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Irina Slav

Irina Slav

Irina is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing on the oil and gas industry.

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An Innovative Solution To Solar's Biggest Problem

Australia is doubling down on its solar push, striving to make renewable power generation available to everyone, including renters. That’s right – there are companies specifically targeting solar power for people renting their house.

One would think that this should have been a no-brainer: solar power is getting increasingly cheap, so why wouldn’t property owners invest in it? Because they won’t benefit from the electricity bill savings is the answer. The renters would enjoy lower electricity bills but there is theoretically nothing in it for the landlord or the landlady. At least that was the case until someone found a way to lure them in with split incentives.

Here’s how these split incentives work, as described by Energy Matters. A company called SunTenants came up with the idea to reward both tenants and landlords for installing a solar system on the property by paying them both: the tenants for consuming the power, and the landlords for installing the system.

First, the landlord installs the solar system, which SunTenants monitors and shares the data with the tenants. Tenants buy the power produced by the installation at a rate of US$0.15 (A$0.20) per kWh at current prices and they also get a cut in SunTenant’s profits in exchange for a higher—but not much higher—rent. The landlord receives higher rent, US$7.70 (A$10) per month per kW of capacity, and also gets a cut of the company’s profits. If they decide to install a battery pack, they get a premium. Here’s a breakdown of how it works with a 5kW solar installation.

In other words, the tenants get lower electricity bills plus a sum from the supplier’s profits and the landlord improves the value of their property thanks to the solar installation and they also get a monthly reward for the investment. Related: Trump Bans Venezuela’s Oil-Backed Cryptocurrency

That’s all good and well but why does it matter? Well, it matters because it’s an export-ready example of how to get more people onto the renewable energy train and make some money in the process.

The fact is that a growing portion of the Australian population does not own their homes. According to the latest national census, in 2016, almost a third of Australians rent their home and, more importantly, they are paying higher rents, at an average of US$260 (A$335) a week. With higher rents any savings are welcome, especially for utilities, so there is a very nice niche for companies like SunTenants opening up.

Let’s compare this model with what is happening in the United States. The Census Bureau’s latest vacancies and homeownership report revealed that the numbers are pretty similar, with 31.4 percent of people renting instead of owning their homes.

Split incentives are not a new idea, and the issue of unhappy landlords resisting the adoption of solar power has been noted  more than once. SunTenants appears to have found a solution for this issue and it is simple enough: reward both sides. It was enabled by the plummeting costs of solar power that obviously makes such arrangements profitable enough for the provider to allow them to share these profits. Related: The World’s Largest Oil Traders Are Shifting Strategy

And that’s not all. There are now organizations and municipalities in Australia ready to offer property owners interest-free loans to install solar systems on their properties. It seems a lot of people are eager to get other people on board with solar, so the lineup of options is expanding: solar gardens are another example of a recent development in the sector, community solar farms yet another.

The biggest obstacle to the adoption of all these cheaper power solutions was landlords. Now it is being dealt with in a way that is sure to stimulate a lot more solar power adoption Down Under.

By Irina Slav for Oilprice.com

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