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How much would solar panels increase a home's property value?

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June 09 2009 - Scripps Ranch
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UH, GUYS?

The question is not the cost of solar panels, the question is How much wil the home value increase by installing solar panels. Does anybody know??

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September 28 2013
After installing the Solar Panels, make sure you update your insurance policy, look for the section on Coverage A, Dwelling and Personal Property. 
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July 08 2012
Profile picture for gwshaw
At today's panel costs, installation is more than half the cost of a typical residential site. And, you'd have to pay for the removal and transport of the panels and racks, seal the prior roof openings, and replace the roofing or solar equipment damaged in the process. You would likely save some money, but the difference, given the reduced or no warranty on the equipment and its age and older technology, may not be worth the trouble.

At the end of June (2012) my wife's cousin signed a contract for a solar installation with premium panels from SunPower. The marginal price for each additional panel was $250 going from a 28 to a 32 panel system--or what should amount to $8000 for just the panels on an entire system cost of about $35,000.
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July 08 2012
Profile picture for choclatcop
Thank you!
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July 08 2012
I cannot tell you exactly how much it would cost you, since i live in Romania :). But you could ask a local installer what would be the cost to uninstall the equipment and reinstall it at another location.
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July 08 2012
Profile picture for choclatcop
My husband asked me that the other day. Can we have our panels removed and have them installed on another property we purchase? If so, what would be the approximate cost for this?

Thanks
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July 08 2012
You could always take away the solar system from that house if the buyer would not agree on paying something more than the value of the house. Why give it for free when you can take it with you?
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July 08 2012
Profile picture for choclatcop
I like the idea of being able to say to the purchaser of my home that they will not pay more than $12 per month (vs. previous $500-$600 pm) before solar.
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September 30 2011
Profile picture for Tom Weiss
This is a great topic.  Thank you, everyone, for your comments as it makes for a great learning opportunity.

I live in New Jersey and work for a Solar PV company.  We are hearing this question frequently, and it will be great to have some hard numbers available as more homes with Solar are sold.

As for the Math behind Solar in NJ, the State Rebate (for Sept 1, 2010) was very recently announced.  It is now $.75 / watt up to 7.5 kW for a maximum rebate of $5,625.  The rebate is typically assigned to the installer.  Then there is the Federal 30% tax credit available.

Once the system is installed and is energized then it begins producing SRECs (Solar Renewable Energy Certificates).  For each 1,000 kWh the system generates, the system owner is given 1 SREC.  These are for sale in a SREC marketplace.  Ultimately, utility companies will purchase these SRECs and retire them to show the Board of Public Utilities that they are achieving their Renewable Portfolio Standard (RPS).

The current cost of the SRECs is available here:  http://markets.flettexchange.com/njsrec/

By applying both the electricity savings and the SREC income toward the system cost, the ROI is typically between 4.5 - 6 years.  The SREC income will continue until year 15.  And, the panels have an output warranty of 25 years.

At this point, I think, the amount of  increase in a home's value is not fully documented based on these newer incentives.  Because of NJ's high electricity costs ($.19 / kWh), larger home sizes and a desire to offset as much of the electrical usage as possible, many of our installs are 10 kW, which is where the Residential Rebate had maxed. 

A 10 kW system will offset about $1,900 - $ 2,800 of electricity costs in a year (based on shading, slope and azimuth).  Using the "each $1 saved in electricity costs increases a homes value by $20" guideline, then we could be looking at a home's value increase of $40,000+.

A home buyer who knows that his / her monthly electricity costs will average in the low double digits will likely be willing to pay more for a home with Solar.  And, the panels will also produce SREC income for the system owner.  I think the SREC program can allow for some creative selling opportunities as there will be income available to be assigned to the seller if the buyer does not want to pay for an increase in home value.  In NJ, the panel installation is supposed to be exempt of property tax increase.

Along with the SREC programs some states are using, I think we'll also be seeing more Feed In Tariffs (FIT) which may show similar or different valuations added to a home's value.
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June 28 2010
Profile picture for gwshaw
I agree with SDhomeownr that one certainly wants to conserve energy first. However, even after saving energy, many homes use enough electricity to make a solar-energy system cost effective.

SDhomeownr's payback math is incomplete. The electricity cost from the solar-energy system is fixed by the purchase price and never goes up in price, while the avoided cost of electricity not purchased from the utility does go up, at about 5-7% a year on average (for PG&E). At 5% avoided energy-cost increases, the "payback" period for a cash purchase is about 11 years since the return each year is increasing. But this is not a useful evaluation since a solar-energy system is an income-producing asset (investment) and not an expense.

SDhomeownr also seems to assume that the solar-energy system adds no value to the home, which is incorrect. At current pricing (in California), solar-energy systems add at least their cost to the value of the home (see prior links). The service life on panels is 30-50 years and the service life on microinverters is greater than 20 years. When the average person sells their home in well less than that time, they will recoup their entire $11,000 investment and have had the benefit of a 10% before tax initial risk free return that grew at 5% a year (to use the example below). But this is still lacking, because this is a RISK-FREE return. One would need to select a much riskier investment for a risk-adjusted comparison and still not get assurance of a rate of return.

