Solar Panels – should landlords fit them to rental properties?

Hi Mick,

I will first of all declare that I love the science behind all forms of noncarbon fuel energy generation and would love to be able to justify adding solar panels to my house as I just quite frankly think it is cool.

However my main concern is the exponential progress of technology. Think of where we were in 1993 and now think of what might be possible with solar panels in 10-20 years time. It is the fear of very quickly being stuck with an energy source that is hopelessly out of date and inefficient compared to the ever increasing costs of electricity that makes me hold out and not be an early adopter.

Then you have all the practical questions that you raise yourself:

What if I need a new tile under the panels
What if I want to sell. Surely despite what you have been told you cannot sell the Freehold and keep the panels and feed-in-tariff unless they mean that they can be moved. Then what about the cost and even suitability of the new property.

I am desperate to say do it, but if I could I would do it myself.

Personally I think cheaper wind turbines are the way forward for now as they are not so much part of the structure of a house and could be easilly upgraded as the technology is purely mechanical and not chemical so is more future proof. However many people do not seem to like the visual intrusion (NIMBY).

Hi Mick,

I run a solar panel installation company called Explore Solar. This is the Green deal and the sales person is not giving you all the facts;

Your tenants will have a slightly higher energy electricity bill, the repayments of the panels will be added to their existing electricity bill as a standing order. In theory since they are saving on eletricity by having panels on the roof they will not notice any difference, but in the real word, their bill will go down but not by as much as quoted, so your tenants will face a higher bill. If during the 10 years your property is vacant, you will have to pay for the standing order to cover the cost of installation per month.

My advice is, if you are going to use the property for social housing, is not to have them fitted, your tenants will love you in the begining thinking that they will get cheaper electricity, but once the bill comes in, it will be higher due to the standing order charges to pay off the panels, they will only complain. If you want to help them then fit them yourself, your tenantt will get a saving on the electricity bill and you will collect the FITs yourself and get a 8-10% return. Its a win -win, but you will have to front the initial cost, we are now working with Sharp on a 7 year loan if you do not have all the money.

If you owned an HMO, and were responsible for the bill, then I would advise you to consider this, since it will save you money in the long run.

What will happen will be that the company will come and install the panels, (but you will still have to make a contribution to the installation cost (otherwise it will not meet the Golden Rule that the panels will have to pay for themselves over 10 years).

At Explore Solar we give inpartial advice, so you are more than welcome to get in touch via our website http://www.exploresolar.co.uk

I hope this helps. I am also a landlord myself.

Hi Neil, can you imagine going to your tenants and saying “I’ve got this great idea, how about putting a bloody great windmill in your back yard of your nice little Coronation Street terraced home and it will reduce your electricity bills?” Sorry mate, rather you than me on that one. I agree with all of your other points though.

I've asked some of them questions myself about repairing tiles etc. They're coming back to me.
You raise some very good points. But what do us Landlords do about the new minimum energy regs coming in a few years? Would we then be having to PAY for the solar panels out our own pocket then anyway, just to satisfy these regs?

Hi Mick, if I were you I would be focussing on the most cost effective methods of improving energy efficiency. I might be wrong but I doubt that’s solar panels. I’d put insulation, energy efficient boilers and windows as a far higher priority on my list.

This is an interesting issue, and one I considered at length before I installed Solar PV on my house and one of my investment properties.

My biggest concern was the sale of the property before the panels had paid for themselves (approx 6-8 years). Whilst it is correct that you can keep the feed-in tariff payments, I am not sure that a buyer would agree to such a proposition; they may also seek to charge you rent for the use of the roof space.

I think there is a good argument that the panels have a value as they will continue generating an income (feed-in tariff plus export tariff plus electricity saving). A starting point for the valuation would therefore be the present value of future feed-in tariff payments.

Maintenance-wise, there are unlikely to be any significant issues. I researched this in Germany where panels have been around a lot longer. The panels are unlikely to go wrong and tiles do not usually break beneath them but could be replaced anyway by removing one/several of the solar panels. The item that does not usually last 25 years though is the inverter.

This bring us neatly onto the obsolescence issue - technology will always move on so from that perspective the installation will always be out-of-date very quickly. The most complex item in the installation is the inverter which, as I mentioned before, will probably have to be changed within the 25 years anyway; new inverters will be more efficient.

That said, my projections (yes, I prepared a discounted cashflow for the 25 years) are based on the technology that was installed on my properties and it made financial sense for that. The projections only take into account the money I receive, not the electricity savings (hard to quantify).

So, for my own house it makes sense as I get paid the feed-in and export tariff and save electricity.

What about the investment property? Well, I still get the feed-in and export tariff and my tenants get the benefit of the electricity saving (at no charge). I am happy, my tenants are happy as they save on electricity (not sure how much of a difference that makes to them). Happy tenants make me happy!

For the avoidance of doubt, I am not associated to any solar PV company, just have considered this in some detail. I am also a long-term property investor and therefore likely to hold the properties throughout the payback period.

Interesting response and welcome to Property118. If you were looking to do this again today would you self finance the deal or use Green Deal finance? Also, may I ask, were your projections based on cash funding or borrowing the money? I can understand how it might make sense to install panels on your own home, however, I’m less convinced about tenanted properties as a proportion of the benefit (I’m not sure what percentage) will be taken by the tenants, thus making the cashflow model and returns for tenanted properties different to your own home, possibly significantly different.

Yeah, got the insulation in all of them-Warmfront grants in all my houses & most are Housing Benefit who get it free.
Got Combi boilers in 95% of them, that should be 100% by end of 2013.
Got UPVC DG in 90% of them & increasing.
I need to look at these solar panets a bit more, especially with me thinking of offloading a load of houses within the next 10 years.

I have free panels installed on one of my HMO's and have calculated if the tenants are using electric during the day my maximum saving is around £200 per year on energy costs based on average sunshine per year based on previous statistics. Maybe its my imagination but we seem to be having a lot of cloudy weather which does not generate much . Also remember an inverter is on 24 hours a day and consumes energy I think about £20/yr . If tenants are not at home during the day there maybe no energy savings ! and I may be down £20/yr. I think free panels work best with people paying the bill as they will set timers for washing machines/dryers/electric heaters to run during the day particularly when sun is expected as cloud on mine only generates a low amount of electric insufficient to run all these devices. ( depends on how many panels mine is based on average 3 bed victorian terrace)

If you have done all of that Mick surely they must have good enough EPC rating by now?