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Published on September 18th, 2015 | by Glenn Meyers


The Dollars & Cents Of Pricing A PV Home

September 18th, 2015 by  

Let’s talk about the bottom line when it comes to pricing a PV home, whether it comes to appraising, buying, or selling such a home.

In spite of the appeal to lower costs in building a PV home, the proposition remains pricey. What does such a home investment mean in terms of its real market value?

A new and timely study published by Lawrence Berkeley National Laboratory addresses important issues such as these.

Titled Selling Into the Sun: Price Premium Analysis of a Multi-State Dataset of Solar Homes, this comprehensive report, sponsored by the US Department of Energy (DOE) – part of its SunShot initiative – is worth reviewing. That’s as long as you comprehend the meticulous methodology algorithm used here — referred to as a hedonic pricing model:

“The basic theory behind the hedonic pricing model starts with the concept that a house can be thought of as a bundle of characteristics. When a price is agreed upon between a buyer and seller, there is an implicit understanding that those characteristics have value.”

Selling Into the Sun: Price Premium Analysis of a Multi-State Dataset of Solar Homes

The first section of this study abstract sets the stage for this fiscal analysis:

“Capturing the value that solar PV systems may add to home sales transactions is increasingly important. Our study enhances the PV-home-valuation literature by more than doubling the number of PV home sales analyzed (22,822 homes in total, 3,951 of which are PV) and examining transactions in eight states that span the years 2002–2013. We find that home buyers are consistently willing to pay PV home premiums across various states, housing and PV markets, and home types; average premiums across the full sample equate to approximately $4/W or $15,000 for an average-sized 3.6-kW PV system.”

row of solar houses shutterstock_125677742

Buyers, sellers, appraisers, and lenders should take note of this study, if for no other reason than its basic conclusion: “We find that home buyers are consistently willing to pay PV home premiums across various states, housing and PV markets, and home types; average premiums across the full sample equate to approximately $4/W or $15,000 for an average-sized 3.6-kW PV system.

For good measure, we should add most of the real estate industry to our ‘must-read’ list, not forgetting the many municipal taxing districts that will no doubt stand to benefit on the collections end of the scale.

As I thought some time ago, a mansion or a two-bedroom ranch featuring a gas-powered HVAC plant will value considerably lower than a comparable domicile with PV extras. Plus, said homes add to the growing list of souls taking on climate change.

The study authors were Ben Hoen, Sandra Adamatis, Thomas Jackson, Joshua Graff-Zivin, Mark Thayer, Geoffrey T. Kline, and Ryan H. Wiser. Each deserves high praise for this research tome analyzing the financial side of renewable electricity.

Initial Reactions

Response to this study has been generally positive. The June issue of TecHome Contractor stated that the average price jump on a PV home came to about $15,000 — no small change at all, particularly when adding in anticipated savings in utility expenses.

Editor in Chief Steve Withrow wrote, “The new study fills important gaps in this literature, [study author] Hoen says, and illuminates various factors that might influence U.S. PV home premiums. It more than doubles the number of PV home sales previously analyzed, examines home sale transactions in eight different states and spans the years 2002 to 2013, encompassing the recent housing boom, bust and recovery.”

I expect the Berkeley Lab study will spur further research in this financial arena, especially with solar PV systems becoming an increasingly common feature in many homes, not just in the US, but worldwide.

Placing value on such energy improvements is a significant step forward from that time when investing in solar was generally regarded as little more than an expensive addition that might hopefully pay for itself in the long run by reducing the electric bill.

Basic Study Conclusions

  • The US DOE estimates that achieving its SunShot PV system price-reduction targets could achieve 108 GW of residential rooftop PV installed by 2050—equivalent to 30 million American homes with PV.
  • Appraisers, sales agents, and others tasked with property valuation have made strides toward valuing PV homes, especially in California.
  • Study more than doubles the number of PV home sales previously analyzed and counts transactions in eight different states from 2002–2013.
  • Study includes recent housing booms, busts, and recoveries.
  • Home buyers have been willing to pay more for a property with PV across a variety of states, housing and PV markets, and home types.
  • PV adds value to non-California homes.

Photo: Row of houses with solar panels via Shutterstock

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About the Author

is a writer, producer, and director. Meyers was editor and site director of Green Building Elements, a contributing writer for CleanTechnica, and is founder of Green Streets MediaTrain, a communications connection and eLearning hub. As an independent producer, he's been involved in the development, production and distribution of television and distance learning programs for both the education industry and corporate sector. He also is an avid gardener and loves sustainable innovation.

  • Roger Lambert

    What happens when you need to replace your roof? Where I live, that is every 15-35 years. I would imagine that disassembling, reassembling a PV array would have to be done by a qualified team and would have a significant cost to take into account.