SDhomeownr's financing math is also not appropriate. He chooses to finance and pay off the system over 10 years, yet the service life of the system is several decades. A more appropriate time is 30 years (if a HE loan, roll it forward at the end of 10 or 15 years into another loan). At 30 years with a 7.5% loan, using the example, the average net cash per month the first year is $52.95, a few dollars less than the initial year's energy savings of $60 a month. HELOC rates are now around 5.5%, which makes for a net cash of $44.92/month, or over a $15 cash savings per month. HELOC  rates will assuredly rise sometime, but may be less than 7.5% for a few years.

Note that these numbers are for an already "Green" house, so our energy usage is very low. Many people simply can't change their habits to be Green, and since their cost for each additional KWh is higher, their savings are greater with the same sized system.
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February 28 2010
Profile picture for Isklopot
The answer usually depends on how much it's worth to ostentatiously "go green".

For most homes comparable energy savings can be reached much more cheaply by doing what we all know needs to be done.  Call in a company with a whole house fan and find out where your home is leaking air--and seal the cracks, holes, electrical outlets, etc.  Get the same company to look at your house with an infrared viewer and insulate where it shows deficiencies.  Install a radient heat barrier over your insulation in the attic.  (Most electric companies will steer you to people who do all of this)  Replace older HVAC units with newer, energy-efficient ones.  Replace old, leaky, poorly insulated doors and windows with updated ones that perform much better.  Install CFLs.

I wouldn't even begin to consider solar panels until after you've done the above;  otherwise, you're spending money to publicly display your green credentials when you could achieve the same savings with less visible but much cheaper fixes.  (And solar panels still aren't cost-effective;  using the example below with a $726/year savings (about $60/month) and a $11,000 installation cost, it will be 15 years before you recover your cost and begin saving money, not considering interest/opportunity costs--how long do you plan on staying in your house?)

(Some math in public, courtesy of my TI BA II calculator.  Using below figures, $11K borrowed at 7.5% interest, paid back over 10 years, gives a monthly payment of about $133--versus savings of about $60/month.  Need to get the out-of-pocket cost, after all tax breaks etc down to about $5K before monthly payments equal monthly savings under above assumptions.) 


  
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February 28 2010
Profile picture for gwshaw
I have to disagree with Allen and Carlittle. A solar-power system saves you money (on energy) whether you care if it is there or not, while a pool costs you money whether you like it or not. If a pool is not desired, it is a white elephant and takes up space that could be used for something else, and costs money then to remove it. It has a high opportunity cost, and, if kept, a high maintenance cost. A solar-power system is completely different.

Solar panels on the roof don't take up land that could be used for something else, so there is no opportunity cost (other than financial, see below). They, in fact, shade the roof, reducing cooling costs.

We put in solar-power panels on our home in the San Francisco bay area in January 2010. I interviewed seven installers. All installers perform all warranty labor free for at least 10 years on everything, and one installer for the entire warranty on each product (25 years on the panels and 15 years on the inverters). Other than our spraying the panels down with water a few times in the summer, there will be no maintenance cost for a long time.

The financial advantage of solar-power depends on where you live and what you are paying for energy. I'm in the San Francisco bay area and our utility is Pacific Gas and Electric. (PG&E). The values below are for our area.

After tax ROI in the 35% combined fed/state marginal tax bracket for a 2kW system is about 10%, and is RISK-FREE since energy costs are not going down. What return do you get on your RISK-FREE investments? That ROI assumes our very-low electricity usage for this area, and a very non-ideal roof for installation (tile, few panels facing south, most facing almost east or west, and using higher efficiency panels due to limited roof area). $11K system and $726 energy savings per year (726/11000/.65) is a 10% after tax, RISK-FREE ROI. My next door neighbor has a more average electricity usage and uses 2x-3x more electricity per month so they are in much higher rate tiers and their ROI would be almost 1.8x for the same system. A more friendly roof could use an $8K system for the same gains at a much higher RISK-FREE ROI. These prices are after tax credits. In California, Arizona, and possibly other states, solar installations do not increase your property taxes.

How you pay for the system can make a difference. If you pay cash, the ROI is simply as above. If you finance the cost, then the interest rate will affect your cash flow. We refinanced to convert from a variable to a fixed rate and took cash out to pay for the solar-power system and other remodeling. Our after-tax net cash flow puts about $300 a year in our pocket now, and that will increase every year as electric rates go up.

The larger the system you put in the lower the ROI (assuming your energy rates are tiered and the more you use the higher the marginal cost). If a heavy energy user evaluates a large system it may not be cost effective at equity-line or second mortgage interest rates. As the solar system replaces energy from the utility, each kWh moves toward lower-cost tiers, so the savings are less. Contractor bids will also vary. I saw differences of 20% in my cost per annual kWh produced depending on the installer.

