Tenant Empowerment

Germany´s “Tenant Supply Act” – Turning Tenants into Prosumers

The German parliament adopted a legislation late June to promote landlord-to-tenant supply with solar power. It foresees a direct financial remuneration from 2,21 to 3,8 €-Cent per kWh, depending on the size of the PV-installation, for solar energy generated on the rooftop of a residential building and then passed on to final consumers “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.

The premium will only be paid to landlords who set up their solar installation after the Tenant-Supply-Act entered into force (end of July 2017). It is limited to PV installations up to 100 kW and 500 MW total per year. According to a study the potential for tenant supply is huge: 3,8 million flats. Tenants will be free in their decision to be supplied by their landlords. Therefore, lease and tenant-supply are two separate contracts and the maximum term for the supply contract is one year.

A lot of winners

The Tenant-Supply-Act might create enough incentives for landlords to start projects. In addition to the premiium, tenants are exempted 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.

Tenant-supply with solar energy has a lot of positive aspects for a lot of players:

  • Finally, also tenants actively participate in the “Energiewende” and benefit financially from the positive aspects of the energy transition, e.g. decreasing costs for PV
  • New business cases for utilities and housing sector and opportunity to increase customer loyalty
  • Increases the acceptance of the “Energiewende” among millions of tenants as well as among utilities and housing sector
  • Boosts use of renewable energy, fight climate change
  • Grid-friendly close-to-generation-consumption

Could have gone further

But the legislation could (should?) have gone further, especially regarding the following aspects.

  • Taxation privileges

Trade and corporate taxation might be the “show stopper”. So far, housing companies benefit from trade and corporate taxation privileges. Revenues from tenant-supply-models put these privileges at stake and hence might make housing companies and landlords step back from tenant supply models. That is why the German Ministry of Economomics and Energy (BMWi) proposed in a first version a threshold up to 20 % of revenue for landlords without losing taxation privileges. But this proposal has not made it into the legislation. It is to be seen whether housing companies start tenant supply projects nevertheless. If not, the legislation needs to be revised in order to  fully unleash the potential of tenant supply.

  • „De-Bureaucratization“ of vendor´s role

Secondly, the vendor´s role remains untouched, making it hard for small-scale private prosumers to implement third party supply. The current framework, that was made for the “old energy world” with big central generation and a multi-level supply and transaction system, imposes many obligations on vendors. Small prosumers, such as landlords of single-, two- or multi-familiy homes, can hardly fulfill these obligations without the help of specialized service providers. The costs for those would impact the profitability. As a consequence, only big players like housing companies, utilities or service providers will implement tenant supply projects under the current regulatory framework. The Tenant-Supply-Act should also enable private landlords of single-, two- or multi-familiy homesSmall-scale to implement projects easily.

  • Metering scheme

Thirdly, the technical implementation of tenant-supply models is very challenging, especially the metering scheme. The so far often used “Summenzählermodell” does not display the physical distribution of tenant supply in a building accurately. Smart meter-based metering schemes would be more accurate but are still too expensive. Nevertheless, tenant-supply models have to be aligned with the recently adopted “Smart Meter-Act”. Blochchain-based metering and billing schemes might be a solution, but they are not feasable under the current framework – there is no regulatory sandbox for innovative technologies.

No collective and district supply

The legislation only promotes models where tenants consume energy generated on top/in the same building or ancillary facilities. It does not include community and district supply models. Especially renewable energy associations asked for enlarging the law´s scope and including also supply outside the “generation building”. This leads to the general question: Shouldn´t community and district supply models also be supported?

Promising but too early to call it a success

The German Tenant-Supply-Act is a first and a promising tool to also enable tenants to become prosumers. But it is too early to call it a success. As the legislation missed the opportunity to fully unleash the potential of tenant-participation, it is to be seen whether all relevant players, especially the housing companies, are incentivised enough to implement projects. If not, the Act must be revised.

Holger Schneidewindt

About Holger Schneidewindt

Holger Schneidewindt is an energy lawyer and policy advisor. He has a decade of experience in energy policy with particular interest and expertise in prosumer subjects, especially related to alternative and renewable energies. As consultant for a German energy consumer NGO, he worked on the “Birth and Rise of Prosumers” along Germany’s pioneering energy transition.

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