Solar Panels and Generation $'s to Owner?

[nathank]

hi Folks,

Not sure if this has been covered (a quick search and i didnt see it?).

I am currently looking at a deal for some cheap(ish) solar panels, where they would become cash flow positive after 2-3 years (after depreciation etc).

Has anyone considered dropping panels on an IP and have $'s of the power generation kept so that the land lord benefits?

What i had considered doing was to drop a clause into the contract to benefit the owner and have the power bill kept in my name. Any issues with Area's / turning off the power, etc?

Anyone tried this?

Thanks.

-nat

 

[Spades]

Hi Nathank,
Personally i wouldn't buy cheapish solar panels.I'd be installing German Solar Panels from Bosch,longer life span.
Cheers Spades.

 

[nww]

An interesting read from the other day.

http://www.smh.com.au/environment/here-comes-the-sun-power-to-the-people-20130830-2sw4k.html

 

[Scott No Mates]

Nathan, power has to be connected in your name if you are to benefit. How do you intend going about reclaiming power from the tenant (are you going to register to become a reseller/power generator?)

 

[D.T.]

Nathan, power has to be connected in your name if you are to benefit. How do you intend going about reclaiming power from the tenant (are you going to register to become a reseller/power generator?)

Keep power bill in your name.
Pay 'tenants' power bill.
Collect higher rent for the privilege -> looks better on serviceability calcs
Collect refunds credits from power company

yes/no?

 

[nathank]

Hey Scott, good question.

i thought i'd handle it like you would a water bill, where the tennat pays usage and i pay for the sewerage.

they are both itemised out on the bill, so it should be clear who owes what.

i'm guessing?

hence the post

 

[arms]

hi Folks,

Not sure if this has been covered (a quick search and i didnt see it?).

I am currently looking at a deal for some cheap(ish) solar panels, where they would become cash flow positive after 2-3 years (after depreciation etc).

Has anyone considered dropping panels on an IP and have $'s of the power generation kept so that the land lord benefits?

What i had considered doing was to drop a clause into the contract to benefit the owner and have the power bill kept in my name. Any issues with Area's / turning off the power, etc?

Anyone tried this?

Thanks.

-nat

now lets see here ,the bill is in your name and you are liable for any charges allocated to the bill ,you charge tenant and extra say $40.00 per week for electricity ,first of all you wouldn't find a tenant that will pay over and above whats the norm for the area in regards to rentals ,and if you did you can bet your bottom dollar tenant will leave every light and appliance going all day because they are paying for it in their rent

 

[nathank]

now lets see here ,the bill is in your name and you are liable for any charges allocated to the bill ,you charge tenant and extra say $40.00 per week for electricity ,first of all you wouldn't find a tenant that will pay over and above whats the norm for the area in regards to rentals ,and if you did you can bet your bottom dollar tenant will leave every light and appliance going all day because they are paying for it in their rent

Not exactly, and it sounds like you've not seen a power bill with a solar feed in. It's in two separate section, clearly showing how much was spent on power and how much the feed-in generated.

My plan was to have the tennant pay the electricity charges (e.g. $546.13) back to the agent and the agent then pays me $287.40 solar contribution credit.

my question was, anyone see any issues with this?

 

[charlieandkath]

Hi Nathank, yep big issues here.

That bill is on the gross 60 cent feed in tariff where you get paid 60 cents for every kWh the solar system produces.

In NSW the way it works now is you can only offset the electricity used against what your solar system produces during the daylight hours.

Or another way of thinking about it is - whatever electricity your solar system produces gets used first in your house/business and if that is not enough power you then draw from the grid to make up the difference. The power that is offset is not metered. The power you draw from the grid is still metered.

If the solar system produces more than you are using at that instant then you export to the grid. This is also metered and this is where you can earn 6 or 8 cents. This is only one tenth of that 60 cents.

To give some rough figures. On that bill the usage is three times the generation. (I'm guessing that the solar system must be a 1.5 kW or close to). Say if you offset the whole 479 kWh then the earnings from your system will be 479 times 24.5 cents (because of GST it is actually worth 10% more unless you are a business and can claim the GST). This is roughly $117 or $129 with the GST. This is the best case scenario in NSW today. Roughly $500 a year income. However this power is not metered so you can really only go off what your inverter is saying and this is where could get tricky with tenants etc.

The above paragragh is the best case scenario aswell. It is highly likely that some of that 479 kWh produced got exported so you would probably only earn 400 at 24.5 cents and 79 at 6 or 8 cents. This reduces the ROI and is why larger solar systems can reduce your ROI further as you will export more power at 6 cents rather than offsetting it at 24.5 cents.

Probably confused you further. Under the old gross 60 cents and the prices to put solar on today your theory would have been a definite goer. Solar today in NSW is still worth doing especially if you use a lot of power in the daylight hours say between 9am and 3pm facing panels north or 11am to 5pm facing panels west.

 

[DaveM]

you can only offset the electricity used against what your solar system produces during the daylight hours.

Now if you could figure out a way to generate solar energy during nighttime hours...

 

[nathank]

Ahh ok, that makes sense.

Well those panels / bill are on a place i will possibly rent in the future, so i might still consider doing it given it will be under the 60c tariff for the near future.

thanks for all the replies!

