Solar for Rentals: Ways to Go Solar Without Rooftop

Solar for Rentals

No rooftop to install solar panels? Staying in a rental property? Do not have funds to purchase solar equipment? Don’t worry. You can still go solar.

Replacing grid energy generated from fossil fuels with clean renewable energy like solar power is a big step forward in reducing our carbon footprint and reversing climate change. As more and more evidence pours in about the environmental impacts of burning fossil fuels, each one of us needs to step up and do our bit for the environment.

Going solar is the simplest step you can take in this direction and it comes with far-reaching results. 

This is easier said than done for many. Like tenants, apartment-dwellers, and city folks with limited or no roof space to install solar panels. In a rented property, tenants may be facing the roadblock of ownership and landlords may not consider solar installations as a worthwhile investment.

The lack of rooftop, ownership, or funds is not a mitigating factor anymore for the devoted solar enthusiasts. Community solar, Power Purchase Agreements, and solar leasing are some notable solutions to this dilemma.

Read on to learn more about ways to go solar without a rooftop or big funds.

Community or shared solar

Community solar pertains to solar facilities shared by members of a community. In this shared arrangement, a group of community members pools together their resources to set up a solar farm and generate solar power for community use. 

Community solar arrangement allows local groups of residents or business owners, environmental as well as financial gains of solar power regardless of the constraints they are facing for solar installations. 

Community solar installations are typically smaller in size – less than 5 MW of electricity generation capacity. They are usually set up on leased land.

There are two kinds of community solar arrangements. The first one and more prevalent one offers access to solar energy generated to community members. For this method to work, the proximity of the solar facility is vital. 

In the second type of community solar, the community members are given credit on their energy bills for their share of electricity generated by the shared solar farm. The power generated by the solar system is fed into the main grid. Though they are not using the energy directly, they are still contributing to a good cause and deriving the environmental and financial gains of solar power. 

The first model is more suited for apartments, while the second community solar arrangement is gaining popularity and is being adopted in more and more states.

Pros:
  • Low upfront investment: If a few consumers come together as a group and purchase and install the solar system, the total cost will get divided and it will be more affordable. If subscribing to a community solar garden, the consumers are allowed to contribute up to 120% of their annual electricity usage.
  • Solar for all: The benefits of solar installations are made accessible to all with community solar arrangements. Tenants and those with unsuitable or no rooftops for solar installations benefit from this program.
Cons:
  • When buying the solar system as a group and installing it on leased property, all group members have to agree to the financial, sharing, and maintenance terms.
  • Both community solar projects would require suitable locations with access to the grid.

Solar Power Purchase Agreements

A Power Purchase Agreement or PPA is an arrangement that allows you to host a solar system and draw energy from it without owning it. In this arrangement, a third-party would be sponsoring the system taking on the role of a solar provider. And, you pay for the electricity used from the system.

This arrangement is ideal for those who have enough rooftop space for the system but do not have the means to pay for it. This is also suitable for those who do not own the property. 

Pros: 
  • No upfront investment cost. However, you need to pay for the electricity used just like you do with the utility company that provides grid energy.
  • Solar electricity rates charged in this arrangement are considerably lower than the rate charged for grid energy. This means the overall monthly expense on electricity will come down, 
  • Agreements usually correspond to the lifespan of the solar system installed. This means you get to enjoy all the advantages of solar installations for the same period.
Cons:
  • As ownership of the system rests with a third-party, the solar installations don’t add value to the property. 
  • As power production varies with climate and other factors, the savings on the monthly electricity bill also fluctuates. However, the same is the case if you own the system.

Solar lease

An arrangement similar to PPA, the solar lease also allows energy consumers to enjoy the benefits of solar power without owning the system. The difference is in the payment method. Instead of paying for the electricity used at a rate fixed by the solar provider, the payment in this arrangement is based on access and use of the system. Like in a rental agreement, you will be paying a fixed amount for accessing and using the energy produced by the system.

Pros:
  • No initial investment. You need to pay a fixed monthly fee to access the energy produced by the system.
  • A fixed monthly fee means no fluctuations in the monthly electricity bill.
  • Even though the lease agreement is typically for smaller periods, there will be a provision to extend it until the lifetime of the system. This means you get to use the solar power produced by the system without ever purchasing it outright.
Cons:
  • No increase in property value as the solar system is owned by a third-party.
  • The fixed monthly fee means no reduction in payment for less electricity usage or lower power production.

Your questions answered

Yes, you are, provided you get the necessary permission from the landlord. However, this is not recommended, as the installation will be on a property not owned by you. And you will need to dismantle it when you move out of the property. If your landlord is not ready to install a solar system, it is better to choose community solar as a tenant.

No, you cannot as a tenant. Only homeowners can avail of these arrangements as they are long-term agreements. Usually, these agreements would include penalties for removing solar panels before the expiry of the agreement.

No. The IRS has issued a clarification that tax credit is allowed for solar panels installed in vacation homes but the credit is not available for taxpayers for the same done on an investment property such as a rental property, not used as a residence by the taxpayer. 

 

Taxpayers can claim solar tax credit only if they live in the property for at least a portion of the year. If you live there for a month in a year, you can claim 1/12th of the tax credit due.

A solar installation increases the value of the rental property as it affords tenants electricity at lower rates than grid energy. More often than not tenants are willing to pay more rent for a property with solar. 

There are multiple ways of going solar on a rental property. You can ask the landlord to install a solar system. If this is not working out, you can choose to have off-site solar installations such as a community solar arrangement.

It depends. The solar lease rates or rent for hosting solar farms can be anywhere in the range of $250 to $2,000 per acre per year. If your area has a steep clean energy goal to meet or there is a high demand from energy buyers for solar energy or a favorable solar policy, the rent will be higher.

Again, the answer is, it depends. If you have the financial backing to purchase or finance solar systems, you get to derive the full benefits due from it. When you are opting for a community solar or solar lease or solar PPA, you lose out on some of the solar benefits but gain some advantages like low/no initial investment and benefiting from solar energy despite limitations like no/insufficient rooftop or rental property. Lean more about Lease or Buy Solar Panels?

Solar systems are considered a part of home renovation and hence regarded as value addition. As all home renovations are taken into account for property tax revision, solar systems are no exemption. Except in some states and municipalities with a specific exemption for solar installations. These states use these exemptions in property tax calculation as an incentive to encourage solar installations.

Bottom line

Going solar is the best decision you can make – both for your pockets and for the environment. If you have sufficient funds and space to purchase and install a solar power system, you can derive the maximum benefits from it. 

However, the lack of one or the other or both need not impede benefiting from solar power. With ambitious clean energy goals to meet, federal, state, and local governments and utility companies are coming up with a range of solar programs to help energy consumers avail the benefits of solar power.

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