To Solar or Not to Solar, That is the Question: Residential Solar Systems Increase Home Sales Prices in California According to New Study

Solar PanelsSo, maybe you’re thinking of having a photovoltaic (that’s solar for all you non-science types out there) energy system installed on the roof of your house. You consider yourself a pretty “green” person and you would like to take it to the next level. You start to look into how much this self-pat on the back will cost and you quickly discover that there are significant up front capital requirements. Read: it’s pretty expensive! Not only that, but your calculations lead you to the realization that the savings on electricity will take many years to catch up to this initial investment. “But, I probably won’t even own this house by that time!!” you say to yourself…

Never fear! The Department of Energy’s Berkeley National Laboratory new study finding “strong evidence that homes with [solar] systems in California have sold for a premium over comparable homes without [solar] systems.” The study, with a dataset spanning 1999-2009, found that the average home’s sales price premium was $5.5/watt (DC), which is comparable to the approximately $5/watt (DC) that the average homeowner has invested to install their system (between 2001 and 2009). Since the average size system in the study was 3,100 watts, this translates to a home sale price premium of approximately $17,000 when the system is relatively new. And, of course, there is the benefit from those reduced energy bills after installation and prior to selling the home.

Interestingly, installing solar on your existing home will fetch you more than twice the premium than from the sale of a new house that had solar panels installed when it was built (an average of more than $6/watt for existing versus an average of $2.3 to $2.6/watt for new homes). The study offers some potential reasons for this pretty significant discrepancy, including “differences in the underlying net installation costs” and new home builders offering the systems as a standard (rather than optional) product and are perhaps more “willing to accept a lower premium in return for faster sales velocity and decreased carrying costs.”

Okay, so just when you have convinced yourself that this may be a great way to feel good about your carbon footprint after all – I have another wrench to throw into the green decision-making process. There is another option: leasing, rather than purchasing/owning your solar energy system. Companies like Oakland-based Sungevity are offering a lease structure that allows you to put no money down. They will guarantee the output of your system (or pay you the difference) which means that your relatively low monthly lease payment combined with your lower electricity bill will almost certainly mean a lower net cost from day one. Another plus is that they install, monitor, maintain and insure the system at no additional cost.

“How is this true? How do they make their money??” you ask… Well, my friends (I think we’re friends by now, right?), therein lies the segway to the obligatory legal(ish)-related portion of this post. Two words: tax incentives. The federal government, when it passed the American Recovery and Reinvestment Act in 2009, extended the tax credit for these types of renewable energy systems. Under this law, about 30% of the cost is covered by the good old US of A. Most states also have some sort of tax credit or rebate program. At the state level, so long as your electricity is purchased through one of the three investor-owned utilities (Southern California Edison, Pacific Gas & Electric or San Diego Gas & Electric), the California Solar Initiative provides rebates that vary according to system size, customer class, performance and installation factors. Typically, this incentive amounts to another 10-15% of the cost of the system. Here’s the kicker: these can only be claimed by owners of the systems. So, your lease payment together with the tax incentives allow (i) the company to make money, and (ii) the homeowner to have their system installed without the big upfront cost.

Whether you own or lease, there is no doubt that the residential solar market is heating up (pun intended). In 2010, residential installations accounted for 30% of the national solar photovoltaic market. There has been an especially significant burst (get it? sun. burst. too far??) in California, with residential installations increasing by 33.8% in 2010 alone. Perhaps the release of this study will allow residential solar to shine even brighter (that was the last one, I promise) and, as study authors stated, “influence the decisions of homeowners considering installing [solar] on their home or selling their home with [solar] already installed, of home buyers considering purchasing a home with [solar] already installed, and of new home builders considering installing [solar] on their production homes.”

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2 responses to “To Solar or Not to Solar, That is the Question: Residential Solar Systems Increase Home Sales Prices in California According to New Study”

  1. Rick Portney says:

    You actually make it seem so easy with your presentation but I find this matter to be actually something which I think I would never understand. It seems too complicated and extremely broad for me. I’m looking forward for your next post, I will try to get the hang of it!

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