 

[arms]

Not exactly, and it sounds like you've not seen a power bill with a solar feed in. It's in two separate section, clearly showing how much was spent on power and how much the feed-in generated.

My plan was to have the tennant pay the electricity charges (e.g. $546.13) back to the agent and the agent then pays me $287.40 solar contribution credit.

my question was, anyone see any issues with this?

sorry but I have solar on my home and I clearly understand the billing system for solar and as one poster has said electric usage uses solar first and draws power from the grid when solar is insufficient for needs ,this still means that the tenant will use max electricity because in their mind they are paying for it

 

[jimmym1]

A thought...

Hi Guys,

The solar company I work for a looking at creating a product that kind of does what you are saying. I'll explain quickly and would love to know your thoughts.

Say you purchased a solar power system and stuck it on your IP with a special meter that can tell you how much the solar panels produced and how much of that was used by the tenants. Therefore, you can charge your tenants for electricity they have actually used.

You then stick the power bill in your own name and when it comes time for billing you get your normal retailers bill PLUS what solar power the tenants used and charge that to the tenant. Maybe charge them the solar power at a slight discount from what the retailers charge as an incentive?? As the IP owner you get paid for the electricity the tenants used and the FIT.

Does that make sense?

My rough calcs estimate it could make $8-$15 p.w. dependant on the tenants usage patterns & system size. Its probably a 12-15% annual ROI and you get the capital improvement of solar power if you sell the place.

ps this is all subject to getting any required retail license, technology that can do the above etc....

Cheers

jimmy

 

[HiEquity]

ps this is all subject to getting any required retail license, technology that can do the above etc....

Ahhh, yes, getting a licence to retail electricity - that could perhaps be a tough one don't you think? There are a few hoops to jump through there...

And then, if it were that simple, why aren't the companies who do have retail licences doing it? They could own the solar panels and just sell the customer the power from their own roof - why don't they?

It all comes down to credit risk, construction risk, production risk, O&M warranties and the cost of meter reading, billing, pursuing your money, etc etc etc. Far simpler to let the customer own them with a consumer finance loan if they don't have the cash. Or the LL owns them and the tenant's low electricity bills form part of the negotiation around the market rent.

In that latter option it's just like installing insulation, high efficiency air con, double glazing / comfortplus glass, solar HWS, etc etc etc. Will tenants pay more for a house with these features? How much more? If they won't, how much are these things really worth to a land lord?

Of course a lot of these things do provide real value to the occupier of the house in the form of lower bills etc - the main problem is that tenants don't think they do. Probably have to work on that side of things first...

In the PPOR market, more than one in eight houses already have solar panels on their roof (and the cost of doing so is still dropping). But in the rental market I would be surprised if that figure was one in eighty.

 

[HiEquity]

Now if you could figure out a way to generate solar energy during nighttime hours...

Of course that can be done using batteries but customers are specifically forbidden from installing batteries on their side of the meter for this purpose. It doesn't take long to work out why...

 

[Ausprop]

i have a place that use to have solar panels before the previous owners took them, leaving one of the old high feed in tariffs in place. after speaking to a retailer their conclusion was that even with the high feed in tariff the economics didn't stack up due to shading and pattern of use. essentially unless you can feed into the network it won't pay off - offsetting usage isn't worth the capital cost.

 

[Tim86]

Another benefit of share accommodation here. I include in the rent $30 per room for bills (internet, elect, and water). I've put solar elec on and I'm putting solar hot water on tomorrow. All the savings from the solar get passed onto me because the bills are in my name, but I still charge the tenants the same amount. It will take a couple of years before I start saving money (after the solar is paid off).

 

[jimmym1]

Ahhh, yes, getting a licence to retail electricity - that could perhaps be a tough one don't you think? There are a few hoops to jump through there...

HI HiEquity,

Yes agreed this is tough but preliminary investigation shows that it is certainly feasible.

It all comes down to credit risk, construction risk, production risk, O&M warranties and the cost of meter reading, billing, pursuing your money, etc etc etc. Far simpler to let the customer own them with a consumer finance loan if they don't have the cash.

I may not have explained myself properly here. I am suggesting that the LL buys the panels with their own $$ (finance/cash etc) and therefore owns the panels and takes care of O&M. The service we are proposing is simply metering the solar and therefore allowing the LL to charge the tenant for power consumed.

I do suppose that solar panels on your IP may be adjusted through market rent, but I guess this way its quantified?

 

[HiEquity]

Hi Jimmy

Getting an electricity retail licence can be achieved (I know someone who did it here in Perth for precisely this purpose) but not for the average (or even spectacular) residential landlord. The business model you propose would have to be an intermediary between the landlord and the tenant and I would argue that would mean there are too many cooks in the kitchen for such a small amount of $.

The person I know ended up making money on the retail licence just by flipping it to a company who always wanted a licence but would have had to spend a lot of money to get one from scratch.

But the main problem with your idea is locking in the tenant to buy the power. If they only have a 12 month lease then you can only obligate them to buy the power for 12 months. If the next tenant who comes along doesn't want what you're selling because their normal retailer is offering them a great deal, or they have a philosophical objection to renewable energy because they work in the coal or gas industries, then you've got a problem. You have no revenue security and the LL can't force a tenant to buy electrickery from them - that would be third line forcing, which the ACCC take a particularly dim view of.