Landlord-to-tenant electricity supply: the energy transition in your own home

What is meant by ‘landlord-to-tenant electricity supply’?

Landlord-to-tenant electricity supply is electricity that is being generated by a solar installation on the rooftop of a residential building and then passed on to final consumers (which particularly includes tenants) living within this building or in residential buildings or ancillary facilities located within close proximity of this building that are connected directly to the installation and not via the public grid. In cases where tenants cannot use all of the electricity generated, the surplus electricity is being fed into the public grid.

Landlord-to-tenant electricity supply – a win-win for both tenants and landlords

By using landlord-to-tenant electricity supply, tenants will be exempt from a wide range of charges that they would otherwise have to pay if they purchased their electricity via the grid. These include feed-in tariffs, grid surcharges, electricity tax and concession fees. In addition to this, landlords will receive funding for every kilowatt-hour of electricity they supply to their tenants. This makes supplying electricity to tenants more attractive and profitable for landlords, whilst at the same reducing tenants’ electricity bills. Landlord-to-tenant electricity supply therefore helps drive forward the expansion of renewable energy across Germany. The potential is huge: estimates suggest that up to 3.8 million homes could be supplied with electricity from rooftop installations.

Funding for landlord-to-tenant electricity supply – the details

Up until now, only few landlords have provided electricity to their tenants. This is because although, under the landlord-to-tenant electricity supply scheme, landlords are exempt from a number of fees and surcharges, the costs incurred for the billing, distributing and metering of the electricity are extremely high. This has meant that the scheme has simply not been profitable enough. However, this is now bound to change as landlords will be paid a premium for supplying electricity to their tenants.

The new programme aims to give tenants are more important role in bringing about the energy transition and to set new incentives for installing solar panels on the rooftops of residential buildings.

Under the 2017 version of the Renewable Energy Sources Act, funding is available for supplying electricity directly from a residential building’s solar installation to final consumers. This means that the persons operating such a solar installation will be paid a premium for the electricity they supply to their tenants. This premium is calculated based on the amount of the statutory feed-in tariff set out in the Renewable Energy Sources Act minus a deduction. The amount of funding that landlords will receive depends on the size of the solar installation and the national photovoltaics expansion rate and will be between 2.2 c/kWh and 3.8 c/kWh. In cases where tenants cannot use all of the electricity generated, the surplus electricity will be fed into the public grid and landlords will be paid the feed-in-tariff.

The premium will only be paid to landlords who began operating their solar installation on the day the 2017 Renewable Energy Sources Act entered into force (25 July 2017) or subsequent to this date. In addition to this, the solar installation for which a particular landlords seeks funding needs to be registered with the Bundesnetzagentur.

In order to ensure that the costs for the new funding scheme will be kept low, the volume of solar electricity that can be added per year and for which landlords can receive the premium will be capped at 500 MW. It is also important to make sure that tenants will continue to be able to freely choose their electricity provider, and that the electricity landlords sell to their tenants is available at favourable prices. The Act therefore sets out rules for the duration of the contract governing the supply of electricity from landlord to tenant, bans landlords from making this contract part of the rental agreement and also introduces a cap on the price landlords can ask tenants to pay for the electricity they supply.

In the run-up to introducing the new funding programme, the Federal Ministry for Economic Affairs and Energy conducted a study into the legal and economic aspects around landlord-to-tenant electricity supply schemes. The study is entitled ‘Landlord-to-tenant electricity supply schemes – legal appraisal, organisational models, potential and economic efficiency” and can be consulted here (in german).