique utility.

So the bottom line is, if you rent and you want solar, talk to your landlord and have them contact a solar systems integrator. They may not have all the answers on this, but at least they can size a system correctly and you can present them with the documents in this post as well.

Also, of course, if you live in San Francisco and you rent or own investment property, I’ll be happy to answer your questions about solar and whether it works in your situation.

How much is the cost per square meter of a solar panel. I have a 25meter x 30meter area I intend to install solar panels. How will it cost me?”Panels vary in efficiency and price. Solar is typically sold by the watt, not the square foot. Vendors with higher efficiency panels can milk more power our of that area, but it will cost more.”I am having a difficult time finding a Solar Installer on the Northshore of Lake Ponchartrain? Can you recommend someone who services Washington & St. Tammany Parishes?”Louisiana is a little light on the solar installers but they are catching up. If you fill this out we’ll try to connect you with one.

“i have a 15 unit building in new york..can i use solar power to heat my building. my heats prices are putting me in the red”

Not really, but you can use solar-thermal to heat your hot water, and it is extremely cost effective, the payback on solar thermal is very quick and it’s not terribly expensive.

“I own four unit building in Florida. Do you have any solar power recommendations for small buildings like this? How can I make this a win-win for me and my tenants?”

The best way we can see to do it is to pinpoint how much money the system produces in electricity, and add that as a monthly fee to the lease.  The tenant gets clean energy for a more stable costs without paying any more, and you get the giant tax benefits and get to recoup your investment.  It’s win-win.  You have to check with the PUC in your state to see if there are issues with “selling” power like this to tenants.  Even the PUC here in San Francisco doesn’t have the answers to a lot of questions, and it’s ground zero here for solar innovation in the US… so, this is untreaded territory, but the financial benefits are pretty overwhelming while the 30% tax credits are still in place.

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