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What exactly is landlord-to-tenant electricity?

Sunlight has to travel around 150 million kilometres to reach the photovoltaic systems on the rooftops of our cities. Find out how this becomes landlord-to-tenant electricity and what this really has to do with tenants.

This is what it's all about: tenants can have climate-friendly and low-cost photovoltaic electricity supplied by the photovoltaic system on the apartment building they live in or on nearby buildings.

The photovoltaic systems on our buildings are very busy on sunny days. They supply environmentally friendly electricity and therefore make a contribution to combatting climate change. When the photovoltaic system does not feed the generated electricity into the public grid, but passes it on directly to the tenants in the same building or neighbourhood, this is called 'landlord-to-tenant electricity'.

Landlord-to-tenant electricity: what part do tenants play?

If the photovoltaic system on the rooftop produces more electricity than is required by the tenants, this will be fed into the public grid. Should the system not supply enough electricity or any electricity at all due to low levels of sunshine, tenants will receive electricity from the public grid. Photovoltaic electricity and grid electricity are now bundled in a tenant electricity tariff. This ensures that the tenants are always well supplied with electricity. It is up to the tenants to decide whether they want to use the tenants' electricity tariff or choose a different electricity supplier. All they have to do is sign a supply contract and the green electricity will be supplied to them from the rooftop of their buildings to their electricity sockets.

Bonus is to make landlord-to-tenants electricity economically more attractive

By using a landlord-to-tenant electricity supply, tenants are exempt from a wide range of charges that they would otherwise have to pay if they purchased their electricity via the public grid. These include grid charges, grid surcharges or electricity tax. However, the additional meters, and the acquisition and billing, for instance, generate higher costs for the provider of the tenant electricity tariff. Also, providers still have to pay the renewable energy surcharge (EEG surcharge) for landlord-to-tenant electricity. To compensate for the higher costs, landlords receive a bonus for every kilowatt-hour of electricity they supply to their tenants. The bonus was introduced with the 2017 Renewable Energy Sources Act and was intended to make tenant electricity economically more attractive for landlords and tenants alike. Installing both a photovoltaic system and a landlord-to-tenant electricity tariff can add value to the property. The tenants can save at least 10% of their electricity costs by choosing the landlord-to-tenant electricity tariff as opposed to the basic supply tariff. It is important to know that in the landlord-tenant-electricity scheme the owner of the photovoltaic system and the electricity consumer are two different people. If a homeowner installs a photovoltaic system on his own rooftop and consumes the electricity himself, it is called self-supply.

Landlord-to-tenant electricity is a great opportunity, especially for the energy transition in cities, where buildings are located close to each other and where most people rent. Since the introduction of the tenant electricity bonus in July 2017, more than 30 megawatts of photovoltaic landlord-to-tenant electricity systems have been installed in Germany that take advantage of the funding. The amount of electricity generated would be sufficient to cover the average electricity demand of around 14,000 households in urban areas.

So far, the Federal Government's 'Landlord-to-Tenant-Electricity Report' (in German only) shows that the expansion of the landlord-to-tenant electricity systems has fallen short of expectations. The amendments to the Renewable Energy Sources Act (EEG 2021) which came into force in January 2021 are therefore intended to further increase the share of landlord-to-tenant electricity in German cities. Several amendments to the 2021 Renewable Energy Sources Act (EEG) make the acquisition and operation of PV systems more attractive and less bureaucratic for landlords.

The supply chain model: as of 2021, the landlord-to tenant-electricity bonus is available even if third parties take over the supply of electricity

Until now, only homeowners who took care of the billing and sale of the generated electricity themselves, and who were not only owners of the system but also assumed all the obligations of an electricity supplier, were entitled to receive the landlord-to-tenant electricity bonus. To avoid this, system owners would lease the entire PV system to electricity suppliers. The 2021 Renewable Energy Sources Act (EEG 2021) allows landlords, as owners of the PV system, to pass on these obligations to a third party that is experienced in the energy industry, such as an energy supply company for example. The third party becomes part of the supply chain of the landlord-to-tenant electricity (the so-called supply chain model). Landlords are then still entitled to the bonus.

But there is more than just that: the landlord-to-tenant electricity subsidy is now independent from the feed-in tariff

The landlord-to-tenant electricity bonus has been recalculated in the 2021 Renewably Energy Sources Act. The bonus no longer depends on the 'normal' feed-in tariff and has also been increased. This is supposed to ensure that the photovoltaic system operates economically over the entire remuneration period. This means that all in all there will be more and more long-term benefits for the landlord-to-tenants electricity.

Neighbourhood approach: landlords are now allowed to supply the entire neighbourhood with landlord-to-tenant electricity

A further amendment now makes the installation of a photovoltaic system more appealing for landlords. In order to receive the bonus, the photovoltaic electricity had to be supplied 'in the immediate vicinity of the building' on which it was generated - which usually means to the same building. Now the photovoltaic systems of neighbouring residential building may also supply tenants with electricity, as long as they are located in the same 'neighbourhood' as the building being supplied and as long as the electricity between the buildings is not fed through the public grid.

Aggregated calculation of installation capacity: in future, every photovoltaic system is to be counted separately

The rooftops of our cities are crowded together and it often occurs that the photovoltaic systems installed on these rooftops are very close to each other, too. Up until now, even if these PV systems were technically separate entities - i.e. with separate connections to the grid - the capacity of installations 'in immediate proximity' has been added together (aggregated calculation of installation capacity). The disadvantage: a large installation would receive a smaller bonus per generated kilowatt hour (kWh) than a small photovoltaic system. By introducing the 2021 Renewable Energy Sources Act, it is no longer relevant for the landlord-to-tenant electricity bonus whether other photovoltaic systems of the same or of other system operators are connected at neighbouring connection points. For instance, if several small photovoltaic systems are installed on your rooftop, you are entitled to a higher bonus than before.

The new bonuses introduced with the 2021 Renewable Energy Sources Act

The landlord-to-tenant electricity bonus is set at 3.79 cents per kilowatt hour (kWh) for up to ten kilowatts (kWh) of installed capacity. The bonus is 3.52 cents/kWh for up to 40 kW and 2.37 cents/kW for up to 100 KW. These bonus rates will apply in January 2021. The bonus rate is slightly reduced for each month the landlord-to-tenant electricity installation enters into operation thereafter.

The amendments to the landlord-to-tenant electricity installations included in the 2021 Renewable Energy Sources Act apply to new systems that go into operation from 1 January 2021. They are intended to make it easier for the landlords to decide in favour of a photovoltaic system on their apartment building. There is still room for more installations on German rooftops. A study (in German only) commissioned by the Federal Ministry for Economic Affairs and Energy on the topic of landlord-to-tenant electricity from 2017 concludes that up to 3.8 million apartments could be supplied with landlord-to-tenant electricity. This equates to about 18% of all rented flats.