The Economics of Solar NOI: A Full P&L Walkthrough
Everyone quotes 'solar adds NOI.' Nobody shows the actual P&L. Here it is — revenue, opex, debt service, and the net line — across three property sizes.
Start with the revenue stack
Solar revenue on a rental property comes from three lines: (1) tenant billing at a sub-utility rate, (2) any state or utility performance incentives, and (3) SREC sales in states that still have an active market. On most multifamily properties, most of the revenue is line 1.
A worked example: 24 units, Tampa FL (illustrative)
| Line | Annual $ |
|---|---|
| Gross tenant billing (24 units × ~$155/mo) | $44,640 |
| SREC / performance incentives | $1,800 |
| Gross revenue | $46,440 |
| O&M, monitoring, insurance | ($3,200) |
| Billing & payment processing (~2.9%) | ($1,346) |
| Property operating impact | $41,894 |
| Financing payment, if the project is financed (a capital-structure cost, set by the actual terms) | quoted per project |
Two different lines. The operating impact is what the property earns and spends to run the system. The financing payment sits below that line: it is a capital-structure cost, and it changes if the project is owner-funded, financed or third-party funded. Valuation conventions differ on how financing cash flow is treated, so put both lines in front of your lender or appraiser rather than capitalising the bottom one by default.
This example is illustrative: every input is an assumption, not a quote, a benchmark or a customer result, and the incentive line assumes a programme the property is actually eligible for.
Sensitivity: what actually moves the number
- Local utility rate. A higher utility rate raises the value of every kWh the building uses on site.
- Roof size / production ratio. Under-sized systems lose the fixed-cost leverage; oversized systems export at wholesale rates and dilute yield.
- Tenant enrollment %. Low enrollment makes the model fragile. Easy enrollment and autopay help; underwrite the ramp from your own leasing data.
Scaling to 96 units
The economics get better per unit at scale because monitoring, insurance, and billing overhead are largely fixed. Scaled on the same illustrative basis, a 96-unit property in the same market improves on a per-unit basis rather than scaling linearly. Actual figures depend on roof area, tariff and enrolment.
Where owners leave money on the table
Two things: signing a 25-year PPA with no rate escalator (locks you below inflation), and letting the installer control the tenant relationship. NOI keeps the escalator aligned to local utility CPI and puts you — the owner — as the billing party of record.
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