    • eveee

      The industry is aware of this problem. If this was not anticipated, it can be an extra expense. PV manufacturers and roofing companies have put their heads together on this. This article describes flat roof constructions an done method that can extend the roof life indefinitely, even when PV is on the existing roof.

      Solar shingles are another alternative.

      Further, if one is considering solar, and roof replacement is in the works, a metal roof is the best alternative. There are no roof penetrations and the roof lifetime is more compatible with PV solar.

    • Jason Willhite

      I bet you’re everyone’s favorite. You gripe a lot and never provide any constructive comments. 🙂

      • Roger Lambert

        Yes – I am here to make friends because I have none of my own. That is what the internet is for, right? To make real friends? 🙂

    • SeaCorey

      The cost of removing and replacing solar systems is just a drop in the ‘reroof’ bucket, and does not significantly impact the cost-effectiveness and attractiveness of solar.

  • Steve N

    The real question is: If I buy a home with solar already on the roof, am I saving enough money on my electric bills to justify the increase in mortgage payment.
    People buy homes for location and life quality. If I save $20 a month at $4/watt I am thrilled if I love the house.

    • Aku Ankka

      Alas, your average homebuyer is basically innumerate, and typically at most grasps the concept of “monthly mortgage payment”. Thinking in terms of total cost of borrowing and other in themselves straight-forward rational methods is unfortunately beyond most buyers.

      And I’m pretty sure the best way for a PV-house owner is to outline actual savings from panels. Especially since there is no easy way to realistically calculate what seller is expecting to get out of PV system; same as it is not possible to identify most other pieces of the puzzle.
      But savings are quite tangible, and can be “proven” by comparing average electricity bills with what you are paying. Add to that possible state-subsidy (if applicable to new owners), and it usually looks just like “free” savings to the buyer. Because obviously seller’s agent is claiming that it’s same price as a house with no panels, just with a free upgrade to save money.

  • Marion Meads

    It’s good. $4/Watt. My friends net out to $1.39/Watt after tax credits and property tax income deductions. Now, they will have additional $2.61/Watt increased appraisal even if it will be paid off in 2 years.

    If I am the buyer, no way I would tack in that $4/Watt for a used PV on the price of a home!!! I would pay for it at $1/Watt because I can install for $1.39/Watt brand new!!!

    • sault

      It’s not that straightforward. People look at house location / school district first, so if you’re selling the only house with PV installed already or there are not a lot of suitable roof spaces available, you can charge a premium for a used PV system. Plus, people are lazy and appreciate not having to go through the hassle of the installation and applying for permits / rebates / etc. And once the ITC goes away at the end of 2016, your logic gets completely reversed since new systems will carry a 30% premium over what people payed to install before January 1, 2017. That’s not too far into the future.

      I mean, if you think you know more than the PhDs at Lawrence Berkeley and have a data set larger and more dependable than the 3900 PV homes they sampled, then please share your analysis with the rest of us. Otherwise, please spare us the hate for all things Elon Musk.

      • Marion Meads

        One doesn’t have a PhD to decide for oneself which one is the more practical approach to pricing. This is due to the effect of tax credits, incentives and rebates when someone is installing solar PV or buying and EV. You can’t sell them at the prices before incentives after you took those incentives! Yes, I do have a PhD degree.

        • sault

          “You can’t sell them at the prices before incentives after you took those incentives!”

          But according to real-world data compiled by this study, you can!

        • Aku Ankka

          I don’t see your point here: what you say is “I wouldn’t pay $4/watt premium”. But the study said nothing about your preferences, but rather about average US homebuyer’s preferences.

          So if you are arguing that “general population is stupid”, you may be right, but there is nothing specific to this particular pricing aspect. Homebuyers are suckers and display very irrational pricing behavior towards myriads of other things; I don’t think there is anything special here.

        • SeaCorey

          Pretending that the study ‘inflates’ values in order to fashion a stick with which to beat the study is disingenuous and not meaningful.

        • Hank 1946

          If things don’t change soon by the end of next year there will not be a tax credit! So they will not have it to hold up the sale and make the seller sell for less! Even if extended it probably will be for less? You might have to depreciate the part of useful life you used. Which would be fair. Quality of the systems might be a issue but a known quantity and knowing what it is doing is good to. As far as your Nissan Leaf goes all cars sell for less right when you drive them off the lot! Homes on the other hand appreciate even if they don’t have PV. Also a car moves around a House doesn’t. So a buyer might not be able to drive down the road they want to live on and just buy the house he or she wants without paying up for all improvements including PV. You might not want a pool but I can guaranty you that you will pay for that hole in the ground anyway if you want that home! Only one thing might make a difference LOCATION and that is it. So unless you live where no one wants to live and we don’t have another 2007 2008 you will not lose with PV systems.

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