Why Solar-Powered Homes Are Worth More

If you’ve spent even the smallest amount of time reading about solarpower, chances are you know that solar panels are good for theenvironment and can substantially reduce your monthly electricity bills. Solar offers other benefits, however.

One that’s being discussed a lot lately is that solar homes tend to sell at a premium relative to non-solar homes. Why?

Andy Black, founder of OnGrid and an industry expert on solar economics, explains
by discussing an example where a homeowner installs a solar energy system that saves $1,000 a year on utility bills:

The rational is that if the $1,000 is not spent onelectricity, it is available to be spent on a larger mortgage payment at no net change in the cost of living. The amount of mortgage that can be supported by $1,000 depends on mortgage rates and the tax rate of theborrower.

Black goes on to discuss in detail mortgage- and tax-related impacts (see the full paper, “Financial Payback on Residential California Solar Electric Systems“). He also discusses a commonly cited rule of thumb that a solar photovoltaic (PV) system increases home value by $20,000 for every $1,000 reduction in annual operating costs.

The main takeaway here, however, is that, all else equal, the cost of ownership for a solar home is lower than for a conventional one. Thatextra cash freed up by the solar panels may be applied to either alarger mortgage, as Black suggests, which supports both the desirability and resale value of the home itself.

To be sure, most of Black’s financial analysis focuses on thecountry’s largest solar power market, California. As such, not all hiscase studies will apply in every market across the U.S. Nevertheless, as more homeowners begin to appreciate the value of consistently lowelectric bills, we expect solar-powered homes to continue to sell at apremium relative to non-solar ones.

Why Solar-Powered Homes Are Worth More


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