Tenant electricity (Mieterstrom) as a direct investment: roof lease, the 100 kW threshold and the IAB from the investor's view

Tenant electricity, Mieterstrom in German, was long the business of housing companies and municipal utilities: the owner puts the system on the roof, sells the electricity to the tenants and feeds the rest into the grid. Service providers now offer a different model. The landlord only provides the roof and receives a lease payment, a private investor buys the system, and the provider takes care of meters, contracts and billing. For investors who otherwise look at solar parks or battery storage, this is a new asset type with rules of its own.

The rules come from three areas of law at once: the EEG for the surcharge, the Energy Industry Act (EnWG) for the contract with the tenants, and tax law for the question of whether the system becomes a business with an investment deduction at all. Of all things, the tax exemption that landlords advertise for small rooftop systems is the investor's biggest obstacle. One step at a time.

Who owns the system in a tenant-electricity model and who sells the electricity?

In the investor model there are four parties. The building owner leases out the roof; for them the lease is income from letting (Sec. 21 (1) no. 1 EStG), and they have nothing to do with operating the system. The investor buys the system, becomes its operator and has it registered in the Marktstammdatenregister under their own name. The service provider sets up the metering concept, concludes the electricity supply contracts with the tenants, bills them and reports the volumes to the grid operator. The tenants, finally, decide freely whether to take part; a tenant-electricity contract may not be part of the tenancy agreement, otherwise it is void (Sec. 42a (2) EnWG).

The EEG allows both forms of supply. The surcharge is due for electricity supplied „by the system operator or a third party“ to final consumers in the building, in an ancillary structure or in the same neighbourhood, without passing through a grid (Sec. 21 (3) sentence 1 EEG). So either the investor sells the electricity and the provider acts in the investor's name, or the provider buys the electricity from the investor and supplies the tenants itself, the so-called supply-chain model. Which variant is in the contract is not a formality. It decides the electricity tax, the question of a business and who bears the duties of an energy supplier.

Whoever supplies the tenants is an energy supplier with the consumer-protection duties of the EnWG. The notification to the Federal Network Agency is waived, however, as long as supply takes place exclusively within a customer installation (Sec. 5 (1) sentence 1 EnWG), which is the normal case for tenant electricity. What a customer installation still is after the rulings of the European Court of Justice and the Federal Court of Justice, and why ownership, easement and the fixture question must be settled for a residential building too, is covered in PV on someone else's roof: what investors should check on commercial rooftops; this article does not repeat it.

One point belongs here, though, because it is often forgotten: electricity tax. Electricity from systems up to two megawatts is tax-free if the person who „operates or has operated“ the system supplies it to final consumers in spatial proximity (Sec. 9 (1) no. 3 (b) StromStG; spatial proximity means 4.5 kilometres, Sec. 12b (3) StromStV). For this the supplier needs a permit from the main customs office (Sec. 9 (4) sentence 1 no. 3 StromStG). In the supply-chain model with a third party as supplier the exemption is at risk, because no further persons may be involved in the supply chain (Sec. 12b (2) StromStV). Without the exemption every kilowatt-hour supplied to tenants costs 2.05 cents of electricity tax, in our calculation 150 to 350 euros a year.

What is the revenue of a tenant-electricity system made of per kilowatt-hour?

Of three streams that are worth different amounts. The first is the electricity price the tenants pay. It is capped: for residential tenants the price for tenant electricity and the additional grid electricity together may not exceed 90 percent of the default-supply tariff in the respective grid area, calculated with standing charge and unit rate (Sec. 42a (4) EnWG). On 1 April 2026 the default-supply tariff averaged 41.23 cents per kilowatt-hour gross across Germany; 90 percent of that is 37.11 cents gross or 31.18 cents net. The cap applies per grid area; the national average is only a guide.

The second stream is the tenant-electricity surcharge. The grid operator pays it on every kilowatt-hour supplied to tenants without using the grid (Sec. 19 (1) no. 3 EEG). For systems commissioned between 1 August and 31 December 2026 it is 2.51 cents up to 10 kilowatts, 2.33 cents up to 40 kilowatts and 1.57 cents up to one megawatt, pro rata by the capacity in each class (Sec. 48a, Sec. 23c EEG). A 45 kilowatt-peak system thus gets 2.29 cents. The surcharge falls by one percent every six months (Sec. 49 EEG); the Federal Network Agency has not yet published values for commissioning from January 2027, because the EEG 2023 only runs to the end of the year.

The third stream is the feed-in of the remainder. For it the operator must choose a sales route at the same time (Sec. 21b (1) sentence 3 EEG), for a system of this size the feed-in tariff for partial feed-in: 7.70 cents up to 10 kilowatts, 6.66 cents up to 40 kilowatts, 5.44 cents above, so 6.76 cents for 45 kilowatt-peak. For comparison: anyone who supplies nothing to tenants and feeds in everything receives 12.22 cents up to 10 kilowatts and 10.24 cents above in full feed-in, 10.68 cents for 45 kilowatt-peak. This gap is the reason tenant electricity only pays off with enough customers.

