Can I Charge Tenants For Solar Power?

If you are renting out a property, adding solar panels can be a good investment. It is a clean source of energy and could increase the property’s value. And what tenant wouldn’t like renewable energy? But the question is, can you charge tenants for solar power? Is it legal?

You may charge tenants for solar power, but the terms have to be laid out in the lease agreement. If you want to modify the existing lease agreement to include solar power, you must present this only as an option to the tenant. The monthly bill should not exceed what the bill would be if there was no solar power.

Why Should Rental Properties Offer Solar Power?

If you’re a landlord, you’re probably asking, why should I install a solar power system? Isn’t that expensive? Why go through the trouble of buying and installing a solar system when electricity works just fine?

Because charging tenants for solar power use is a win-win prospect for the landlord and tenant. You will have a side income while the tenant pays less.

The average cost of electricity per kwh in the US is .13.9 cents. The average cost per kwh of solar power is 6-8 cents. You can set a minimum charge of 12 cents per kwh – a nice profit- and your tenant will still be paying less than the average electricity cost. For you, this means extra cash, an added income source and faster recouping of an investment.

The key is to explain to your tenants that using solar power is to their advantage. Show the numbers in your proposed lease amendment and how they’ll be able to save money. This is very important especially for people who are not familiar with how solar power works. Once they realize the potential cost savings and benefits of solar power, there is no reason why they won’t agree.

How to Add Solar Power as an Option For Tenants

Currently there are no regulations that govern solar power rental. To be clear, you can offer this service but you and your tenant must come to an agreement on the modified lease payment. Solar power for present tenants is an option, not a requirement. However you can make solar power mandatory for new tenants under the amended lease agreement.

Suppose the tenant pays for the electricity based on the lease, but you want to install solar panels. First you have to create a lease addendum specifying the addition of solar power. Present this to the tenant as you need their consent.

Important: you cannot charge more than the electric company. You can charge the same rate or lower but not higher. If the tenant agrees they will receive two monthly bills, one from the power utility company and another from you, the landlord. Their monthly bill will still be the same because they no longer use as much electricity. It could even be lower if you charge a low rate.

Once the tenants agree, it’s time to install a solar system. You can install solar panels on an RV DIY, but for large properties, it should be done by a professional. There are many solar power system installers, and they will tell how many solar panels are required for your property. They’ll also take care of installing everything.

While you don’t have to do the installing, there are several things to keep in mind before you think about adding a solar panel.

• Your property must not be near trees. Foliage and branches can block a solar panel and reduce its efficiency.
• Solar panel installation may require modification or strengthening of the roof structure. Lighting arresters, waterproofing, support structures, reconfigure cables or satellite dishes etc. You need to plan ahead for these.
• Solar panels do not require a lot of maintenance, but some cleaning will help

How Much to Charge Tenants For Using Solar Power?

Okay, so you’re convinced adding solar power benefits you and your tenants. Now how much should you charge?

The amount can be based on the tenant’s average monthly electrical consumption over a fixed period. This period is up to you but preferably it should be the duration of the tenant’s stay. There are several ways to bill a tenant for solar power consumption.

The easiest is to install a monitoring system that tracks how much solar power is being used. A system monitor is usually included in solar panel kits, but you can purchase one as well.

There are different types of solar monitoring devices, but we recommend the DROK Solar System Voltmeter as it conforms to industry standards and is easy to use.

Once installed, the device displays start/stop dates (set every 30 days) and the kwh consumed. Divide the usage by the kilowatt on the tenant’s bill, and you have the monthly solar power bill.

If you already have solar power installed and running, check the average monthly bill. Now you can charge new tenants a minimum amount as long as it isn’t higher than their electric bill would be. Make sure you show the electric company’s monthly bill. If the tenant consumes more solar or electric bill than the average, they have to pay extra.

You can earn even more -and make up your solar investment faster – with this method.

Add the total cost of the solar power system. Deduct any tax credits you received and will receive in the future. Amortize the remaining total by the solar system’s expected lifespan. That can be 10-25 years depending on the warranty. You can add the amortization amount to the minimum monthly charge. As long as it does not exceed the bill if there’s no solar power, it’s all good.

Important Factors to Consider

The most important factor is maintaining the trust of your tenant. That’s why we emphasized that you should not charge more than what they would pay if there was no solar power. Second, you need to be transparent about how you calculate the bill.

Record Solar Production and Consumption

Your monitoring device must measure and record solar power production and usage. The device should run in real-time and easily accessible. An informative and easy to use system is essential for both you and your tenant.

Transparency

If you already installed a solar system and there are prospective tenants, explain clearly how it works. Show the cost per kwh, the monitoring system, how often they will be billed, how solar power works etc. Be as transparent as possible.

If you want to add solar power and there are tenants, use the same approach as above. Provide as much detail as possible and answer all questions to the best of your ability.

The easiest way to ease their mind is to install an electric meter and a solar production monitor. Show them how the metering works or better yet install on the property. This way the tenant will se how much electricity and solar power they consume in real time.

Solar and Electricity Power Sharing

This point needs to be emphasized too. Just because you’ve added solar power does not mean the entire property will now run on solar. It simply means that a portion of the power requirements will be handled by solar power.

The division between solar and electrical power will depend on your system arrangement. Keep in mind that solar production varies., reaching peaks in the summer and lows in the winter. This will affect the amount of energy produced and consumed by your tenants. The exception would be if you have batteries or a solar generator that can run a house.

Even with a solar generator, you should keep your property connected to the grid. One, the grid will supply electricity if solar production is low. Two, the tenants don’t have to worry about lack of power during rainy days and winter. Third, you can profit by exporting excess solar energy into the grid, another income revenue stream.

Usually tenants have control over the utility bills, but in this case you have to exercise control over it because you need to monitor the solar power usage. If you’re not managing the bill you won’t be able to profit from the extra credit given for exporting solar energy to the grid. This is something you are going to explain to tenants who may be used to managing their own electricity.

Billing Agreement

Most lease agreements have a monthly or quarterly billing frequency. The payment terms can be full, every week, every two weeks, etc. This doesn’t have to change when you install a solar system. The only difference is they will be paying the electricity company and you for using solar power. but as we pointed out earlier, their monthly bill will still be the same even without solar (or even lower).

Conclusion

With solar panel becoming more prevalent, we can expect more and more houses for rent that offer solar power as an option. If you own a property and want to provide solar power, it’s a great way to earn some side income while recouping your investment. As long as there’s an agreement between you and your tenants, everything will be fine.