Landlord-to-tenant electricity is electricity that is generated by a solar installation on the rooftop of a residential building and then passed on directly, i.e. without passing through a grid, to and consumed by final consumers living within this building or in a residential building or ancillary facilities located within close proximity of this building. Electricity from other renewable energy sources (e.g. electricity from wind energy) is not covered by this definition.
In practice, many landlords do not generate and supply the electricity themselves, but commission third parties and provide them with the required roof space. Many of these third parties are companies specialising in energy services.
Up until now, homeowners have been the main beneficiaries of the possibility to generate electricity in rooftop solar installations. The new legislation makes it feasible for tenants to benefit as well. Landlords who have solar installations on the roofs of their buildings can sell the electricity generated by these installations to their tenants. This was already possible, but was not generally economically viable for most landlords.
In contrast to electricity purchased from the grid, there is the advantage of eliminating grid charges and grid surcharges. The electricity thus supplied is also exempt from electricity tax and concession fees. On the other hand, landlord-to-tenant electricity models entail additional expenses for marketing, metering and billing (including the labelling of the electricity). For this reason, it often makes more economic sense for the landlord to feed the electricity into the grid and receive a market premium or feed-in tariffs, than to offer it as landlord-to-tenant electricity to his or her tenants. The Landlord-to-Tenant Electricity Act closes this financial gap. The envisaged funding is intended to make it more attractive for landlords to supply landlord-to-tenant electricity.
Landlord-to-tenant electricity is funded via the “landlord-to-tenant electricity premium”. The installation operator can demand the landlord-to-tenant electricity premium from the grid operator if the eligibility requirements are met.
The entitlement to the landlord-to-tenant electricity premium exists for electricity from solar installations with a total installed capacity of up to 100 kilowatts which are installed on or in a residential building. Also, this electricity must be supplied to and consumed by final consumers within this building or in residential buildings or ancillary facilities in a direct spatial relationship with this building. And it must not pass through the public electricity grid.
The funding from the landlord-to-tenant electricity premium is restricted to solar installations with an installed capacity of up to and including 100 kilowatts.
The level of the landlord-to-tenant electricity premium is based on the rates of the feed-in tariff for solar power. However, the landlord-to-tenant electricity premium is not precisely the same as the feed-in tariff. This is to account for the fact that in addition to being paid the premium, landlords also receive revenues for selling electricity to their tenants. In view of this, the level of the landlord-to-tenant electricity premium is calculated via a flat-rate reduction of 8.5 cents per kilowatt-hour from the .
Like the feed-in tariff, the landlord-to-tenant electricity premium is included in the “breathing cap” system. This means that the funding decreases over time – more quickly if more new solar installations are built, less quickly if fewer are built. In this way, the funding is aligned with the cost degression for photovoltaic modules. Like the feed-in tariff, the level of the landlord-to-tenant electricity premium also depends on the size of the solar installation. This is because the investment costs per kilowatt of installed capacity and the power generation costs per kilowatt-hour of electricity generated are lower for large installations than for small installations.
The funding for a solar installation is calculated on a pro-rata basis on the basis of the various output categories stipulated in the 2017 Renewable Energy Sources Act.
For example, a 40 kW installation is currently (July 2017) entitled to funding of 11.95 cents/kWh. That part of the installation which totals up to 10 kilowatts accounts for 25% of the calculated amount; the other 75% is based on the part of the installation above 10 and up to 40 kilowatts: 0.25 x 12.20 cents/kilowatt-hour + 0.75 x 11.87 cents/kilowatt-hour = 11.95 cents/kilowatt-hour (rounded figures). The amount of 8.5 cents/kilowatt-hour is now subtracted from that. So a 40 kilowatt landlord-to-tenant electricity installation would currently receive a landlord-to-tenant electricity premium of 3.45 cents/kilowatt-hour.
The funding is paid to the operator of the installation. The landlord can operate the installation himself/herself, or commission a third party to do this.
However, the premium will only be paid for electricity from solar installations which commenced operation on the day the 2017 Renewable Energy Sources Act entered into force (25 July 2017) or subsequent to this date.
