Case Study: Solar for Multi-Family Investors – Small-Scale Solar for a 5-10 Unit Property in Ontario, Canada

• Location: Ontario, Canada
• Property Type: 7-unit apartment complex
• Building Size: 7,000 sq. ft.
• Annual Electricity Consumption: 70,000 kWh
• Current Utility Rate: $0.12 per kWh (average residential electricity rate)
• Current Annual Electricity Cost: $8,400 (for common areas and individual tenant units)

The building is primarily made up of residential units, with common areas (hallways, lighting, HVAC) that consume a significant portion of the electricity. 

While tenants pay for their individual electricity usage, the building’s common areas account for substantial costs, and the excess energy can be fed back to the grid through net metering.

• Proposed Solar System Size: 20 kW solar PV system
• Estimated System Cost: $50,000 – $60,000 (including installation, equipment, and labor)
• Available Incentives:
  • 30% Federal Investment Tax Credit (ITC): The system qualifies for a 30% tax credit, which can reduce the upfront cost by $15,000 to $18,000, making the initial investment more affordable.
  • Accelerated Capital Cost Allowance (CCA): The system is eligible for accelerated depreciation under the CCA. This allows the investor to deduct a portion of the system’s cost from taxable income over 5 years, resulting in immediate tax savings.
• Net Metering: The investor can participate in net metering, allowing any excess solar energy produced by the system to be sent back to the grid for credits to offset electricity costs.

A 20 kW commercial solar system in Ontario typically generates about 24,000 kWh annually depending on location, weather, and system efficiency.

• Estimated Solar Production: 24,000 kWh per year

Given the relatively low electricity usage of a smaller building, this system can offset a substantial portion of the electricity used for common areas.

• Common Area Consumption: 20,000 kWh (estimated)
• Energy Savings from Solar for Common Areas: 20,000 kWh×$0.12 per kWh=$2,400 in annual savings for common areas 
  • 20,000 kWh x $0.12 per kWh = $2,400 in annual savings for common areas

While the tenants pay for their individual electricity usage, the investor can charge tenants for the energy produced by the solar system, either by selling the power to common areas or using a shared model for individual units.

1. Selling Solar Power to Common Areas:
   The solar system will offset 100% of the electricity needs for common areas (hallways, lighting, HVAC). This reduces the building’s electricity bill for common areas, resulting in $2,400 in savings annually. If the building owner wants to pass on these savings, they could potentially raise rent slightly or lower operating costs for themselves.
2. Solar Energy Shared with Tenants:
   If the investor wants to share the solar energy with tenants, they could sell it at a competitive rate that’s lower than what tenants are currently paying to the grid. For example, if each of the 7 units uses 7,000 kWh annually, the solar system could cover a portion of this consumption.
   • Total Tenant Energy Usage: 7 units x 7,000 kWh = 49,000 kWh
   • Energy Revenue from Tenants: If the building owner sells solar energy at $0.12/kWh, and the system produces 24,000 kWh annually, the investor can charge tenants for this energy, creating an additional revenue stream. 

By selling solar power to tenants for $2,880 annually, the property owner adds to their bottom line, while also providing tenants with greener, more affordable energy.

1. Stable, Recurring Revenue:
   After the payback period, the investor can expect a steady income from the solar system’s energy production, which will continue for 20+ years. This provides an opportunity to either lower tenant utility costs, increase cash flow, or boost property profits.
2. Property Value Increase:
   A building with solar energy is more attractive to environmentally-conscious tenants and can command higher rents. In addition, solar panels can increase the property’s market value, making it a more attractive investment if the owner decides to sell the property in the future.
3. Green Building Appeal:
   Tenants are increasingly looking for sustainable living options. A solar-powered building is a strong selling point for attracting high-quality, long-term tenants. Additionally, solar systems can help the investor meet green building certifications, which could open the door to incentives or rebates in the future.
4. Utility Cost Savings:
   The building will continue to see reduced operating costs as electricity prices rise. The solar system’s energy savings will increase over time, as it offsets more of the building’s consumption.

Even for smaller multi-family properties like a 7-unit apartment, investing in solar energy can provide substantial financial returns. By taking advantage of the 30% federal tax credit and accelerated depreciation, the upfront cost of the system is reduced significantly, making it an accessible investment.

With the ability to offset common area electricity costs, sell solar power to tenants, and create steady revenue streams, solar offers strong financial benefits that can improve cash flow, reduce operating costs, and increase property value.

For multi-family property investors in Ontario, solar is not just a smart move for cutting utility costs; it’s an investment that provides long-term stability, increased rental income, and an opportunity to enhance the property’s appeal to eco-conscious tenants. 

As demand for sustainable living options increases, solar-powered buildings offer a competitive edge in attracting high-quality, long-term tenants.

Whether the investor plans to hold the property long-term or sell it after upgrades, solar power will be a valuable asset that adds both financial and environmental value to the property.

With future energy price increases and the potential for additional government incentives, the long-term benefits of solar continue to grow, ensuring continued returns well beyond the initial investment period.

If you’re thinking about solar for multi-family property’s in Ontario, Forever Free offers free commercial solar estimates – contact us to get started!