Dear Monty: Will adding solar panels affect the value of my home?
By Richard Montgomery
Reader Question: How will adding solar panels to my home affect its value? Are the panels an asset or a liability? Does their value change with time?
Monty’s Answer: You are asking questions that rely on science and future events that are beyond the scope of my expertise. With that qualification, here is one person’s opinion based on the limited knowledge gleaned seeking answers. The answer to your questions depends on a variety of considerations. These considerations fall into several different categories.
- The product you are purchasing. Here are the considerations. The total cost of the product when calculating energy costs. The manufacturer’s warranty on the expected life of the product. Whether or not the company offering the guarantee will still be in business. The location of your home. Whether or not your utility company buys back energy from consumers. Whether or not the cost is included to store excess energy to sell back to the utility. The limitations included in the company’s warranty.
- You and your home. Alternative Energy Tutorials suggests there is a correlation between peak efficiency of the product and the pitch and the alignment of your home with the azimuth and zenith of the sun. As an example, some solar collectors rotate with the path of the sun to maximize the energy collected. It is impractical to apply that function to your home, but your roof design and the orientation of your home impact solar efficiency. The federal government (and others) provide tax credits to reduce tax liability over five years. This type of legislation can be enacted and later struck down. Will the tax credits last?
- The housing market. Many of the solar installations are aesthetically unattractive, in part because they are attached on top of the roof and do not blend in architecturally. This appearance could affect marketability for consumers concerned about aesthetics. Native advertising abounds suggesting that solar panels add value to your home and a recent study described in a major newspaper adds credence to the suggestion. That said, others who study energy for a living are not convinced. Here is another article in a major magazine that paints an entirely different picture.
As the solar energy market evolves, it is unknown whether mortgage companies and appraisers will give full credit for the cost of solar panels in both resales and new construction. The vast majority of appraisers today have limited experience with solar as there are so few comparable sales. If half-a-million homes have solar power, that number represents less than one percent of all detached single family homes in the U.S. Here is a link to an online discussion on solar energy in an appraisers forum.
It is possible the consumer will face buying a lesser house if they favor solar when financing the purchase of their home. Whether or not consumers of existing homes and custom homes will make that choice is unclear, but if their choosing is for solar, their home may be competing with larger non-solar property in the marketplace upon resale. Selling a solar home may be more difficult in the future.
It is also possible that over time, production costs will come down, energy costs will go up, government subsidies will continue indefinitely, and as the solar price difference narrows, more consumers will accept the higher installation costs.
The undisputed pros and cons of solar panels
- It is renewable energy. The sun is not going anywhere.
- It is environmentally friendly. The sun is a major component of life as we know it.
- Solar technology is advancing rapidly. The more resources we invest in solar, the more likely costs will drop.
- It is expensive to install and operate. Much of the sales talk assumes certain future events that may or may not occur.
- It is intermittent. With almost three hundred days of sunshine, Phoenix, Arizona will generate more energy than Portland, Oregon.
- Storing energy is expensive. Battery packs for storage have a limited life span although some have extended warranties
Solar energy is a hot topic.
There are other pros and cons mentioned in articles about solar energy that assume the current environment will remain constant, or future events will occur. Some scholars argue incorrect facts skew the assumptions on the future development of solar power. As you review the links embedded in this article for reference you can decide for yourself to add other pros and cons to the list.
“Richard Montgomery gives no nonsense real estate advice to readers most pressing questions. He is a real estate industry veteran who has championed industry reform for over a quarter century. Send him questions at DearMonty.com.”