If the eligibility criteria (see above) are met, the operator of the installation has an entitlement to receive the landlord-to-tenant electricity premium from the grid operator. This entitlement is – like the right to the market premium and the feed-in tariff – anchored in the 2017 Renewable Energy Sources Act. The solar installation for which a particular landlord seeks funding needs to be registered with the Bundesnetzagentur.
Tenants are to remain able to freely choose their electricity provider, and the electricity landlords sell to their tenants is to be available at favourable prices. For this reason, the contract for the electricity supply must not be part of the rental agreement. This means that the landlord-to-tenant electricity contract can be terminated independently from the rental contract. Also, the length of the electricity supply contract is restricted to one year (although it can be tacitly renewed). Contracts must be designed in a way that ensures that tenants have a reliable supply of electricity, including at times when the landlord cannot supply any, for instance because the sun is not shining. The Landlord-to-Tenant Electricity Act also includes an upper price limit: landlord-to-tenant electricity and the electricity additionally taken from the grid may not cost more than 90% of the basic tariff in force in the grid area.
The landlord-to-tenant electricity premium is funded from the EEG surcharge.
Yes, but the impact on the EEG surcharge and the grid fees is minimal. In order to ensure that the costs are kept low, the volume of solar installations that can be added each year and for which landlords can receive the premium is capped at 500 MW. Also, the EEG surcharge must be paid in full for the landlord-to-tenant electricity supplied. In this way, it is ensured that the costs of the Renewable Energy Sources Act will continue to be spread across many shoulders.
If one assumes that the maximum potential for landlord-to-tenant electricity is fully utilised in the long term, the impact on the EEG surcharge will be less than 0.1 cents/kilowatt-hour. That is less than 3.50 euros per year and household. The same is true – on average – for grid fees.
Landlord-to-tenant electricity can also be funded in buildings with some commercial tenants. However, at least 40% of the floor space in the building must be used for residential purposes.
Yes. The European Commission issued the approval on 20 November 2017.
Will landlords become energy utilities when they offer landlord-to-tenant electricity? What obligations are they taking on?
Anyone (including a natural person) who operates an installation to generate electricity and supplies the electricity generated in it to third parties is an energy or electricity utility within the meaning of the Energy Industry Act and the 2017 Renewable Energy Sources Act. This entails various obligations under energy legislation (in particular contractual provisions, invoicing, labelling of electricity, registration and reporting requirements). The work involved in this has already been priced into the landlord-to-tenant electricity premium.
Further to this, it may be necessary to comply with certain tax rules.
As a provider of landlord-to-tenant electricity, must I ensure that my tenant customers are fully provided with electricity?
Yes. Contracts must be designed in a way that ensures that tenants have a full supply of electricity, including at times when the landlord cannot supply any (for instance because the sun is not shining). This additional electricity is taken from the public grid at the grid connection point.
The electricity price agreed in the landlord-to-tenant electricity contract consists of the landlord-to-tenant electricity price and the price of the additional electricity. The agreed electricity price must not exceed 90% of the basic tariff in force in the relevant grid area (Section 42a subsection 4 of the Energy Industry Act).
I have a solar installation which commenced operation before 25 July 2017. Am I eligible to receive the landlord-to-tenant electricity premium?
No. For electricity from solar installations which commenced operation before the entry into force of the act, there is no entitlement to the landlord-to-tenant electricity premium (Section 100 subsection 7 sentence 1 of the 2017 Renewable Energy Sources Act). The Landlord-to-Tenant Electricity Act entered into force on 25 July 2017.
As a provider of landlord-to-tenant electricity, must I pay the full EEG surcharge for the landlord-to-tenant electricity I supply?
Yes. Prior to the legislative procedure for the Landlord-to-Tenant Electricity Act, consideration was given to promoting landlord-to-tenant supply models via a reduction in the EEG surcharge. However, it was found that providing landlord-to-tenant electricity with direct funding in the shape of the landlord-to-tenant electricity premium is a more targeted and differentiated way to fund the electricity than a flat-rate reduction in the EEG surcharge. Also, it is necessary to keep the costs down for other electricity consumers, e.g. tenants who do not have solar panels on their roofs.
