A residential solar panel system can literally pay for itself, not from reduced utility bills, but from its selling price.
Home buyers bent on reducing their carbon footprint and lowering their utility bill, perceive so much earth-saving, cash value in a solar-panel equipped home, they are willing to pay a premium that equals the seller’s cost to install a solar system.
This is big news.
“We find compelling evidence that solar photovoltaic (PV) systems in California have boosted home sales prices,” says Ben Hoen, a researcher at the U.S. Department of Energy’s (DOE) Lawrence Berkeley National Laboratory (LBNL).
What’s more, not only will solar homes generate smaller utility bills and a premium when they sell, they also sell for a price closer to list than comparable conventional homes and they sell faster.
An array of recent studies indicate home owners can shed concerns about recouping the high, upfront cost of a solar system and other energy-efficient upgrades and instead take their commitment to conservation to the bank.
The studies are exciting because they cast a bright light on the struggling solar power industry and could help open the floodgates to financing based on resale value, rather than a home owner’s ability to repay a home improvement loan for tens of thousands of dollars, the most common obstacle to going solar.
Recouping the cost from energy savings alone can take a decade or more.
The LBNL recently found that California homes with a new 3,100 watt solar photovoltaic (PV) system (the average size of PV systems in the lab’s dataset) sold for a premium of about $17,000.
Such a system, which provides the majority of a home’s energy needs, costs about the same after tax incentives, rebates and other subsidies.
The Berkeley Lab study, “An Analysis of the Effects of Residential Photovoltaic Energy Systems on Home Sales Prices in California,” released in April this year, analyzed more than 72,000 California homes sold from 2000 through mid-2009, approximately 2,000 of which had a PV system at the time of sale. The study claims to be the first to “empirically explore the existence and magnitude of residential PV sales price impacts across a large number of homes and over a wide geographic area.”
“Average sales price premiums appear to be comparable with the average investment that home owners have made to install PV systems in California, and of course home owners also benefit from energy bill savings after PV system installation and prior to home sale,” added Hoen, lead author of the study.
The study also found that existing homes retro-fitted with solar systems commanded a larger sales price premium than new homes with solar systems, but surmised that could be because new home comes with a built-in higher price for the solar option.
Another study, “Understanding The Solar Home Price Premium: Electricity Generation And ‘Green’ Social Status,” released in July this year by the National Bureau of Economic Research (NBER), focused on San Diego County, CA home sales and found an even larger premium of about $20,000 for solar-equipped homes.
It also found that while buyers paid a premium for a solar-equipped house, they were getting the solar system at a discount.
“This comparison suggests that, on average, home owners fully recover their costs of installing solar panels upon sale of the property. Buyers purchasing homes with pre-installed solar panels are paying less than the cost of a new system,” the study said.
How cool is that?
You can also squeeze energy-efficiency related value out of a home if you pack it with energy efficient design, sustainable construction techniques, sustainable building materials, better air quality and water conservation, according to Portland, OR-based Earth Advantage Institute, a nonprofit green building resource.
From May 2010 to April 2011, Portland area existing homes wearing Earth Advantage New Homes, ENERGY STAR, or a LEED for Homes certifications or combinations thereof, on average, sold for 30 percent more than homes without such a designation. The premium was only 8 percent for new homes with the certifications.
Unlike the solar payback studies, the certified homes and non-certified homes were not comparables.
“This is important news for builders and home buyers alike,” said Dakota Gale, the sustainable finance program manager at the Earth Advantage Institute.
“While it must be noted that the data are supplied by real estate agents themselves through standard (multiple listing service) forms, and are based on averages, not comparables, we can still see a consistent trend that third-party certification continues to result in a higher sales price, even during the past year when home sales were down,” Gale said.
And then there’s the marketing advantage that comes with energy efficient homes.
Since 2008, Carson Matthews, a real estate agent and Certified EcoBroker with Atlanta Fine Homes Sothebys International Realty in the Atlanta, GA area, has been tracking sales of local energy-efficient certified EarthCraft homes as well as those with the LEED and NAHB Green certifications.
Matthews found in a combined 2009 – 2010 report “green” homes sold on average in 104 days, compared to 132 days for conventional comparables. Green homes also sold for 94.9 percent of their list price, compared to 91.8 percent for homes not certified as green.
“These are compelling numbers for home builders and consumers alike,” says Matthews.