I’m late to the discussion, but I wanted to add some points regarding your central questions.
First, the SolarEnvelope guarantees solar exposure for a specified amount of time, at the plane at which it is defined, not just the ground plane. So technically you can apply it at a higher level to guarantee solar exposure for the facades of surrounding buildings (for passive solar gain) although this obstructs solar access at ground level.
You’re right that by limiting the south side, you’re limiting the passive solar energy potential for the building mass within the SolarEnvelope. But I think this gets at a broader point about the use of this tool in the context of building energy performance: it’s only one strategy amongst many, and many of these strategies will contradict each other.
Here are a couple examples of relevant conflicts, off the top of my head, to your problem: (1) in order to maximise passive solar gain, it would be ideal to concentrate built massing on the north side side of the lot (increasing solar exposure on the south face) - as you suggest - but that would then obstruct solar exposure to the south face of the building immediately north of your site. (2) Increasing the surface area to passive solar gain and daylighting could reduce building energy, but it can also increase building energy due to surface heat loss, or increased air conditioning loads. If air conditioning loads are high, it would be better to do the opposite of the solar envelope, use the neighbouring massing to obstruct heat gain.
So the interaction between overshadowing, passive or active energy gain, built massing, glazing ratios and building energy is complicated. A couple of things you need to address: what is the dominant load in your buildings - is it heating (like residential) or lighting (like office)? You may require different energy strategies for each. If the building is multi-use, you have an opportunity to combine different strategies. I believe commercial ground programs for example usually don’t require daylighting or passive solar gain, as their primary energy load is air conditioning. As I mentioned above, you can therefore raise the SolarEnvelope, ignoring the ground plane, and instead focusing solar exposure to neighbouring facades.
Keep in mind that at a certain point (as I believe the paper Chris linked mentions) SolarEnvelopes constrain density to a point where it can be detrimental to broader urban goals. So if you want higher densities I wouldn’t use the SolarEnvelope so ‘strictly’.