Why may tenant electricity be worth 31 cents net at all when electricity costs four to seven cents on the exchange? Because it skips everything that sits between power plant and socket. The following table shows which components of the household electricity price do not arise with tenant electricity.

Together that is around 13.7 cents net, 15.8 cents including electricity tax, that neither tenant nor investor pays to third parties. By law the tenant gets at least ten percent off the default-supply tariff from this; the rest is the margin from which the investor pays for the system and the provider for its work. The margin is smaller in 2026 than in 2025: grid fees fell from 10.72 to 9.17 cents thanks to the federal subsidy to the transmission grids, and the default-supply tariff from 44.93 to 41.23 cents. For 2027 the transmission system operators have again set the three levies higher, at 3.62 cents in total.

What does a 45 kWp system earn on a building with 30 flats?

Less tenant electricity than the roof area suggests. We modelled a 45 kilowatt-peak system on a building with 30 flats in Hanover, south-facing at 25 degrees, PVGIS weather year 2023, 962 kilowatt-hours per kilowatt-peak. Each flat uses 1,900 kilowatt-hours a year following a simplified load profile with morning and evening peaks. Because the system delivers 77 percent of its electricity in the summer half-year and half of it between 11 a.m. and 3 p.m., when little is used in rented flats, only part of it stays in the building.

Three things stand out. First: even if almost all tenants take part, only 39 percent of the electricity ends up in the building; the other 61 percent goes into the grid at 6.76 cents. Second: revenue per kilowatt-peak rises with participation from 108 to 166 euros, but at low participation it barely exceeds full feed-in at 103 euros. Third: the provider's fee eats the lead. At 10 euros per month and participating flat, the tenant-electricity system supports an investment of 870 to 945 euros per kilowatt-peak at five percent interest, whereas full feed-in supports 1,082 euros because it needs no fee and no tenant contracts. Only at a fee of 5 euros does tenant electricity overtake full feed-in, from 45 percent participation, and then supports up to 1,344 euros per kilowatt-peak.

An east-west system with a shallow tilt changes the picture only slightly: it delivers 834 instead of 962 kilowatt-hours per kilowatt-peak, but 20 to 45 percent of that goes to the tenants because its output in the morning and evening fits consumption better. Per kilowatt-peak it supports 784 to 857 euros. Anyone buying a tenant-electricity system at 1,400 euros per kilowatt-peak reaches five percent pre-tax in none of these scenarios. The purchase price per kilowatt-peak and the provider's fee are therefore the two figures an investor should check first, before any discussion of participation rates.

Why does the tax exemption for small rooftop systems take the IAB away from the investor?

Because it is not an option but mandatory. Income from photovoltaic systems on, at or in buildings is tax-exempt if the system has at most 30 kilowatts per residential or commercial unit and all of a taxpayer's eligible systems together have at most 100 kilowatts (Sec. 3 no. 72 EStG, for systems acquired after 31 December 2024; for older systems 15 kilowatts per unit apply). The exemption expressly covers payments for electricity supplied to tenants, and it does not require the operator to own the building (Federal Ministry of Finance circular of 17 July 2023, paras. 8 and 9). A 45 kilowatt-peak system on a building with 30 flats is far below 30 kilowatts per unit and is therefore eligible. Anyone operating only that system is tax-exempt.

Tax-exempt sounds good and is the opposite for the investor. If no profit has to be determined, the investment deduction is ruled out (para. 19 of the circular, Sec. 3 no. 72 sentence 2 in conjunction with Sec. 7g (1) sentence 2 no. 1 EStG). Special depreciation and declining-balance depreciation are likewise unavailable without profit determination; all business expenses, from roof lease to insurance, are non-deductible under Sec. 3c (1) EStG (para. 21). The exemption saves the business-income schedule in the tax return and in exchange removes every lever that makes a direct investment attractive to high earners. The basics are in Deducting photovoltaics from tax: when depreciation and the §7g deduction still work.

The way out lies in the second limit. The 100 kilowatts are a hard threshold, not an allowance: if a taxpayer operates eligible systems with more than 100 kilowatts in total, the exemption „is not applicable at all“ (para. 17; the explanatory memorandum to the Annual Tax Act 2024 says the same, Bundestag printed paper 20/12780). Then all systems are taxable, the investor has a business, and investment deduction, special depreciation and declining-balance depreciation are available. For the tenant-electricity model this means: a single roof does not work for tax purposes. Three roofs of 45 kilowatt-peak each, 135 kilowatts in total, do.

