March 2, 2018: More Solar For Landlords and Renters

No More Tile Roof

Putting the finishing touches on the new roof for the cottage next to the Greeny Flat (click here to see how it looked with the tiles)

This week we completed the job of replacing the tile roof on the cottage next to the Greeny Flat with a light-coloured Colorbond roof. This will help to keep the house much cooler in the summer because:

1. The light colour will reflect heat much more effectively than the dark tiles;
2. The light weight of the metal will not hold heat like the heavy tiles did;
3. We added ‘Anti-con’ blanket (50mm fibreglass insulation over reflective foil sarking) directly under the corrugated metal so it will transfer very little heat into the attic;
4. We added plenty of eave vents plus a ‘whirly bird’ ventilator near the peak of the roof which will help to keep the attic cool in summer plus help to control moisture and condensation in the winter, and;
5. We were also able to put insulation into large areas of the ceiling that did not get insulated properly when the ceiling was done years ago. It is very difficult in most attics to install insulation right out to the edges where the roof meets the exterior walls so often (as in our case) this just gets left uninsulated (see photo below). In total there was probably 25sqm of uninsulated ceiling that has now been insulated to a very good standard. This will greatly help to keep the house cooler in summer and warmer in winter.

While we were at it we also added steel ‘triple grips’ to tie the roof rafters down to the top plates and steel strapping to tie the top-plates down to the wall framing. Without the enormous weight of the tiles to hold the roof down, these details will ensure that the whole roof doesn’t lift off in a big wind.

Some of the things we were able to do while the roof was off.

Time to Put Solar on the Roof???

As I have mentioned in our last two Newsletters (here and here), we are looking into the costs and benefits of putting solar on the roof of this rented house. This is a dilemma that affects every landlord and tenant due to what is known as the ‘split incentive’. The tenant could benefit from having solar on their roof but they have no incentive to install it when they don’t own the building. Meanwhile, the landlord owns the building but has no incentive to install solar because the tenant would get all the benefit in the form of lower electricity bills. See our previous Newsletters for more about this Australia-wide problem and some of the possible solutions.

There are organisations like SunTenants, Matter and PrePaid Solar that have been set up to try to resolve this issue but I don’t think any of them offer the perfect solution. For one thing, I’m not keen on paying a fourth party a lot of money to administer what should be a very simple transaction. Ideally I think every electricity retailer should be required to offer a service for landlords and tenants in order to simplify the arrangement. This would mean that there are just three parties involved, the landlord, the tenant and the retailer.

However, since that is not currently available (although I am planning to talk to my retailer (Energy Locals) about offering it) I’m thinking that the next best option will be for Mum to keep the electricity bill in her name and simply charge the tenant for the daily supply charges plus the grid power and solar power they use. She can set her own price for her solar power (although I understand that she cannot legally charge more than the retail price) and she can even offer the tenant a percentage of the FIT if she’s feeling generous. In order to try to understand the financial returns for her I have put together the following spreadsheet and I would greatly appreciate any feedback on it, especially if you happen to be an expert on solar and/or an accountant. (Please note that I am neither and I make no guarantees about the accuracy of the numbers presented below).

The idea is that the fields shaded green can be changed to test different scenarios and I have shown six such options below (scroll right to see more).

In this example I have used the approximate rates that I currently enjoy with Energy Locals along with estimates for things like the cost of the system, the amount of energy the tenants use, the percentage of solar they might self-consume, Mum’s tax rate, etc.

In the six different options shown I have simply tweaked one of the variables each time, e.g. Option 1 is for a 4kW system, Option 2 is for 5kw, Option 3 I changed the percentage of self consumption from 20% to 30%, then 4, 5 and 6 I just adjusted the amount Mum could charge or refund the tenant.

In all six cases that I tested, the simple Return On Investment (ROI) and Payback Periods seem very acceptable with paybacks ranging from 6 to 8 years (when you factor in depreciation). I recently realised that a landlord has the additional benefit (compared to a home owner) of being able to deduct the depreciation of the solar system from their taxable income. So I have attempted to factor that in at the end.

Setting this up would require agreement between the tenant and the landlord. It might also require a monitor to determine the amount of solar power the tenant has used (although I’m pretty sure this can be calculated from the total solar production (read from the inverter) minus the solar power exported (read from the export meter). If so, it would simply be a matter of reading the meters and inverter each quarter and calculating what the tenant owes. It might involve paying the Property Manager a small additional fee to do this and to request payment from the tenant.

The beauty of a system like this is that it can benefit both the landlord (by providing a good return on their investment) and the tenant (by lowering their electricity bills) plus it provides an incentive for the tenant to use more solar power and less grid power which is good for the planet.

Any comments about this idea will be more than welcome and can be made by filling out the ‘Leave a Reply’ field below.

Investment Opportunity 1 – Crowd-funded Solar Electricity Retailer

I have also just registered my interest in possibly investing in Australia’s first crowd-funded, solar-focused energy retailer. Called DC Power Co this is a startup venture that promises to…

‘…reward solar owners with cheaper bills, better feed-in tariffs, transparency around how your investment is actually working, genuine guidance on how to get more out of your solar and wholesale top-up prices for when you need a little extra from the grid.

And best of all … we’re inviting all Australian Solar Owners to join us in building the company by becoming shareholders.

A $50 investment will see you own a piece of DC Power Co., allow you to have a say in how the business is run, and offer a share in future profits.’

I have no affiliation with DC Power Co, I just think this sounds like a good idea and possibly a good investment opportunity but I don’t offer financial advice so please, do your own research.

Investment Opportunity 2 – Repower 6 Now Open for Investors

If you’re not familiar with Repower you can read more about their system of using local investors to fund solar power systems for local businesses in this previous Newsletter. If you are familiar with them you might be interested to know that their sixth investment round is now open… but hurry, their previous five rounds got filled very quickly.