Solar for Renters

Electrification
for everyone

A Guide for Commercial Landlords & Tenants

As the Queenstown region moves toward a cleaner, electrified future, solar energy presents a powerful opportunity for landlords and tenants to reduce electricity costs, carbon emissions and increase resilience. But how can renters benefit from solar when they don’t own the roof? This guide outlines two practical models that enable tenants to access solar electricity, without compromising their choice of electricity retailer:

Two Options

Fixed Monthly Payments

A simple arrangement where tenants pay a set amount to the landlord for solar access.

Power Purchase Agreement

A flexible model where tenants pay only for the solar electricity they use, at a rate lower than grid electricity.

In both options, the tenant holds the electricity contract with a retailer and then has a separate agreement with the landlord for the solar electricity. This way, the tenant maintains the independence to choose their retailer for any electricity consumed from the grid.

Option 1

Fixed monthly payments from tenant to landlord

Fixed monthly payments are set up from the tenant to the landlord, this can either be as a part of the rental agreement or a separate agreement. The tenant holds a separate electricity contract with an electricity retailer to pay for any grid-consumed electricity and earn from any solar exported to the grid.

‍

‍The cost of the fixed monthly payment can be calculated in two methods:

Rate of Return Approach

(best suited to short-medium term lease agreements, and/or the tenant's consumption is unknown)

The upfront cost of electric machines is higher and that can put some people off. But in New Zealand, electric machines are now cheaper to buy and run than fossil fuel machines over their lifetime, even with those upfront costs included.
‍
If you add them to your mortgage and pay interest, it’s still cheaper. It’s not just an environmental argument anymore, it’s also an economic argument.

Tenant Consumption Approach

(best suited to long-term lease agreements, and when the tenant consumption is known)

The landlord outlines a fixed price to the tenant, based on a combination of the rate of return from the solar system and the average amount a tenant would save per month from having access to solar. A full solar analysis would be required to evaluate the tenants consumption profile vs predicted solar performance, to understand how much the tenant would be saving with solar (and the fixed payment).

Method two example

This option works best when

There is a high trust relationship between landlord and tenant. The tenant must be comfortable with the fixed price and be assured that they are saving money.

In method two, high confidence in the consumption data of the tenant is required, to ensure there is high certainty over the amount they will save during the agreement.

Benefits

Tenant Benefits

Minimal administration after the agreement is set up.
Solar consumed by the tenant does not need to be continually metered.
The tenant earns solar export.
Tenants can accurately forecast costs as the payment is set monthly.

Landlord Benefits

The landlord has high confidence in the payback period of the solar investment due to the fixed monthly payments.

Drawbacks

Tenant Drawbacks

If the solar system is oversized in comparison to the tenant’s consumption profile, the fixed payment may be disproportionate to the savings enabled by solar.
The set payment is required regardless of the solar performance.
Higher overall risk and uncertainty for the tenant.
(Method two) If the tenant’s electricity consumption is lower than predicted during solar producing hours, then they may end up losing money or not saving as much as predicted.
(Method two) A full analysis of the tenant’s consumption profile vs predicted solar performance would be required to understand how much the tenant would be saving with solar (and the fixed payment).
(Method two) A re-analysis would be required each year to ensure the monthly payments are fair for both the landlord and the tenant. This analysis would require retrospectively analysing the tenant’s consumption data over the past year.

Landlord Drawbacks

The landlord does not earn any money from solar export.

Option 2

Power Purchase Agreement (PPA) between the landlord and the tenant

Under a PPA, the tenant pays a fixed price per kWh for the solar electricity they consume. This rate should always be lower than their current grid electricity price per kWh. The landlord also receives the full value of any solar exported to the grid, which gives them guaranteed income even when the tenant is not consuming power or when the property is unoccupied.

‍

The tenant continues to hold the main electricity contract. A separate PPA agreement is set up to cover invoicing for both solar consumption and any exported solar. Export is paid at the export rate in the tenant’s electricity contract with their retailer.

‍

Smart metering is required so both tenant and landlord can see how much solar is consumed and how much is exported. The landlord then uses this data to invoice the tenant each month. Most modern solar installations already include smart metering systems.

‍

This option works best when

Benefits

Tenant Benefits

Tenants only pay for the electricity consumed (rather than a fixed cost), which is at a lower rate than grid electricity costs.
Payments are in proportion to the performance of the solar system.

Landlord Benefits

The landlord earns money from solar exported to the grid, even if the tenant does not consume any solar electricity themselves.

Drawbacks

Tenant Drawbacks

Higher administration required due to monthly readings and invoices.
The tenant does not earn from the solar export.

Landlord Drawbacks

The amount of solar consumed is dependent on the tenant’s activities.
As the tenant owns the electricity contract for grid electricity, the landlord has no control over choosing a retailer who pays a higher rate for solar export.

Which option to use?

Ultimately, the choice between these options depends on the specific circumstances of the landlord and tenant, including their relationship, certainty of energy consumption, and desired level of administrative involvement.

Once the landlord and tenant have decided which solar for renters option best suits their needs, a formal agreement will need to be signed to outline the terms of the arrangement.

Discover more resources

Solar Quote Comparison

Compare quotes side by side so you can see the best value for your home.

See Resource

EV Step by Step Guide

A simple, practical walkthrough of everything you need to know before getting your first EV.

See Resource

Solar Step by Step Guide

Your easy roadmap to choosing the right solar setup for your home and budget.

See Resource

Solar Financing Guide

A clear breakdown of ways to pay for solar, from loans to grants, so you can pick what fits your situation.

See Resource