With three roofs and an investment of 189,000 euros, the investment deduction of 94,500 euros brings 41,873 euros of relief in the year before acquisition; in the year of acquisition, special and declining-balance depreciation on the reduced acquisition costs add a further 23,030 euros. Together that is 34 percent of the investment within two years. With two roofs the same line shows zero. How the IAB works across several systems within one business, and when two systems are two businesses, is covered in A second solar park: one business or two? What it means for the IAB, trade tax and VAT.

The threshold has four traps. First, only eligible systems count: a system that already breaches its own building limit of 30 kilowatts per unit is taxable on its own but is not counted towards the 100 kilowatts (para. 15). It therefore does not help to tip the others out of the exemption. Second, the investment deduction is claimed before acquisition; at that point the plan must already exceed 100 kilowatts and be recognisable as the opening of a business, for instance through roof leases and quotations (Federal Ministry of Finance circular of 15 June 2022, paras. 2 and 3). Anyone who buys one roof first and two more later has no IAB for the first. Third, the exemption tips in both directions: if one of three roofs is sold and the portfolio falls below 100 kilowatts, the remaining systems are exempt from that point on (para. 18), with all consequences for deductions; on top comes the retention period of Sec. 7g (4) EStG for the system sold. Fourth, what happens to an IAB whose system later becomes tax-exempt has not been conclusively settled. In case III B 24/24 the Federal Fiscal Court expressed serious doubts as to whether an IAB claimed in 2021 has to be reversed because of the new exemption; a decision on the merits is pending.

Operator or lessor: when is the tenant-electricity system a business at all?

Only if the investor sells the electricity. A business is an independent, sustained activity with the intention of making a profit and participation in general economic life (Sec. 15 (2) EStG). Anyone who, as operator, supplies electricity to tenants and feeds in the rest meets that test even if a service provider does the work; the electricity is used 100 percent for business purposes, and the provider is an agent like the direct marketer for a solar park.

Some offers are built differently: the investor buys the system and leases it to the provider, which runs it as operator and pays a fixed rent. That sounds more convenient and is risky for tax. Under case law, letting individual movable assets is regularly private asset management with other income under Sec. 22 no. 3 EStG and not a business, as long as the transfer of use is in the foreground (H 15.7 (3) EStH). Then there is no profit determination under Sec. 4 or Sec. 5 EStG and hence no investment deduction (Sec. 7g (1) sentence 2 no. 1 EStG); losses from such income may not be offset against other income (Sec. 22 no. 3 sentence 3 EStG). The fact that Sec. 7g also covers leased assets only helps if the letting itself takes place within a business and the rent is business income (Federal Ministry of Finance circular of 15 June 2022, para. 36). The zero VAT rate, too, applies only to the supply to the operator; letting a photovoltaic system is a service at the standard rate (section 12.18 (1) UStAE).

We have found no decision specifically on leasing a photovoltaic system to a tenant-electricity provider. That is not a free pass but a reason for caution: anyone who wants the IAB should be named in the contract as system operator and electricity seller, be registered in the Marktstammdatenregister and collect the revenue from electricity sales and feed-in themselves. What the intention to make a profit means with small revenues is explained in Liebhaberei and profit intention: when the tax office cancels the tax lever; the other requirements are in Investitionsabzugsbetrag: all §7g EStG requirements, and who can use it.

Why does the building owner give the roof to an outside investor?

Mostly for trade-tax reasons; for the investor that is good news. Housing companies that only manage their own real estate use the extended trade-tax deduction. Alongside it they may supply electricity from renewable sources, but only as long as that revenue does not exceed 20 percent of rental revenue, and to final consumers only if these are their own tenants (Sec. 9 no. 1 sentence 3 (b) GewStG, since the 2023 assessment period; previously 10 percent). Separate profit determination is also required for the electricity sales (sentence 4). Anyone who leases out the roof has none of this: the lease is use of their own real estate, not an electricity supply.

A lessor with this motive wants the contract to run for twenty years and to have nothing to do with operations. That is the kind of partner an investor needs. Owners' associations (WEG) are more complicated: the association can conclude contracts (Sec. 9a (1) WEG), but a photovoltaic system on the common roof is a structural alteration that has to be resolved (Sec. 20 (1) WEG); only plug-in solar devices are privileged, not rooftop systems (Sec. 20 (2) WEG). The roof lease here needs a resolution, and the investor should have seen it. How trade tax works on the investor's own side, with the 24,500 euro allowance and the credit against income tax, is in Trade tax on PV and storage direct investments: how much of it actually sticks.

Mieterstrom surcharge or shared building supply: which suits the investor?

