Across the country more homebuilders are realizing that solar represents a good investment for their portfolios. Integrating solar photovoltaics (PV) into new construction has become a focus for many companies and municipalities, who are incorporating building integrated PV into their master plans. Cities like Tucson, AZ, Carbondale, CO and Chula Vista, CA have developed requirements or incentives for new homes to be “solar ready,” as installed costs of solar have decreased exponentially in recent years.
Solar Homes Sell for More Money
Several studies have been conducted regarding the “value” of PV on homes. Most recently, a 2015 study from Berkeley Lab shows that homeowners across the country have been willing to pay a premium of about $15,000 for a home with an average-sized hosted solar array. Previous Berkeley Lab studies in 2011 and 2013 showed that 1,750 California homes found clear evidence that solar homes sell at a premium. The researchers found a strong correlation between premium size and PV system size, and a weak correlation between premium size and system age. A home with a new 5 KW system, on average, sold for nearly $40,000 more than similar homes with no PV installed. This is well above both the replacement cost of the system and the system’s expected income.
Together these studies paint a clear picture: while market factors like electricity rate and system price may impact the size and extent of the premium, solar homes can be expected to sell for more than homes without PV.
Solar Homes Sell More Quickly
Though studies regarding selling time have not been as extensive as those regarding price, there is evidence indicating that homes with PV spend less time on the market than those without. In 2008 California homes with energy efficient features and PV were found to sell faster than homes that consume more energy. And in Denver, homes with solar were marketed more quickly than homes without. This evidence indicates that a solar home, when properly valued, tends to sell more quickly than a home without solar.
Solar Ready Requirements
Model ordinances for solar homes are designed to ensure that homeowners have the ability to easily install solar after construction is completed. These ordinances vary widely in both their content and implementation design. While some municipalities require homebuilders to meet a minimum standard for new construction, others provide incentives and best practices to facilitate for easy installs of solar. Common requirements/guidelines include: arranging for homes to be built on an east-west line to maximize rooftop solar potential, building dedicated electric wiring or pipes in attics so PV and solar hot water systems can be added at a later date without opening walls or ceilings, and building large southern facing windows to provide for passive solar heating.
Resources for Homebuilders
- Solar Basics for Homebuilders: Reducing the Total Cost of Ownership - This informational guide from Sandia National Laboratories explains how homebuilders can integrate PV into new homes to attract customers and increase their bottom line. Solar PV is an attractive opportunity, but many homebuilders are unsure how to navigate the installation process and effectively market PV systems. As consumers increasingly choose PV to meet their energy needs, builders need to solve these challenges to remain competitive. Download the guide.
- Survey of Buyers, Sellers and Realtors Involved In San Diego ThirdParty Owned Solar Home Transactions – A Qualitative Assessment - Third-party ownership (TPO) structures, which include leases and power purchase agreements, have revolutionized the residential solar industry, opening up new customer segments and growing to dominate the market. While the immediate benefits to customers are well-documented, there remains some question as to the long-term impacts of TPO agreements, particularly as they relate to home sales. This research utilizes data collected through a combination of surveys and interviews with various participants involved in actual home transactions to explore how TPO solar systems impact homes sales in the San Diego region. Download the summary.
- Fannie Mae Guidance for Homes with Solar Panels - Fannie will purchase/securitize homes where the owners have purchased solar panels or have a third party financing agreement in place. There are a few exclusions that should not limit the vast majority of homeowners that choose third party ownership as a vehicle to go solar, and then choose to sell their home. One potential downside for third party owned systems is that while the price of purchased electricity/lease payment must be included when evaluating debt-to-income levels of perspective borrowers, Fannie Mae does not allow the system to be included in the appraised value of the home. This could potentially deflate the value of a home under a PPA as it adds additional cost in the debt/income valuation, but does not allow for the value of the system to be included in the appraisal of the home. See the full Fannie Mae guidance.
