A new report analysed 43 PV sales in six U.S. states and found that owning a PV system consistently adds value to a home. For the sales checked in the sample, which took place in 2012, this premium value was on average 3.78 US$/W or about 14,000 US$ extra for a home with an average 3.8 kW PV system.
There were over 725,000 residential PV installations through the second quarter of 2015 in the US, leading to a total of 4.4 GW solar capacity on homes. Host-owned PV systems have been shown to fetch a premium on the housing market, but so far there was no conclusive study showing how much value PV systems add to single-family homes. In 2014, already more than half a million homes in the United States had a PV system. Since this number will grow further, there is a need for additional valuation options of these houses.
The new report called “Appraising into the Sun: Six-State Solar Home Paired-Sales Analysis” used the industry-standard of paired-sales valuation, where recent sales of comparable homes are matched to compare their prices and estimate the premium buyers would pay for PV. It was written by home appraisal expert Sandra Adomatis and Ben Hoen, researcher from the U.S. Department of Energy’s Lawrence Berkeley National Laboratory.
14,000 US$ more for a home with 3.8 kW PV
Premiums calculated by the researchers varied across the six analysed states between 2.68 US$/W and 4.31 US$/W, the average being 3.78 US$/W or about 14,000 US$ extra for a home with a 3.8 kW PV system.
The appraisers found both the replacement cost, specifically one that takes into account federal state and utility incentives, and the present value of energy savings are likely good predictors of premiums found in individual markets. “These results will benefit appraisers, real estate agents, and mortgage lenders who increasingly encounter PV homes and need to understand the factors that contribute to, and detract from, market value,” says study co-author Ben Hoen.
Additionally, the new study confirmed statistical modeling results from a large Berkeley Lab study (link is external) conducted in 2013, which focused on PV premiums in California. Nevertheless, the new report only shows a general trend. The market price of individual homes can vary considerably depending on factors such as the location of the house, the size and orientation of the PV system and of course current market conditions including incentives, electricity rates and real estate values. Additionally, falling solar prices will most likely also lead to a smaller premium. These factors have to be considered when estimating the prices of PV homes.
An alternative to paired-sales valuation
“Many appraisers and lenders prefer the paired-sales valuation techniques that are standard in the real estate community, but comparable pairs of PV and non-PV homes are not always available, which can result in PV systems on some homes receiving no appraised value,” explains Sandra Adomatis, the study’s lead author. “One of the most important contributions of our study is to show that paired-sales analysis accords with cost, income, and statistical-modeling approaches to estimating PV home premiums. Lending appraisal guidelines and expectations should allow these methods for estimating PV home premiums when comparable sales are not available.”
The study concludes with a list of recommendations for improving PV home valuation. These include providing a verifiable documentation of the PV system’s characteristics for the real estate market.
The research was supported by funding from the U.S. Department of Energy SunShot Initiative, which aims to lower the cost of solar electricity to 0.06 US-$/kWh.
You can access the full report via the website (link is external) of the Berkeley Lab or download the pdf document (link is external).