The reasons to not go solar are becoming a thing of the past. Instead the installation of solar panels is quickly becoming considered the smartest thing a property owner could do. It is a potential investment that will increase your property’s value in the long run. In addition to property appreciation, solar panel installation will allow you to enjoy a significant amount of electricity bill savings. Whether you own a home, run a business or manage a property, installing solar energy panels will benefit you in lots of different ways.

 

Do Solar Panels Increase Home Value?

According to a recent study by the Lawrence Berkeley National Laboratory, a photovoltaic (PV) home is preferable to a regular one for home buyers while people are usually willing to pay a premium equates to nearly $15,000 for a property with solar panels. The result enhances the provisionally accepted hypothesis that adding solar can increase home value.

 

Why should you go solar?

Professionals and real estate experts alike are all on board with solar… Now!  This hasn’t always been the case and in fact there was a period of time where the real estate sector openly warned against solar systems for homeowners who were looking to sell their properties. Claiming poor curb appeal, roof concerns and of course transfer issues with the PPA/lease rooftop systems due to the applicable finance agreements.

 

In numerous cases realtors would advise sellers to remove/uninstall perfectly working systems so that they could attract buyers more easily. This is considered the dark ages for real estate regarding solar arrays.

 

It’s only been in the last five to six years that a new understanding in regards to solar installation benefits in the form of higher property values at time of sale have taken root and blossomed.  That is why in today’s real estate market both solar homeowners and the real estate associations are in agreement. A homeowner who opts to go solar today is making one of the wisest choices they could possibly make in regards to their home’s long term energy costs and overall property value.

 

Not only does it supply clean low cost energy throughout ownership of the property but more and more reports showing a TRUE increase in property value at time of sale. To the solar sceptic this means that solar is the way to go, the maintenance costs are minimal and with a growing support from the real estate market a solar investment can mean an increase to your property’s value at time of sale.

 

This most recent discovery is responsible for giving homeowners a renewed interest in the solar installation benefit.

 

Factors That May Affect Your Property’s Value:

The findings were somewhat shocking. The study concluded that potential homeowners were more inclined to spend more for a property at time of sale if that property had a working solar array affixed.

 

The study also determined that for every $1 saved in energy cost there was a $20 associated increase to the sale price of the property. Although there are other variables in play that will determine final price, the study proved that solar was a good investment regarding overall property value. Here are the factors that will directly affect the properties final value.  

 

Location

With solar success in states like California, Nevada and Arizona out west and a slew of Eastern seaboard states like New Jersey, New York and North Carolina, more and more states are turning to residential solar installations as a viable option for combating rising energy costs.

 

That said, different markets with their regional climate conditions make developing a foothold all across the US a challenge. Nonetheless, with the technological advancements of the solar panel and applicable technology, states that never entertained solar as a viable option in the past are taking a second look and are liking what they see.

 

Some states will be hard pressed to go solar moving forward, but as homeowner shows savings with a shortening ROI, the solar option will begin to appeal to a wider range of buyers throughout North America.  

 

Size Matters

Typically, property values are directly proportional to the number and quality of solar panels installed. Potential homeowners with kids or with multiple members looking to live in the house are more likely to covet solar homes and in turn spend more on systems that can offset more of the monthly consumption. In California, for instance, a 3.1-kilowatt solar system can boost the resale value of a medium-sized home by $18,324.

 

Value of the property

Larger homes with higher initial value usually offer bigger nominal returns after solar installation. However, it usually represents a smaller percentage rate on the total home value.

 

How much does solar systems increase your home value?

According to the Berkeley Lab study, average premium a solar system brings to a home is approximately $4/W nationwide. Properties in California receive higher solar payback in property value, specifically, premiums for solar houses are $1.10/watt larger in California compared to comparable houses in other states (Figure 1).

 

Figure 1: All-homes and location-based PV home premium results compared with contributory-value estimates.

 

As Figure 1 shows, each watt of solar increase a home’s value by $4 in California while only $2.9 in other states.

 

Example: a 6 kilowatt (kW) solar photovoltaic system is designed to provide 6000 watts of power supply. Thus, the system is expected to boost a house’s value by ($4/W x 6000W =) $24,000 in California and ($2.9/W x 6000w =) $17,400 elsewhere in the US.

 

Differences between Leased and Owned Solar Systems

Although leasing a solar system may seem like a more affordable option with less initial investment, it may put the owner in a tough position when he/she decides to sell the home. The owner may have to break the current lease with the solar company, which will lead to a full bill charge for years of usage he/she agreed to at the very beginning.  However, it is obvious that nobody wants to be stuck with a bill that may go up to 200k dollars. Therefore, the most common option is to transfer the lease to the buyer to avoid any additional large costs.

 

This provides a whole different set of concerns as well. As it’s not a simple matter of the new homeowner singing on the dotted line. In fact, the potential new homeowner must also qualify for the terms of the current lease. In some PPA’s there is also a built in transfer fee. This is traditionally a fairly nominal fee. Nonetheless, its still another circumstance the needs to be factored when selling a home with a lease/PPA solar system attached.

