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How solar panels increase your home’s resale value

Switching to solar power can pay you back in more ways than a lower electric bill: houses with solar panels have also been proven to have a higher resale value. Even if you sell your home before you’ve had the opportunity to use solar power over a long period, the panels are still a good investment.

After 8 ½ years of research on California home values, scientists at Lawrence Berkeley National Labs concluded that houses with solar power sell for more money. The premium varied from $3.90 to $6.40 per watt of power on the home. The average premium was $5.50 per watt. For a house with about 3kW of solar power– the average amount in the study– that adds up to a sale price that’s about $17,000 more than an ordinary house.

The study came out last year, and the researchers pointed out that the average premium was more than the average amount homeowners spent to originally get their solar systems. During their study period (2001-2009) people spent $5/watt on average. With those numbers, you’re able to not only recoup your original investment, but actually make a little money. The cost of installing solar power is lower now– closer to $4/watt. If premiums stay the same, a homeowner could now get an even better return on their investment.

The premium’s highest for homeowners who install on existing homes rather than those who build it into new homes, at least in the California study. Solar panels on an existing home can increase its value more than three times more than a new house.

Why do buyers pay more for homes with solar power? While there are many benefits to going solar, and many are motivated at least in part by environmental reasons, in the end you can’t argue with the math: the new owners will be saving so much on their power bills that the premium makes sense.

Another way to estimate your house’s resale premium is to calculate how much you have reduced your annual electric bill, and then multiply that by 20. So, if you’ve reduced your annual electric bill by $1,000, you can expect that your house will be able to sell for about $20,000 more than it would have without solar panels.

Why 20? Your home solar panels are expected to last at least 25 years at 90% of their original efficiency. 20 years makes for a nice conservative estimate of future savings and value.

Last modified: December 30, 2014

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2 thoughts on “How solar panels increase your home’s resale value

  1. Ben Hoen says:

    Dave, I am the lead author of the California Lawrence Berkeley Laboratory Study and want to inform your readers that relying on a study that was based on sales from many years ago drawn from areas of CA that might be very different from a particular home is inappropriate. We were very clear that the study measured average impacts at that time for our sample. If practitioners want to determine the contributory value of solar of a particular home they would want to base it on it’s particular market characteristics at a particular point in time (such as the time of sale). For example, calculating the present value of energy savings of a particular home’s solar system over time is one of three methods practitioners can use to determine value. This is called the income method and a tool to estimate these values can be found at pvvalue.com. A second method involves estimating the replacement cost less applicable incentives at the time of sale, and those values could be obtained from local installers. A third method is to derive the local contributory value from a comparison with other sales of homes with solar locally. Using these three methods practitioners might better understand what value solar has in their area at a particular point in time. Finding a qualified appraiser to estimate these values would be prudent and they can be found through the Appraisal Institute.

    1. Ben Zientara says:

      Ben-

      Thanks for writing, and thanks for expounding on the best practices for determining the solar price premium for any given home. At this time, we have several articles that draw data from many studies related to the home solar price premium, including this infographic and this article, but it’s high time we consolidated those with the article you commented on into a single, unified piece that both covers the various data points in a holistic way and lays out how appraisers might be contracted to do the work of determining the solar price premium for any given home.

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