More and more homeowners are choosing to install solar panels (as of 2018, the Solar Energy Industries Association estimates there are more than 1.6 million solar installations in the U.S., most of which are on residences). As such, both homeowners and appraisers/realtors need to better understand how solar panels affect the value of a home.
Whether the PV system is owned or leased is an important distinction. The studies we refer to below looked at owned systems. In the case of leasing, it is more relevant to consider the terms of agreement if you think you might sell your home – can the lease be passed on to the next owner, what are the penalties for breaking the lease agreement, is there a buy-out option, can you take your panels to your new home, etc. We go into the specifics of lease agreements in our article Anatomy of a solar lease.
As with many solar panel related questions, the answer to the question Do solar panels increase the value of my home? is location dependent. Homeowners in jurisdictions that are favorably located for solar energy production, have high retail electricity prices, and that encourage development through incentives and subsidies are more likely to find their investment will pay off. This is even more true in areas where green or renewable energy is very highly valued, such as neighborhoods with a higher concentration of hybrid or electric vehicles.
According to a study by the Lawrence Berkeley National Laboratory, supported by the U.S. Department of Energy SunShot Initiative, the average premium for a home in the U.S. with owned solar panels was $3.78/W, or $14,000 on an average sized PV system of 3.8 kW on a home sold in 2011. PV premiums varied across the U.S. (in the study, 43 home-sales pairs were studied in six states, where home-sales pairs are pairs of comparable PV and non-PV homes) and ranged from $2.68/W to $4.31/W. It was found that PV premiums were more similar to net PV costs, as opposed to gross PV costs, which is understandable as incentives/subsidies decrease the cost to the homeowner significantly. When the federal solar Investment Tax Credit (ITC) of 30% reduces at the end of 2019, and expires completely in 2022, then PV premiums may correlate more closely to gross PV costs. As the cost of solar PV installations decrease, it is expected that PV premiums will also decrease.
For another source, check out what a Forbes.com article had to say on this issue, where they report on a 2011 National Bureau of Economic Research study conducted in California. In that study, the authors found that solar panels add $20,194 to the value of a home (for homes in the mid-$500,000 range). Despite the fact that installing solar panels on your home comes with a hefty price tag (on average the total system cost considered in this study is $35,967), homeowners are able to recoup close to 97% of their investment, thanks to the generous incentives available, such as the federal tax credit in the United States, which actually lowers the average effective cost of solar panels to $20,892.
Another study conducted by researchers at the Lawrence Berkeley National Laboratory, looked at real estate transactions in California between 1999 and 2009. Out of the 72,000 houses analyzed, 2,000 had solar photovoltaic panels. On average, solar homes sold for $17,000 more than houses without any solar panels. In that study, the average size of the solar panel installation was 3.1 kW.
In Ontario, where the past microFIT program guaranteed a fixed price for electricity generated through solar energy, sellers who qualified are able transfer this contract to the next owner, a considerable selling advantage. Similarly, New Jersey allows homeowners with solar panel installations to participate in the Solar Renewable Energy Certificates (SREC) program, whereby homeowners receive a certificate in a dollar amount for every 1000kWh of electricity they produce
. The value of these certificates varies based on the trading prices of these certificates. A home that is already approved to participate in the SREC program would be more highly valued by homeowners looking to reduce their home energy bills and live green.
Investing in solar panels for your home is no longer just an environmental decision taken by green-living homeowners. It is an economic decision taken by homeowners looking to make a smart, financially sound decision with respect to the value of their home. If you’re not ready to make the investment in solar panels just yet, there are other environmentally friendly home improvements that can increase the value of your home and help the planet. And when you’re ready to investigate solar energy for your home, Sunmetrix Discover is here to help!