Going solar is a long-term investment. Discussions about solar value are often limited to avoiding electricity costs, and oftentimes neglect the additional market value that these “mini power plants” can add to your home.
The good news is that installing solar panels on your roof not only defrays your electricity costs, but also can increase your property value. In fact, in some markets, the income value of a solar PV system is actually higher than the cost of the system new. EnergySage and Sandia National Laboratories conducted an analysis that uses the income value approach to estimate solar market values in 15 cities across the United States. We used the PV Value® tool, an online calculator developed by Energy Sense Finance that allows real estate appraisers and other industry professionals to determine the market value of solar energy systems. The results are remarkable.
For details on the approach used for this analysis, please review our Key Assumptions and Data Analysis document.
In five of the cities that we analyzed, solar has a retained income value that is actually higher than the cost new. This means that, according to the income approach to developing market value, the value of solar PV systems in those cities is higher than what they cost. In San Francisco, the retained income value of a solar energy system is 46 percent greater than the cost of the system new. Los Angeles, Las Vegas, New York City, and Newark round out the top five, with retained income values ranging from 108 to 136 percent of cost new.
If the retained income value of a system is higher than the system cost when new, real estate appraisers will likely develop a market value for the system that more closely reflects the cost new. Prospective homebuyers don’t want to pay more for a solar PV system than they would pay to install it themselves. Regardless, in many cities, solar is still one of the smartest investments you can make in your property.
For the top 10 cities in our analysis, solar PV systems have estimated retained income values equal to 80 percent or more of their cost new. By comparison, if you attempt to boost the market value of your home with a major kitchen remodel, you’ll only be able to recoup 67.8 percent of your investment.
We also estimated the market value of solar at five, 10, and 15 years from purchase. While we can’t know what installed costs will be at that time, our analysis suggests that PV will still have value far into the future that could be capitalized into the market value of your home.
Remember, market value is only one factor that plays into the financial benefits of solar. Until you sell your home, your solar panel system is also saving you significant cash, and can even earn you money after you’ve reached payback. In addition to the financial bump that solar value provides if you sell your home, your solar energy system provides you with electricity, allowing you to reduce or even eliminate your utility electricity bills. In some areas, your solar panels can also generate income from the sale of solar renewable energy certificates (SRECs).
The bottom line: assuming that you own, rather than lease, your solar panel system, going solar is a smart financial investment even for property owners who decide to sell their property after they install their system.
In order to find the best deal for your home, be sure to solicit quotes from multiple solar installers and compare your costs and financing options. Get an instant estimate of how much you can save by going solar, or register your property to receive multiple quotes from pre-screened installers in your area.
PV Value® is a registered trademark, owned by Energy Sense Finance.
This post originally appeared on Mother Earth News.