Solar Installations And Real Estate Values
Categories: Solar Energy
One of the greatest benefits of installing solar panels on your home is the fact that when financed, you can pay less monthly than your electric bill was, all while adding value to your home. How much value? Well there is a formula for that, but I'll get to that in a moment. Appraisers call me all the time and ask me how they should value a solar system as it is on a home. It's really hard to find comparables here in Florida, and realistically, it's even harder than that to ascertain a value. Here's why:
People who buy solar panels tend to be long-term planners, and usually, before buying a system, have decided that this will be either their foreverhome, or at least their foralongtime home :)
Warning: Technical Talk Ahead: That said, let's say Jim and Judy have decided to sell their family home with solar panels on it. The system was installed 12 years ago, and is a 6kw system of 120 watt panels. That means there are 50 panels on the home. There is a little math required when ascertaining value, but the biggest number that matters is .... how much of the electric bill is offset by that system? For practical purposes in this case, let's take that 6kw DC produces 5000w / hour AC. Here in SW Florida, a South Facing solar system receives 5.35 sun hours per day on average. 4.85 for East, 4.75 for West, and 3.9 for North. Considering that it took 50 panels to get 6kw on the roof, likely you are using most all of the roof - North, South, East, and West. Let's say there were 12-13 panels on each face using all four faces, for an average of: 4.71 Sun Hours per day. That's 4.71x5000 Watts, or 23500 watt hours per day. The local rate including taxes is 11.5 cents per kilowatt hour (or thousand watt hours). That means 23.5x11.5 cents = $2.70 per day in energy, or about $81.00 per month.
The value formula is the cost of solar energy produced x 20 years.... so $81x12x20 = $19,440.00. That said, factors such as... how old is the roof? are important in determining value, since it costs about $100 per panel to take the system down and put it back up. If this home was using $280 per month in energy, and the solar only removed $81 per month of that cost, it's not as exciting as a home with no energy costs.
Today, a new system would use 450 watt panels. That means 33 panels on a south face would produce $280 per month worth of energy. The value of that system would be $280x12x20 or $67,200 in equity on the home. So you can see that the above system with 50 panels is much less valuable than the below system with 33 panels, because panel count is not the only factor when determining value. Energy production is where the value comes from. Also, with much more energy production, the risks to the roof are far less when it comes to holes and penetrations. The good news is, however, the more of the roof that is covered by panels, the more of the roof won't be exposed to the sun and its deterioration factors.
Energy produced isn't the only factor. You have to take comparables as much as they are available, and consider that putting a $60,000 solar system on a $15,000 mobile home may not reap the kind of equity you are looking for. But a waterfront home worth $500k will reap the benefits of equity easily. Also, don't forget to check and see if the home has a battery backup system. They are quite costly, and very convenient when you have a power outage. Homes that are completely off-grid with no electrical connection haven't much to worry about. They just keep running and running! The amount of energy storage determines a lot about the value of the system to the home.
I hope these calculations help your realtor or appraiser make a better assessment of your home and its value after a solar installation. It is a fantastic benefit of solar to spend money on a system, and then reap the equity, the energy value, as well as the tax credit. It's a triple gain! If you have questions, always feel free to email me at email@example.com, or message me on the Living off the Grid page. I do my best to keep up with all the commentary and questions.
CMO Solar Direct
Co-Founder: Facebook's Living off the Grid