Yes. This electricity is entitled to the statutory feed-in tariffs.
In my building, some of the tenants receive electricity from my roof-top installation, but others don’t. What happens when the landlord-to-tenant electricity supply contract ends? Are there costs for installation work?
This depends on the metering system used. Basically, there are three different metering systems for landlord-to-tenant electricity: the double busbar model, the totaliser model using conventional metering technology, and the totaliser model using smart meters.
The double busbar model physically separates landlord-to-tenant electricity users from those using third-party electricity: a second busbar is installed alongside the usual single busbar. This model is rarely used, not least because having an electrician reconnect individual apartments when a tenant switches from landlord-to-tenant electricity to third-party electricity (and vice versa) costs a lot of money.
In practice, many landlords opt for the totaliser model with virtual meters. This model can be implemented using either conventional or smart meters. It is also possible to combine the use of conventional and smart meters. In the totaliser model, all the providers and consumers are connected to one busbar. A bidirectional meter is installed as a totaliser at the grid connection point. The amount of solar electricity generated is registered by a generation meter. The consumption of all the solar electricity generated is attributed arithmetically to the landlord-to-tenant electricity customers. Final consumers who do not receive their electricity from the solar installation (i.e. who are not landlord-to-tenant electricity customers) are supplied with electricity by an external provider.
In order to exclude the quantities consumed by those final consumers not taking part in the landlord-to-tenant electricity model, their meters are moved virtually to the grid connection point. The quantities consumed by these final consumers (measured at the respective sub-meter) are fully subtracted from the total amount of electricity purchased from the grid and measured at the totaliser. Where it is positive, the remaining difference is allocated to the consumers of landlord-to-tenant electricity as their purchase of additional electricity. If, on the other hand, the difference is negative (i.e. if the amount of electricity consumed by the final consumers not taking part in the landlord-to-tenant electricity model exceeds the amount purchased from the grid as measured by the totaliser), it is still assumed that the final consumers not taking part in the landlord-to-tenant electricity model were fully supplied by their external provider. At the same time, it is assumed that the afore-mentioned difference (which can only come from the solar installation) was fed into the grid. This quantity of electricity, which is only fed in “arithmetically”, is added to the quantity of electricity measured at the grid feed meter. This arithmetically fed in electricity is also eligible for funding under the Renewable Energy Sources Act.
In order to ascertain the quantity of landlord-to-tenant electricity, not only the amount of the solar power measured at the grid feed meter which is fed into the grid, but also the amount of arithmetically fed in electricity must be subtracted from the quantity of electricity measured at the generation meter. The remainder is the quantity of landlord-to-tenant electricity. It can never be greater than the total consumption of those consuming the landlord-to-tenant electricity.
The totaliser model makes it possible to ensure that the electricity consumers are free to choose their supplier behind the grid connection point with relatively little inconvenience. This is because no installation work is required when a customer switches from landlord-to-tenant electricity to third-party electricity (and vice versa). It is merely necessary to note the figures on the meter.
The legal framework established by the Landlord-to-Tenant Electricity Act permits the totaliser model using conventional metering technology. When the rates of the landlord-to-tenant electricity premium were calculated, the costs of providing the metering infrastructure to implement the totaliser model were included.
However, particularly when conventional metering technology is used, the totaliser model does not precisely reflect the physical distribution of the electricity generated locally in the building. This is because, as already stated, it is also possible for apartments which are not participating in the landlord-to-tenant electricity model to physically consume the locally generated electricity. This imprecision, which affects the billing, can be significantly reduced by metering and calculating every 15 minutes. Smart meters are capable of delivering this quarter-hourly metering and calculation. For this reason, in future the metering concept for landlord-to-tenant electricity should move towards the use of smart meters. The general rules governing the switch to smart meters can be found in the Metering Point Operation Act (find out more ).