Solar panels add premium to home value, study finds

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Residential solar installations could make U.S. homes more attractive, and their sale more lucrative.

According to a new report by the U.S. Department of Energy’s Lawrence Berkley Laboratory (Berkeley Lab), home buyers have been consistently willing to pay more for homes with host-owned solar systems, averaging about $4 per watt of PV installed, across various states, housing and PV markets and home types.

The report, Selling into the Sun: Price Premium Analysis of a Multi-State Dataset of PV Homes, found that premiums for a typical residential PV system averaged around $15,000.

Berkeley Lab led a multi-institutional research team of scientists in partnership with Sandia National Laboratories, universities and appraisers in conducting what it describes as the largest-ever study quantifying the value of rooftop PV on homes that sold across eight states over a 15-year period.

The team analyzed nearly 22,000 sales of homes, almost 4,000 of which contain had installed PV systems, in eight states from 1999 to 2013 for what Berkeley Lab said was “the most authoritative estimates to date of price premiums for U.S. homes with PV systems.”

“Previous studies on PV home premiums have been limited in size and scope,” said Ben Hoen, the report’s lead author. “We more than doubled the number of PV home sales analyzed, examined a number of states outside of California, and captured the market during the recent housing boom, bust, and recovery.”

More than half a million U.S. homes had PV as of 2014, and the number is growing rapidly, according to Berkeley Lab. “The growth in home PV systems means that the real estate industry will need reliable methods to value these homes appropriately. Further, having greater certainty in those methods will likely facilitate additional growth in the residential PV market,” it added.

Hoen, a researcher in Berkley Lab’s Environmental Energy Technologies Division, collaborated with researchers from Adomatis Appraisal Services, Real Property Analytics/Texas A&M University, University of California at San Diego, San Diego State University and Sandia National Laboratories.

The study also found only a small and “non-statistically significant” difference between PV premiums for new and existing homes; the existence of a PV “green cache” (home buyers paying a certain amount for a PV system of any size and incrementally more as system size increases); and an apparent sharp depreciation rate for the PV premium in home sales transactions as those PV systems age. The report also notes that market premiums are statistically similar to those estimated using the income and cost approaches, methods familiar to appraisers.

“As PV systems become more and more common on U.S. homes, it will be increasingly important to value them accurately, using a variety of methods,” said co-author Sandra Adomatis, an appraiser who helped develop the Appraisal Institute’s Green Addendum. “Our findings should provide greater confidence that PV adds a quantifiable premium to a wide variety of homes in California and beyond,” she added.

The U.S. Department of Energy SunShot Initiative funded the research project.