In a tough housing market, consumers become cautious about any upgrades. They need to know they can recover all or most of the costs upon resale. While the energy savings of solar photovoltaic (PV) systems are important, it can take quite a few years before those savings cover the cost of the system. The larger question is whether PV systems improve the resale value of the home.
In one of the first comprehensive studies, the U.S. Department of Energy's (DoE) Lawrence Berkeley National Laboratory found that PV systems substantially add to home sale prices in California. The study ("An Analysis of the Effects of Residential Photovoltaic Energy Systems on Home Sales Prices in California" pdf) examined home sale prices from 2000 through mid-2009 and found that consumers recovered approximately the full cost of installation.
"We find compelling evidence that solar PV systems in California have boosted home sales prices," says the lead author Ben Hoen, a researcher at Berkeley Lab. "These average sales price premiums appear to be comparable with the average investment that homeowners have made to install PV systems in California, and of course homeowners also benefit from energy bill savings after PV system installation and prior to home sale."
Lawrence Berkeley National Lab, Press Release
California is currently the largest market for solar PV systems in the country. As such, it provides the critical mass for data analysis.
Approximately 2,100 megawatts (MW) of grid-connected solar PV have been installed in the U.S. California has been and continues to be the country’s largest market for PV, with nearly 1,000 MW of installed capacity. California is also approaching 100,000 individual PV systems installed, more than 90% of which are residential. Though an increasing number of homes with PV systems have sold, relatively little research has been performed to estimate the impacts of those PV systems on home sales prices.
Lawrence Berkeley National Lab, Press Release
The obvious caveat is that impact of PV systems in other states is unknown, but this is an important first step to give customers confidence to make the investment in solar panels.
The researchers examined a large number of variables related to the property, including all the usual variables used to determine real estate "comparable value," neighborhood characteristics, and housing inflation (deflation) rate (see pages 18-20). A large number of statistical models were used to evaluate how robust the effects were to specification, time, location, and comparable value determinations.
The bottom line was that on average, the increase in home selling price associated with PV systems covered the cost of installing the systems.
This corresponds to an average home sales price premium of approximately $17,000 for a relatively new 3,100 watt PV system (the average size of PV systems in the Berkeley Lab dataset), and compares to an average investment that homeowners have made to install PV systems in California of approximately $5/W over the 2001-2009 period.
There was a difference in the impact of PV systems on sale price between new and existing homes (see page 36). For new homes, the price differential ranged from $2.3 to $2.6 per watt installed. For existing homes, the price differential ranged from $6.4 to $7.7 per watt installed. The researchers offered a number of explanations for why this difference existed, including bulk installation discounts to new home developers, sales staff less well versed in PV technology in new home construction sales, and buyers more well versed in PV technology for existing homes.
There was some depreciation value associated with PV systems for existing homes. The older the installed equipment, the less value it returned. Savvy customers attracted to solar systems are aware of technological improvements.
The annual energy savings were estimated to be $0.29 per watt of installed PV.
Specifically, assuming that 1,425 kWh (AC) are produced per year per kW (DC) of installed PV on a home (Barbose et al., 2010; CPUC, 2010)43Figure 5 and that this production offsets marginal retail electricity rates that average $0.20/kWh (AC) (Darghouth et al., 2010), each watt (DC) of installed PV can be estimated to save $0.29 in annual energy costs.
The data could not directly evaluate the factors that influenced the attractiveness of PV systems in home buying decisions. Based on previous small studies, the researchers suggested that home buyers were attracted to lower energy costs and the "cachet value" of going green.
This study solidifies the evidence for the practical value of solar systems, which is critical at this stage of development and consumer adoption. Thanks to the effective brainwashing of conservatives to encourage antagonism toward environmental issues, going "green" as an ethical choice is not likely to appeal to that segment of the market. However, conservatives are persuaded by economic benefits to adopt other energy efficient technologies. Thus, this evidence is essential to boost the appeal of solar PV across the broadest range of consumers.