If the solar system is installed so as not to detract from the appearance of the home, it adds to the value of the home because the home costs less to operate. Studies show this:

http://www.ongrid.net/AppraisalJournalPVValue10.98.pdf

Further, other evidence shows that solar homes sell faster and demand a higher price:

http://www.sunrunhome.com/blog/2008/11/solar-and-home-value/

The study above shows that solar can increase the value of the home by $10 to $25 for every $1 in energy savings. For the system I listed above, the value of the home increases by at least as much as the cost of the system, maybe more. This means that the "When will it pay for itself?" question is irrelevant--it doesn't have to because it is an investment and not an expense. If you pay cash and want the cash back out, that is a simple function of the ROI.

The solar-power system adds to the value of the home every dollar spent on it. The simple decision is that if the solar-power system can make its own payment then there is no reason not to go solar.



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February 27 2010
I am a heavy user of electricity and have looked into purchasing solar panels.  Unfortunately, unless you plan on purchasing the equipment and installing it yourself, the cost of solar panels is a little more than it would be to just pay the local energy company.

I am pretty sure most people don't have the expertise to install a solar array.  I have looked into solar panels several times over the last 10 years.  Every time, for me, they result in an increased cost and an ROI of 20 years at best.  That is with the rebates. 

The cost does not include maintenance which would need to be done at about 15 years to replace some parts if nothing else goes wrong and it does NOT include a battery array which would allow you to store energy to use in the evening. That would of course all be extra.  A LOT extra.

Something else to consider.  Any location above the 30 degrees latitude will see a diminishing return on the energy production.  So if you live in Washington state, the amount of energy you can produce with solar will be less than if you live in Southern Arizona.  Especially in Winter.

If you are considering solar, you need to either REALLY want to help the environment or you need to seriously consider what the length for return on investment will be.  If something breaks at the local power company, they cover that cost.  If your solar panel breaks, you pay for it. 

For me personally, the cost of maintaining a solar array and the length of ROI makes it better to just pay the monthly installment to my local power company, without interest, rather than a large up-front cost that I would have to finance with interest.

And to Allen's point, unless there is a huge demand for them in your neighborhood, I think they are going to be similar to a pool.  It just comes as a bonus with the house and add little value to the bottom line of the purchase price.  If I was going to get a pool or solar panels, then it would cost less to sell my place and purchase a home with them than to have the installed on my current home.
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June 24 2009
Profile picture for cyrix45
I would have to disagree completely with the previous post.. It really depends on what market you live.. for example in California, Nevada, and Florida everyone is going green so there is a lot more demand, all this could attract more buyers. Of course I am not a real state expert but just a Homeowner that installed Solar panels. I did however received tax cuts from the state for going with solar and solar hot water heater. All this can be advertised as an extra savings in bills for the new homeowner. In your example having a pool or pond really don't save the new homeowner any money rather spending extra electricity on the pump and water.
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June 23 2009
How?My Name is Jennifer OrdwayI can't help you with this, but I just got my house redone by this construction company they are truly good guys and very professionals, I had them coming over to give me an estimate for stucco and new driveway, they where amazing and grate prices, I paid $13 per SqFt for the stucco and that was done on 3/12/09 I don't know about other prices, but I can tell you they are the best. [content removed by moderator for being self-promotional]
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June 19 2009
Allen has a point in that right now, it may not increase the value of your property. However, according to research, homebuyers desire solar panels - most are just unwilling to pay for them at this time. As utility bills rise, that may change. The cost of solar panels has come down over the last couple of decades. Manufacturing costs of solar panels are expected to come down making prices more affordable to more people.
So, depending on how long you stay in your home, the panels might increase your home's value. They would certainly be a selling point if yours were one of the few that had them.
If you do install solar panels, be sure to keep copies of utility bills before and after to show potential buyers when you do sell.
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June 11 2009
How much would solar panels increase a home's property value?  That would depend if the neighbors had them. If in your particular market solar panels were something desirable. Other wise I would call it a "FREE GIFT WITH PURCHASE" for the next homeowner.

A good example.... My neighbor has a beautiful pool, hot tub and backyard. He is the only person to have a pool in our neighborhood of about 600 homes. Because of that fact when he gets ready to sell that pool will not increase the value of his home. The people buying in the particular market I am in would not pay for the pool.

Anytime you add an expensive item to your home make sure when you get ready to sell the market will pay for that item. Another example... My brother lived outside of Nashville TN in a small community. He spent thousands of dollars adding a Japaniese Garden with a huge Koi pond, walkways and bridges. It looked great when he finished. But when he was transfered to another state they sold the house and the new owner took a few loads of dirt and filled up everything. My brother was crushed but leared a valuable lesson.

This is my opinion and only my opinion... when a home owner purchases solar panels they reep the reward by lower electric bills and knowing they are helping our enviorment. Hopefully in the future the cost of the solar panels will be more affordable and then we can all buy them.
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June 09 2009
 
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