PV premium: More reason consumers will go solar

November 12, 2015 | By Barbara Vergetis Lundin

What could make solar PV, the growth of which is already soaring in the U.S. residential home market, even more popular? The value it adds to the home itself.

Credit: francepig

In 2014, the number of home PV systems in the United States totaled more than half a million. Photovoltaics currently add value to homes, according to a new report led by the U.S. Department of Energy's Lawrence Berkeley National Laboratory and a home appraisal expert that studied six markets.

The research is supported by funding from the U.S. Department of Energy SunShot Initiative -- a collaborative national effort that drives innovation to make solar energy fully cost competitive with traditional energy sources before the end of the decade. Through SunShot, DOE supports efforts by private companies, universities, and national laboratories to drive down the cost of solar electricity to $0.06 per kilowatt-hour.

Researchers engaged a team of seven appraisers from across the six states to determine the value that solar photovoltaic (PV) systems added to single-family homes using the industry-standard paired-sales valuation technique, which compares recent sales of comparable homes to estimate the premium buyers would pay for PV. The appraised premiums also confirmed statistical modeling results from a large Berkeley Lab study conducted in 2013, which found that buyers were willing to pay $15,000 more for a home with the average-size solar PV system (3.6 kilowatts), or about four additional dollars per watt of solar power -- though premiums for any individual home are market dependent and are likely smaller given currently falling installed solar prices.

For each of the 43 pairs of comparable PV and non-PV homes, appraisers found premiums were highly dependent on the underlying system and market characteristics, including the size of the system, available incentives and installed prices at the time of sale, and underlying retail electricity rates. They found both the replacement cost, specifically one that takes into account federal state and utility incentives, and the present value of energy savings are good predictors of premiums found in individual markets.

"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," said lead author Sandra Adomatis, an appraiser who helped develop the Appraisal Institute's Green Addendum. "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 also found that price per watt was the appropriate metric for valuing PV systems and that there was no consistent difference in days on the market between PV and non-PV homes.

For more:
- see the report

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