Since May 2024 there has been a second model alongside tenant electricity, the shared building supply (gemeinschaftliche Gebäudeversorgung) under Sec. 42b EnWG. The operator of a building electricity system allocates the solar electricity to the participating households every quarter-hour according to an agreed key; each household keeps its own supplier for the rest. The operator does not have to ensure full supply (Sec. 42b (3) EnWG) and is relieved of most supplier duties. In return there is no tenant-electricity surcharge (Sec. 42b (1) sentence 2 EnWG), and metering must be quarter-hourly per participant (Sec. 42b (1) no. 3 EnWG). The fee for the building electricity is agreed in cents per kilowatt-hour (Sec. 42b (2) no. 2); the law does not apply a price cap like the one for tenant electricity to it.

In our calculation with 25 cents net per kilowatt-hour of building electricity, shared building supply supports 609 to 726 euros per kilowatt-peak, clearly less than tenant electricity, because surcharge and price level are missing. Its advantage lies in the effort: no full-supply contract, no purchase of residual electricity, no supplier duties. For an investor who leaves operations to a provider anyway, this advantage counts for less than for a landlord who does everything themselves. The models can be switched, but only at the start of a month and with consequences for the tenant contracts (Sec. 21b (1) sentence 2 EEG).

What does the EEG 2027 change for tenant electricity?

Little on the surcharge, a lot on the feed-in of the remainder. The government draft (Bundestag printed paper 21/7867 of 7 September 2026) leaves the entitlement to the tenant-electricity surcharge unchanged and only caps it for systems above one megawatt. The feed-in tariff for small systems, by contrast, is to be replaced by a „grid operator acceptance“: a time-limited transitional payment of the applicable value minus one cent is to be available only for systems below 50 kilowatts commissioned before 1 January 2028, after that only for smaller systems; beyond that the grid operator takes the electricity free of charge. For a tenant-electricity system commissioned in 2027, the remainder fed in would thus earn nothing after a few years.

What that means is shown by the lower bound of our calculation: without any payment for the residual electricity, the 45 kilowatt-peak system at 60 percent participation supports only 455 euros per kilowatt-peak instead of 940 euros. The tenant-electricity share would turn from a side issue into the main lever, and a battery shifting midday electricity into the evening would become more important, even though the surcharge is not paid for electricity going into the battery (Sec. 21 (3) sentence 4 EEG). Systems commissioned before 1 January 2027 remain under the old law according to the draft (Sec. 100 (1) EEG draft). The draft does not touch the shared building supply.

Which questions should investors put to a tenant-electricity provider?

• Who is the system operator in the Marktstammdatenregister and who sells the electricity to the tenants: the investor with the provider as agent, or the provider in its own name? What does the tax adviser say on business versus asset management?
• How many kilowatts does the planned portfolio comprise in total and when is the 100 kilowatt threshold exceeded? Is there a plan if one roof falls through?
• What participation rate has the provider actually achieved in comparable existing buildings? How far is the offered tenant-electricity price below the cap and below the special-contract tariffs in the grid area?
• How high is the provider's fee per flat or per kilowatt-hour, what does it include (metering, billing, purchase of residual electricity, reports to the grid operator) and how does it rise over the term?
• Is the main customs office permit for the electricity-tax exemption in place or applied for? Who bears the electricity tax if it is refused?
• What does the system cost per kilowatt-peak and how does the price compare with a full feed-in system of the same size? What margin sits with the provider?
• How long does the roof lease run, is the easement registered in the land register and what applies if the building is sold or the roof renovated?
• What happens to tenant contracts, billing and surcharge if the provider becomes insolvent? Is there a replacement arrangement and does the investor hold the data?
• How is the system switched to full feed-in if tenant electricity does not work? Who bears the conversion costs for the metering concept?
• Does the prospectus use the EEG 2023 feed-in tariff for the residual electricity? What happens to the calculation under the EEG 2027 draft?

What happens to the system if the operator or provider becomes insolvent is described in Provider or operator insolvency: what happens to your direct investment; general checkpoints for any provider are in How to tell a trustworthy provider of energy direct investments.

How we check tenant-electricity projects

Tenant electricity is a new channel for us. We are currently talking to providers looking for investors for systems on apartment buildings; no tenant-electricity project is in our data room yet. Before we present one, three questions must be answered: the investor must be operator and electricity seller, not lessor; the portfolio must be planned above 100 kilowatts from the outset, which usually means three to six roofs; and the provider's fee must fit the purchase price, measured against full feed-in as the benchmark. We check the participation rate with our own hourly model against the assumption in the prospectus.

We do not make any promises on returns. We show which figure rests on which assumption; the tax structure belongs with the tax adviser before the first signature. What a direct investment in a solar system involves overall is set out in Investing in solar parks: revenues, costs and tax leverage at a glance. That is exactly what we check with you in a free initial consultation, ideally on the basis of a specific offer.