Homeowners can rely on solar systems to shower them with savings on their electricity bills … so long as they live under the rooftop where it’s installed. Owners of rental properties, however, are far less incentivised to invest in the clean energy source. Perhaps that’s why 29% of owner-occupied dwellings around the country have rooftop solar installed, compared with just 4% of rented digs.
“Renters are one part of the market that hasn’t been able to enjoy the financial gains from installing a solar system,” says Australia Institute communications and special projects director for South Australia Noah Schultz-Byard, who has co-authored a discussion paper the institute hopes will light a fire under policymakers in Adelaide.
Payback periods for installed solar systems (without storage) have been falling but renters still rely on landlords to believe it’s a good investment. The economics don’t make immediate sense to owners when it’s the tenants who gain from reduced electricity bills.
The Australia Institute report suggests a scheme where the state government offers landlords a rebate and interest-free debt to install PV, where some of that cost is recouped via a rent increase that would be below the expected energy bill savings, so the tenant is better off.
It also recommends the state act as a “trusted broker” and pay installers’ costs and a “finder’s fee” for property managers who secure an arrangement between a landlord and tenant.
Finally, legislation would be needed to ensure tenants’ requests for reasonable energy efficiency and solar are heard, so long as tenants understand they’ll bear some cost via rent increases.
There is potential to overcome this “split incentive” problem in South Australia, with a survey by the institute of 510 respondents showing 41% of tenants and 55% of landlords would be willing to share the cost of installing solar.
How much is enough?
The report suggests the amount of empty rooftops in the state could accommodate 17GW of solar (based on a 2019 report for the CEFC and Property Council of Australia), which isn’t to say that would be a good idea. “That’s just a way to look at how much was out there,” Schultz-Byard says.
South Australia already hosts about 1.5GW of rooftop PV, making privately-owned solar the largest generator in the state.
There is already so much rooftop solar in South Australia that there are periods on some days where solar will make up 100% of supply in the state. Voltage rises in substations in parts of the SA Power Networks system are causing systems to switch off and complaints from solar owners have been rising over the past few years.
“There is so much energy going backwards through the network it’s actually exceeding what used to be going forwards – it’s exceeding the thermal ratings of equipment,” SA Power Networks general manager strategy and transformation Mark Vincent told EcoGeneration in October last year.
Still, the government, SAPN and the Australian Energy Market Operator are fixed on finding solutions that will allow rooftop PV to flourish.
“In the near term, SA Power Networks is implementing a number of initiatives that are aimed at doubling the amount of solar that can connect to our distribution network by 2025,” Vincent said in January, when asked about the Australia Institute’s recommendations to boost solar onto rental properties.
“We welcome initiatives to provide equitable opportunity for all South Australians to participate in our renewable – and distributed – energy transition. In fact, we retain the view that this provides the prospect of all South Australians having access to abundant, reliable, low-cost and low-carbon energy.”
A tricky one
Owners of investment properties will want to know whether a rooftop system adds value to a bricks-and-mortar asset. Schultz-Byard concedes there is scepticism among landlords about the potential financial dividends that would come from installing solar, which is why his study backs an online portal similar to one developed by Solar Victoria where benefits to owner and tenant can be estimated.
“That can then be used to negotiate a fair rent increase,” he says, where a bill saving would hopefully be greater than interest-free repayments on a subsidised system.
“It is a tricky one, when it comes to figuring out the economic value of having a system installed and who gets to benefit – is it the landlord or is it the renter. That’s why we see such a lesser level of uptake with rental properties.”