Aug, 2014

Will solar power work if you’re a tenant?

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An ideal candidate for solar is someone with a nice big roof, who owns the property they work in, and is consuming a large amount of power. And they’re fed up with paying so much for power.

Every now and then we talk to these people.

More often, we talk to people who meet some of these criteria but not all.

Sometimes solar will work for them and sometimes not. Part of the equation might be missing.

A scenario that we hear often is that people are “just renting, so it won’t work”.  This is not always true, and we have several commercial systems on rented premises.

So, will solar power work for a tenant?

The short answer is “Yes, if you want it to” and the long answer is “Solar has to make sense economically ANYWAY. Ownership is secondary”. So don’t rule it out immediately. Look at the fundamentals of the case for solar, and if it would work for you, then we can help find a solution for the landlord / tenant situation. We have several systems on roofs in this scenario, and they all work well.

If someone is a tenant in a property, these things matter:

  1. The planned length of lease. Many businesses have a 5-10+ horizon, so solar should not be an issue.
  2. The viability of the system. Do the economics stack up? If so, most things can be worked out.
  3. The relationship with the landlord.

Here are some scenarios which may work for a landlord / tenant situation. I am sure there are others, but these might get your creative juices flowing:

  • The tenant seeks permission to install a system, gets permission and installs a system. This situation will work if the lease is longer than the expected payback period, or the tenant fully intends to stay and renew their lease. It may be that an arrangement is made about the possible sale of a system back to the landlord on termination of a lease. Many solar systems will pay for themselves with 4-6 years, so if the business has a “horizon” of more than 6 years, then it should work.
  • The landlord purchases the system and charges the tenant. This could be an increase in rent for a period of time, or they could also just sell them the electricity from the system. This gets more complicated and may need a retail licence exemption, but is entirely possible.
  • The tenant ‘buys’ the system using a PPA (power purchasing agreement) which means they pay as they use. Eventually ownership will pass to them. If they exit, a new tenant or the landlord can take over the system, or take over the PPA.

What helps in all of these is finance. Often cashflow gets in the way and stops businesses making a decision. The benefit of solar is that 1. It can be financed and 2. You were going to spend the money anyway – so instead of paying your power provider for everything, now you pay off a solar system as well.

The main motivation is the never ending death-from-a-thousand-cuts of paying for power every month. If the power usage is high, and the rate per kWh is high, then solar will make sense. How it makes sense can be worked out. The solution will be a balance of meeting everyone’s expectations and covering the risks associated with a tenant deciding to leave. Luckily solar is an investment with a predictable return, and a long life span, so there are ways around tenancies.

The place to start is a Solar Business Case. This is an analysis of your usage, your rates, your roofspace and your pattern of consumption that lets us tell you what solar will achieve for you.