Two recent studies have added ammunition to the argument for supporters of solar power systems, especially regarding residential installations. There are the obvious benefits that everyone understands -- non-polluting, renewable energy resource, and lower electricity bills. In addition, free energy, once the system pays for itself. Many advocates knew intuitively that PV systems added to a home’s value. These reports officially confirm solar panel installations on residential structures have a positive affect on home values and sale prices for the data set examined.
In April, the Lawrence Berkeley National Laboratory (LBNL), a division of the U.S. Department of Energy, released a research, which shows homes outfitted with photovoltaic power systems sold at a price premium versus homes without PV systems. The analysis focused on homes in California. Berkeley Lab researchers articulate the premium in terms of dollars per watt of the installed photovoltaic system, which ranges from $3.90 to $6.40 per watt.
Based on a new 3,100 watt (DC) photovoltaic system, which comprises the average system size in the LBNL study, the sales price premium equates to about $17,000 per home. In comparison, the average investment for the installation of residential photovoltaic systems from 2001-2009 worked out to $5 per watt (DC), according to the researchers.
Berkeley Laboratory scientist Ryan Wiser, a co-author of the study, states the information gleamed from the research may have some bearing on the decision-making processes for players in the housing market. This includes homeowners who contemplate installing a solar power system, homebuyers deciding whether to buy a home with a PV system, and homebuilders who may consider offering photovoltaic systems as a standard selling point for new homes.
Details of the LBNL Study
California has more installed capacity of grid-connected photovoltaic systems - residential and commercial, than any other states. At the end of 2010, California boosts about 1,000 megawatts (MW) of the 2,100 megawatts installed in the United States. As reported by the Berkeley Laboratory, residential installations make up 90 percent of the 100,000 PV systems in the state. The number of homes with solar power systems has followed an upward trajectory for the last several years; however, little analysis has taken place to quantify the data and the influence of PV systems on sales prices.
The study examines data for over 72,300 homes sold from 2000 through the middle of 2009. About 2.8 percent, or 2000 homes, have photovoltaic systems. The research represents the first look at just how much value -- expressed in dollars-- solar power systems have on the sales price of homes over a large region. The research took into account other factors that influence home sale prices, including real estate market volatility, neighborhood influences, the home's age, size and the tract of land on which it sits.
Another co-author of the study, San Diego State University Economics Department Chair Mark Thayer, sums up the report this way: “This is the most comprehensive and data-rich analysis to date of the potential influence of PV systems on home sales prices.”
Price Premiums
Researchers found the premiums were constant across a large pool of “PV specifications and robustness tests.” Another finding revealed that older PV systems resulted in a lower premium. Furthermore, owners of existing homes who had solar power systems installed received an average three times the premium ( $6 per watt) compared to new homes ($2.3 to 2.6 per watt), with the same size system.
Pete Cappers, another co-author and Berkeley Lab researcher attributes the discrepancy to the value home builders gain by making PV systems a standard feature to make homes more attractive to potential home buyers. Builders may have been reluctant to increase home prices, especially in the current market environment. The authors stated that this aspect of the evaluation needed further study.
The researchers state the average price premium for PV-equipped homes sold in the City of San Diego worked out to about $22,554. Add state and federal incentives to this amount to arrive at the average residential installation costs, which average around $30,000. According to the authors of the report, "This comparison suggests that, on average, homeowners fully recover their costs of installing solar panels upon sale of the property."
National Bureau of Economic Research Study
An analysis by the National Bureau of Economic Research (NBER), considered the nation's leading nonprofit economic research organization, add credence to the Berkeley Lab study. NBER's research went even further by quantifying the “sizable effect,” as verified by the Berkeley Lab study, of PV systems on home values. NBER examined data from homes in the Sacramento and San Diego, California, geographical areas.
The report found that solar power systems added from 3 to 4 percent to the market value of homes. The data set consist of homes that generate electricity only from grid-tied PV systems.
According to the researchers' findings, the facts point to solar modules as having the same effect as traditional upgrades and investments that enhance the structures value, such as a kitchen or bathroom remodeling. The economists stated in their report: The "investment value" increases the sale price of a home and the "consumption value" is the benefit of having an environmentally friendly energy source.” The study also discovered neighborhoods where people valued “green” products, like hybrid or electric automobiles, added even more to a home's value.
Conclusion
Although research show homes with PV systems have increased in value and are sold at a higher price than homes without photovoltaic systems, the studies have a limited scope and underline the need for additional research across the country. The Berkeley Lab authors emphasize that anyone using the data from their research to extrapolate for other regions of the country does so with caution. The same advice would hold true for the NBER analysis.
At $20,000 to $40,000 for a home, purchasing a solar power system is still a costly investment for most homeowners, even with federal and state subsidies. For most homeowners interested in a PV system, leasing the equipment makes the most sense financially.
Supporters of solar power systems would argue that these studies add yet another benefit and continue to make the case for public and private investments in R&D to lower costs and make policies designed to keep the benefits rolling.