Our local newspaper here in Washington DC, The Northwest Current (June 29, 2011), reported on a home for sale under the following headline: “Wardman-style row home offers solar savings.” The article reports that the owners of the home in the Petworth part of town installed a solar energy system on their home and are now saving $50 to $80 per month on utility bills.
Is this house worth more because of its solar panels?
So if you have a home with solar panels and next door you have a home without solar panels, you would expect that there should be a premium for the home with solar panels. So you have just sunk $20,000 for your solar panel system—and you will get some of that back from incentives, but will you be able to recoup any of your out of pocket cost if you move in a year.
Think of it this way, the home with the solar panels allows the homeowners to save an average of $780 annually (using the example of the house in Petworth). If the useful life of the solar energy on the home is 25 years, and we use a discount rate of 5% per year, then the economic value of the solar panel system you have on your home is $11,000. All things being equal, and assuming that the market is rational, a purchaser of your home should pay an additional $11,000 over what the house next door is selling for without solar panels on the roof.
The argument for solar panels is even more compelling than putting in a new bathroom or a new According to this study on Realtor.org, the cost recouped on a minor kitchen remodel is 72.8% — better spend your money on an entry door replacement, where you recoup 102% of the cost of the project.
You would expect that you would recoup at least the present value of the energy savings over the next 25 years if you go sell your home. There is scant evidence out there and we at SolarTown wanted to see if this assumption was correct. Accordingly, we are now completing a study to see whether homeowners do indeed receive a premium for the “solar savings” of having a solar energy system on the home. We are about to release the results of a study on this issue. Stay tuned to the SolarTown Learning Center to see the results.
Tags: energy savings, home solar panels, Solar Energy System, solar panel system, solar panels, solar panels for home, solar premium, solar savings
Why use a 5% discount rate on the entire 25 yr time? Maybe for the one year in this example 20000 x 5% = 19k
Is not the opportunity cost of electric service going to rise over the next decade allowing for even greater savings
800x24yrs=19200 w/o utility hikes …add in tax incentives received by the seller and it seems that adding solar arrays to most homes are the only remodel / improvement that makes the seller money today. Other than the new front door. I am interested in the +++ of going green vs. personal aesthetics acceptance of the panels for the new buyers in the mkt today. I would think that it is “in vogue” to go green and put your money where ……….
You are right that installing solar panels compares favorably to other home improvements. We have now posted a summary of various studies and various approaches, and this economic approach that I suggest comes out actually on the low side. These studies suggest that the value that solar panels adds to your home is much more. Here is the link to our Learning Center.
http://www.solartown.com/learning/view/solar-panels-add-to-the-value-of-your-home
The discount rate is essentially the time value of money so that it would have to be applied for the entire 25 years to get the right approximation of the present value. And if you take into account increases in the cost of electricity, you would have to figure net of inflation. In the example, we would assume that the increases are the same as inflation, which may or may not be correct. Thank you for your comment.