Are you selling a home with solar? Have you ever wondered whether a PV system adds value to a home? New research by Lawrence Berkeley National Laboratory (LBNL) illustrates that price premiums were consistently paid in the US for homes with solar photovoltaics (PV). This research shows that it is important to value PV systems accurately when selling a solar home.
These study results are very relevant to real estate professionals in Western Australia. Latest figures from the Clean Energy Regulator show over 1.3m small scale solar PV installations across Australia and over 900,000 solar hot water systems installed (January 2015). In fact, Western Australia reached around 175,000 solar PV systems; meaning over 18% of WA homes are powered by free, clean, renewable energy. (Source: Clean Energy Regulator.)
It is the largest ever study quantifying the value of rooftop PV on homes that sold across eight states and nearly 15 years. The sample included homes no more expensive than $900,000. The research team and their collaborators looked at sales of almost 22,000 homes from 2002 to 2013, almost 4,000 of which had PV systems. The study found that home buyers consistently have been willing to pay more for homes with PV energy systems, averaging around $4 (USD) per watt of PV installed; this is across various states, housing and PV markets and home types. The results impart confidence that PV consistently adds value across a variety of states, housing and PV markets, and home types.
Additional findings include the existence of a so called “green cachet” for PV homes; that is, buyers might be willing to pay a certain amount for having any size of PV system on their homes and then some increment more depending on the size of the system. The market appears to depreciate PV systems in their first 10 years at a rate exceeding the rate of PV efficiency losses.
The study also found that market premiums are statistically similar to those estimated using the income and cost approaches, methods familiar to appraisers.
PV premiums remained fairly consistent even as PV gross costs decreased dramatically over the study period, suggesting that net cost, rather than gross cost, is the dominant market signal. Net cost estimates—which account for federal, state, and utility incentives—seem to be the best proxy for market premiums. Income estimates using the PV Value® algorithm are consistently lower than market premiums, possibly due in part to the sensitivity of this method to electricity-rate assumptions.