Is the Tenant responsible for the roof?

As a property owner, you may not even be allowed to enter the building or walk onto the roof. If you have a long term NNN lease where the tenant is responsible for the roof, you will need an amendment to the lease to take back ownership of the roof.

Are you responsible for the roof?

Once a property owner has ownership rights and obligations for the roof and parking lot space, solar can be installed, with the following caveats:

1. Common space area. Often, common space power consumption is already part of the existing lease, so if you would like to offset those electricity costs with solar and pass them onto the tenant, no additional agreement is needed between the tenant and the property owner.
2. Mastered metered buildings. If your building is master metered, and tenants pay the property owner for electricity on a Ratio Utility Billing System (RUBS), then you may also start to bill tenants for solar derived electricity, without an additional agreement.
3. Tenant has own meter. If your tenants pay for electricity directly to the utility company, then a separate agreement or an amendment to the lease can be negotiated between the tenant and the property owner for solar power generated.

How to convince a tenant to buy electricity from you instead of the local utility?

As mentioned above, if the tenant is already paying you for power, either for common space, or because the building is master-metered, you may be able to bill for clean energy now, without amending lease terms.

If the current lease doesn’t explicitly give you permission to charge tenants for electricity, some negotiation may be needed. Understand there are many win-wins for both you and the your tenant:

1. Green — Tenants do not want to block the adoption of renewable energy. Make your tenant a hero by making it easy for them to publicize that they are supporting clean energy to their customers and employees. Provide them with marketing material that they can use directly.
2. Economics — Some discount may be needed to incentivize the tenant to make the switch. We found that giving anchor tenants a 5% discount on the electricity derived from solar can speed the adoption.
3. Credibility — Provide your tenant with a credible bill and customer support. Tenants are comfortable paying when they are getting a better experience as compared to the the local utility company.
4. Fear of missing out — Let tenants know that your solar system can only accommodate a subset of the buildings total energy consumption and that you are offering it only to select tenants or tenants on a first come first serve basis. Those who don’t meet the deadline, don’t get to participate and will continue to pay higher rates for electricity to the local utility.
5. Stability — Let tenants know that the solar system is a supplement to grid power, and that the building will continue to be connected to the grid for power that is not provided by the system. They should expect equal or more reliable service than what the local utility company can provide.

You don’t need 100% of your tenants

Getting 100% of your tenants to participate in the solar program is not a requirement. For example, if you have a residential building, you may not want to offer solar to tenants that are not currently paying retail for grid power:

1. California Alternate Rates for Energy (CARE) — designed to provide a discount on energy bills for eligible low-income customers
2. Medical Baseline Allowance — provides additional energy at a lower rate to households where a member has a qualifying medical condition.

In a commercial setting, you may want to offset meters in this order:

1. Common area meters — tenants already have agreed to pay for this power consumption
2. Long term anchor tenants — these tenants are stable and will be motivated to reduce their rapidly rising energy costs
3. Smaller tenants — these tenants turn over more often, can easily be offered excess solar production at a discount

Interested in learning more? Check out Energy311’s Blog!