- A Homeowners' Guide to Solar Financing -- The Clean Energy States Alliance has released a guide to help homeowners navigate the complex landscape of residential solar PV) system financing. The free online publication helps help homeowners make sound decisions and select the best financing option for their needs.The guide describes three popular residential solar financing choices – leases, loans, and power purchase agreements (PPAs) – and explains the advantages and disadvantages of each, as well as how they compare to a direct cash purchase. It clarifies key solar financing terms and provides a list of questions homeowners should ask before deciding if and how to proceed with installing a solar system. Download the guide.
- Going Solar in America: Ranking Solar's Value to Consumers in America's Largest Cities -- This report from the North Carolina Clean Energy Technology Center reveals that in 46 of America’s 50 largest cities, a fully-financed, typically-sized solar PV system is a better investment than the stock market, and in 42 of these cities, the same system already costs less than energy from a residential customer’s local utility. Of the single-family homeowners in America’s 50 largest cities, 9.1 million already live in a city where solar costs less than their current utility rates if they bought a PV system outright – and nearly 21 million (93% of all estimated single-family homeowners in those cities) do if low-cost financing is available. Download the report.
- PV Value – Sandia National Laboratories has developed a prospective model of determining the value of PV. Sandia uses an income capitalization approach, which considers the present value of future energy production to determine the remaining value of a PV system. An online tool developed by Energy Sense Finance, currently in beta, has been released to the public and is available at pvvalue.com. PV Value uses factors like electricity rates, system size, and yield, warranties, and location to make its determination. This tool can be of great use to homebuilders incorporating PV who wish to understand the monetary value it represents.
- Solar Ready Buildings Planning Guide – The National Renewable Energy Laboratory has created a document identifying important aspects of building design and construction to easily enable the installation of solar PV and heating systems after the building is constructed. The guide offers insight and best practices on how to maximize system yield and installation efficiency. Download the guide.
- Property Taxes and Solar PV Systems: Policies, Practices, and Issues – There is a distinct lack of clarity surrounding the impact of how property taxes are valued on solar systems. While many states have adapted their tax policies to address solar, many more have not. This report investigates state and local property tax practices as they apply to solar. Homebuilders should consult this guide for a clear overview of solar technology and markets, with insight on how they can relate to property tax. Download the guide.
- Local Lending For Solar PV – Securing streams of capital can be a significant barrier to installing PV. This guide gives an overview of ways to tap financing. Despite solar’s high upfront cost, financing, in many cases can make solar competitive with traditional sources of electricity. This guide reviews different available financing options, with case studies of institutions that have implemented solar loan programs. Download the guide.
- The Database of State Incentives for Renewables and Efficiency (DSIRE) – Programs and processes to encourage solar deployment can vary radically across states. DSIRE was created to clarify these ambiguities and is the most comprehensive database of state incentives that relate to renewable energy. Homebuilders should consult dsireusa.org to ensure that they are taking advantage of all of the available incentives for solar energy.
- PVWatts – Factors like shading and orientation can have a tremendous impact on the generation of a solar system. PVWatts is an online tool that can estimate the energy production and cost of energy of grid-connected photovoltaic (PV) energy systems throughout the world. It allows homeowners, small building owners, installers and manufacturers to easily estimate the performance of potential PV installations and their economic potential in different geographic regions. PVWatts at pvwatts.nrel.gov provides a quick and easy look at the solar potential of specific facility.
- System Advisory Model (SAM) – Determining whether or not a PV system is economical can be one barrier to customers considering solar. SAM is a tool that assesses the performance and costs of a range of renewable energy technologies, and compares them with conventional power sources. SAM uses an hourly performance model to estimate a specific power system's total annual output, and a cost and financial model to calculate a project cash flow. Performance and financial metrics are reported in tables and graphs, which can be exported for use in reports or for further analysis in other models. The tool is available at sam.nrel.gov.
What is Green Worth? Unveiling High-Performance Home Premiums in Washington, D.C. – Homebuyers are not only increasingly interested in high-performance homes, or homes incorporating green features, but they are also willing to pay more for them. This report from Institute for Market Transformation and the District of Columbia’s Department of Energy and Environment finds that high-performance homes marketed with green features sell for a mean premium of 3.46 percent compared to homes without green features. Download the report.