Price Premiums for Homes with Rooftop Solar

by Liza Farr

The Lawrence Berkeley National Laboratory recently released a study on solar PV systems housing premiums using the largest data set to date (Hoen et al. 2014). PV costs have dropped drastically in the past several years, and innovative financing options such as Power Purchase Agreements and solar leasing have made solar an increasingly popular addition to residential homes. The new study, using a hedonic pricing model, reveals an average of around $4 per watt increase in housing price for a PV home over a non-PV home. This approximates to about a 0.92% increase in value for each kilowatt installed. There also appears to be a “green cachet,” meaning buyers are willing to pay a base amount for having PV at all, with incremental increases in willingness to pay with increases in the size of the system. Unfortunately, although to be expected, there is a clear decrease in price premiums as the systems age. Since one of the biggest drawbacks of solar panels are the high input costs, this return in the form of a housing price premium could convince many homeowners to make the purchase (Hoen et al. 2014).

This has broad implications for solar stakeholders, housing developers, and homeowners. Stakeholders now have defensible, concrete evidence promoting the economic viability of going solar, and the subsequent viability of solar companies as a good investment. Housing developers can increase the price of their homes if they use solar, as well as the boost they will get in their public image. Developers can also advertise homes with large south facing roofs as an asset for homeowners to put their own solar panels on, and receive the price premium. With this information, homeowners will increase their deployment of rooftop solar, perhaps in place of other remodeling that can be just as expensive, with less of a payback. The newly popular leasing option now appears less appealing, as Fannie Mae has indicated leased systems cannot be included in the appraised value of the property (Hoen et al. 2014). Undoubtedly, this is good news for solar power, and we can look forward to accelerated deployment of residential PV, more jobs in the solar industry, and reduced greenhouse gas emissions as a result.

Hoen, B., S. Adomatis, T. Jackson, J. Graff-Zivin, M. Thayer, G.T. Klise, and R. Wiser. 2014. Selling into the Sun: Price Premium Analysis of a Multi-State Dataset of Solar Homes. Berkeley, CA: Lawrence Berkeley National Laboratory.

Fact Sheet for Selling into the Sun (http://emp.lbl.gov/sites/all/files/selling-into-the-sun-fullreport-factsheet-jan12.pdf

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