Q: This question is about renting out a property that is zero carbon.
I saw that you have rental properties that are zero carbon. How did you get those to work financially? I’d like to create a zero carbon rentals, and the ways I can imagine getting it to work financially:
1. Include electricity in the rent (charging enough to pay off the solar panels, heat pumps in a reasonable period). The drawback there is it doesn’t incentivize energy conservation, unless there was a cap at e.g., #### kwHr/month on average (the first one I’d convert to such a rental is the home I’m living in, so I’ll have a pretty good understanding of energy usage).
2. Charge a premium because it’s a net zero house, but they still pay the electric bills.
3. Charge a monthly fee (e.g., “a climate-friendly house” fee, and educate them about how they recover some of those costs with reduced electric bills) such that the heat pump and solar electric system pay for themselves in e.g., 10 years.
I live in a state that doesn’t do much to incentivize zero carbon, but fortunately my city (Columbia, Missouri) has both net metering, and rebates and low-interest loans (3-5% for 5-10 years) for heat pumps, energy efficiency measures, and solar electric.
I would appreciate any perspective you can share.
Hi Terry, neither of my rental properties is zero carbon, at least not yet.
The first one is almost impossible to insulate due to having brick walls with no cavity and very nice old oak paneling on the inside. We have added triple-pane windows, some insulation in the basement, heat pumps and a 25kW array. It is still not at net zero. I am waiting for a wall injection system that drills through the mortar rather than the bricks before I can insulate it without having to either drill the bricks (which is prohibitively expensive) or take off the oak panels. It is probably about 70% of the way there. We charge market-rate rent for the place (I found I could not charge any premium for bring “green” though I do think it creates a preference at the market price) but I add the solar production to the electricity consumption from the grid and charge the tenant for this. I am making solar electricity at around 10c/kWh and I am selling it to the tenant at utility rates currently around 40c/kWh and long term perhaps 25c/kWh. I sell the tenant about 20k kWh a year which at 15c/kWh is $3,000 a year which is about a 5% increase in the rent. So I do get paid something, but probably not enough to justify all the investment. However the value of the house has gone up considerably and I think I would get my investment back if we sold it. Academic research strongly supports this conclusion.
On our other rental property we are making progress but it is still a long way off. We are just about to replace the HVAC system ( the furnace broke and the AC units are 25-years old) and are considering geothermal. At a minimum we will do ASHP. The attic needs insulating and draft sealing but I have not done it yet due to dampness in the basement. If I draft seal it now I will just get mold in the attic. Hence I need to put a sump pump in the basement first. This is coming this month. I already have installed a heat-pump hot water tank which is doing a nice job of dehumidifying the basement. This house is too shaded, and the roof lines too chopped up, for solar. Hence I have bought 12,000 kWh a year from an installer of big solar arrays in MA. In MA, the net-metering law allows you to transfer excess credits to other meters. There is now a whole industry doing this because it is highly profitable. You generate zero-carbon electricity from utility-scale solar arrays at about 5c/kWh and sell it at a 12% discount to utility rates or about 35c/kWh. That’s a fat profit!
This second house is not currently rented. I doubt I can get a premium for the “low carbon” status. I might be able to once it is finished and has zero-carbon status. I have no doubt I would get my money back if I sold it with zero carbon emissions and zero utility bills. I think I could get a rent premium once it is there because of the zero utility bills. The utility bills are about $12k a year and that would represent a 12% premium to market rent.
I hope this helps. Please let me know how you get on with zero carbon rentals!
The Easiest Way to Calculate Your Home’s Carbon Footprint:https://greenzerocarbonhome.com/2018/07/what-is-the-carbon-footprint-of-natural-gas-heating-oil-propane-and-coal/
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Database of State Incentive for Renewable Energy (DSIRE) https://www.dsireusa.org
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Department of Energy, EnergySage, “Zero Carbon Home”https://www.energysage.com/project/7230/zero-carbon-home/
Zero Energy Project, “My Zero Energy Retrofit beats my 401k”https://zeroenergyproject.org/2018/09/23/my-zero-energy-retrofit-beats-my-401k/
Cool Effect, “Mr. Green’s Zero Carbon Home” https://www.cooleffect.org/content/news/green-testimonial?utm_source=Cool_Effect_CRM&utm_medium=EMAIL&utm_campaign=20180814Engage_Testimonial&utm_content=green_CTA
Green Energy Times, “My Zero Energy Pool is a Great Investment!” http://www.greenenergytimes.org/wp-content/uploads/2019/05/GET_May-2019.pdf
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