A solar sweetener to the resale equation

A study of homes in California shows rooftop solar can add thousands to resale values, yet consumer misconceptions persist.


Installing rooftop solar panels boosts a home’s resiliency and green credentials while cutting utility bills, but does it also increase a home’s resale value?

The answer, according to Exploring California PV Home Premiums, a new Lawrence Berkeley National Laboratory study, is a resounding yes – at least in California.

Data analysed from 2000-2009 highlights a clear trend of solar homes selling for a higher premium than non-solar homes statewide, meaning going green also creates economic opportunity and empowers homeowners to make some greenbacks.

Graph for A solar sweetener to the resale equation

Rooftop solar values undefined and underestimated

Fast on the heels of America’s record-setting third quarter for new residential solar installations, the LBNL study fills a major gap in adequately valuing home solar systems.

While several previous studies (including a 2011 LBNL report) recognized solar homes command higher prices, many appraisers assign no additional value to a solar PV system. And, those who do assign value have little data in terms of comparable home sales to determine the exact value to assign to the home. Considering sales of green goods have outpaced the overall economy and clean energy investments have been shown to significantly boost commercial building values, it’s a timely quandary.

LNBL decided to solve this problem by examining sales data for 1,894 solar homes and 70,425 comparable non-solar homes sold across California between 2000-2009. Analysts took three factors into consideration: regression analysis of actual sale prices over time, sensitivities of estimated solar premiums to the system age and size, and comparison of actual solar premiums paid compared to predictions made through estimated system cost and income.

$5900 resale value increase per installed kilowatt

Their results are as clear as the sun on a cloudless day. LBNL’s report estimated that each 1-kilowatt (kW) increase in rooftop solar system size adds $US5911 to a home’s resale value. “Our analysis offers clear support that a premium exists in the marketplace, thus PV systems have value and their contribution to home values must be assessed,” states the report.

However, consumer misperceptions about a rooftop solar array’s age diminishing its output and value often hang over solar homes. The report found that for each year of a system’s age, solar premiums decline 9 per cent – falling much faster than either system income (which decreases .5 per cent annually), system cost (which increases 5 per cent annually), or system output (which decreases around 1 per cent annually).

This means consumers look at solar panels the same way they do most consumer electronics – as the item gets older, it gets less desirable, even if it work just as well as a newer model. Interestingly, the LBNL findings track with data from PV Value, a spreadsheet tool developed by Sandia National Laboratories to determine the value of solar PV systems through system income.

What about other states or third-party systems?

The LBNL report is great news for homeowners in California, but it’s not surprising considering the state is the epicentre of the US clean tech market while leading America in distributed solar generation. What about the rest of the country, or the growing number of homes that install solar through leasing programs or third-party companies?

Not to worry – the report’s authors plan to cover those questions starting with the next edition of their research. Subsequent studies will examine solar home premiums from markets beyond California, the change in premium through the housing market crash and recovery, sale price differences between customer-owned and third-party owned solar arrays, and the impact system age and retail electricity rates have on solar home premiums.

Add it all up, and America’s sizzling solar industry could get even hotter as homeowners look past environmental benefits to see the pure investment opportunities rooftop PV systems generate.

Silvio Marcacci is principal at Marcacci Communications, a full-service clean energy and climate-focused public relations company based in Washington DC.

Originally published on CleanTechnica. Reproduced with permission.

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