How to charge for the electricity from a solar system?

How to ensure fair, correct and efficient payment of solar electricity when owner and tenant are different parties? In this article, we explore what factors should be taken into account, why we recommend charging for the opportunity cost of the electricity and how the billing can be solved correctly and efficiently.
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Is it necessary to charge for solar electricity?

‍The short answer is yes. If the farm owner takes the entire investment cost of a solar system himself without charging for the solar power generated from the tenant, the tenant will in effect receive free electricity when the sun shines. This gives the farm owner weaker incentives to take the investment for a solar plant and will not be perceived as a good solution.

Also read: The value of green commercial buildings
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Alternative ways to calculate price

‍There are several ways to calculate price and who takes the risk on developments in the price of electricity and production from the plant.

• Fixed price of estimated production
  • Building owner sets a fixed amount tenant pays for the solar plant, much like a fixed rent for the plant. The tenant uses electricity as usual and benefits the entire reduced cost of electricity. The tenant then takes risks both on how much is produced and the evolution in electricity price. The building owner may prefer this as one can take it as part of the rent. However, experience-wise it may be perceived as less fair for the tenant to take the full price and production risk.
• Fixed price of actual production
  • The tenant pays a fixed price per kWh for all electricity supplied by the plant. The tenant thus assumes the risk on the evolution in electricity price, while the owner takes the risk on the actual electricity production. This can be to the disadvantage of the tenant as the spot price of electricity can vary widely.
• Variable price of actual production (the opportunity cost of the electricity)
  • The tenant pays the opportunity cost of what the same electricity would have cost if one had bought it from the mains. This model leaves the building owner sitting with production risk, while the tenant pays the same as they would otherwise pay on their electricity bill. Most farm owners and tenants choose this model as it is perceived as the most equitable for both parties and maximizes the likelihood of the project being realized. Therefore, this is also the model Sunday Power uses in its invoice calculation.
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Automatic invoice calculation with SundayOS

Sunday Powers software, SundayOS, automates calculation of variable cost of solar power. The invoice basis is calculated based on what the tenant would otherwise pay for the electricity by calculating the consumption of solar power in the built and exported solar power when production exceeds consumption.

The consumption of solar power in the building is calculated using the same factors as on a normal electricity bill, which is categorized under grid rent and electricity:

1. Net rental

• Consumption tax - Government fee per kWh
• Energy Link - Net Owner Fee per kWh
• Power Leads - Fee to network owner based on max power

2. Power

• Spot price - Spot price per kWh in the current range per hour against the consumption per hour. The number shown on the bill is the weighted average
• Markup from electricity company - a cost that is added to the price of the electricity consumption itself. This cost is often undercommunicated from the electricity companies and several electricity companies have received criticism for lack of transparency around the price of the mark-up.

Solar power exported is calculated from:

• Electricity price - Compensation from the electricity company, Spot price per kWh in the current range per hour against the consumption per hour. The number shown is the weighted average
• Production/ Feed-in Tariff - Net Owner Compensation per kWh

As a building owner, ensuring the correct calculation of this month by month can be complicated and time-consuming. SundayOS automates the calculation, and the farm owner can thus be assured that the tenant is paying the correct price for the solar power without having to make calculations themselves.
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Also read: Negative electricity prices - what does it mean for owners of solar plants?
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