 

It is a completely different story from the buyer’s perspective. Usually buyers will ask previous owner to pay off the lease or PPA agreement since most people are hesitant to take over the existing lease. It is understandable that many consumers may feel uncomfortable, even stressful committing to a long-time lease agreement.

 

Buyers are not stupid. Thus, you may want to think twice before you lease a solar panel system and reconsider whether you would be better off if purchase your PV system outright. In addition, when selling the house, the appraiser will not add value toward homes with leased solar system since it is not permanent to the property, with that being said, only owned solar system will generate premium.

 

Is Your Solar System Outdated?

In a recent study of more than 300,000 residential solar installations in Southern California, more than 10% were found to either be completely inoperable or working well below maximum specifications as outlined by contracted installer at time of installation.  

 

The reason for this can be linked back to simple service and maintenance of the solar panels. Yes, solar panels have been tested to withstand severe weather conditions and they require minimum maintenance. That is in comparison to other energy producing machinery.

 

That said, those test were conducted under optimum installation conditions and mother nature has a way of wreaking havoc on even the best of installations. Simple and low cost annual maintenance is all that is need to ensure that the system you paid for operates as promised throughout the duration of the warranty.

 

The reasons Solar power has been in a constant state of innovation in the past few years is because of its success in the marketplace. More and more manufacturers are looking to improve on existing technology in order to provide a better performing lower cost option. All in an attempt to earn a piece of the ever growing solar market.

 

This means that newly developed PV systems tend to be more desirable than older ones and thus, a residential solar array’s value depreciate more quickly over time along with the increasing degradation rates. However, this is no way diminishes the potential savings that can be achieved by a homeowner who went solar just a few years ago. Furthermore as outlined in the Berkeley Lab study, the precedent has been set, People are willing to pay more for a property with solar than without. Regardless of age.

 

Generally, photovoltaic (PV) modules usually come with 20-25 year warranties that guarantee the panel will have an at-least 80% production rate after 20-25 years of usage. The National Renewable Energy Laboratory (NREL) performed a meta-analysis regarding lifespan of PV panels and factors that impact degradation rate of crystalline silicon modules.  

 

NREL found that crystalline silicon solar panels, which is the most commonly used panels for residential and commercial purposes, has an average degradation rate of 0.7% per year. Specifically, the degradation rate for panels made after 2000 is less than 0.4% (Figure 2), indicating that panels made nowadays should have a no less than 92% efficiency rate after 20 years of usage.

 

Figure 2. Solar Panel Degradation Rate. Image courtesy of NREL.

If you install your solar system before 2000, it is likely that your panels will produce less than 82% of its original power estimated by the 0.8% rule. This explains why old solar systems tend to worth less and there is an apparent depreciation rate for the solar premium as the system age.

 

How to make the most out of your solar system?

Size of The System

The Berkeley lab study also found the existence of “green cachet” effect, meaning perspective homebuyers have been consistently willing to pay a certain amount of premium for an average-sized solar system and then incrementally more as the size increases. The size of the system usually does not impact buyer’s decision while people consider any PV installation to be an asset. In fact, smaller solar system is able to bring a larger $/w solar premium, indicating that more returns can be generated by installing smaller PV instead of larger ones.

 

Neighborhood Dynamics

There are many considerations that come into play when going solar. Choosing the right neighborhood is always critical due to the correlation between the neighborhood dynamics and solar premium. According to a study conducted by National Bureau of Economic Research, solar premium is expected to be larger in communities with a highly-educated population and richer.

 

They also found that if a neighborhood is more liberal and contributes to environmental friendly solutions (e.g., Electric cars, Green Party), property value increases more after solar installation since people tend to value solar panels higher. It is not surprising to find out that the most active solar markets nationwide are in liberal states such as California, New Jersey, and etc.

 

How to get ready before selling your solar home?

1 Hire a real estate agent who is familiar with solar home transactions. An experienced agent has more accurate view for prospective home buyers and able to assess the value of your house as well as the solar system.

 

2 Accentuate the ancillary improvements in conjunction with your decision to go solar. If you had to get a main panel upgrade or new roof at time of your solar installation, make sure that potential buyers are aware of the upgrades.

 

3 Make sure that any tree growth that may be covering rooftop solar panels is pruned back so that it does not interrupt production or leave cause for worry for a potential home buyer

 

4 Look into getting a solar panel/system report. Different than an appraisal in these are geared not at general information like size of system and or purchase type. Instead these reports provide a true real time output and project the overall life expectancy of the system throughout the remaining lifetime of the warranty

 

5 Service & Maintenance is key. Realtors stress the importance of curb appeal. The same can be said for solar panels. Make sure that they have been cleaned and are in good appearance at time of sale.

 

6 If you leased your solar system or through a Power Purchase Agreement, make sure that the home buyer is aware of the situation up front. If the buyer is not willing to take over the lease, be prepared to break the current agreement with the solar company and buy out the contract.

 

7 If the home buyer agrees to take ownership of the leasing contract, you may want to adjust the sale price accordingly.

 

Final Thoughts

The solar benefit now extends to selling your home. It’s that simple. Say it like this… “Going Solar has real time daily cost savings measurable along with providing true value to the property at time of sale.” This is now recognized throughout the real estate industry.

Categories: Solar Panels