According to a Wood Mackenzie forecast, the US should reach 3 million solar installations by the end of this year.
People are increasingly moving towards solar and it’s not hard to understand why. Federal and state-level tax benefits, solar loan advantages, inflation of electricity bills and general awareness of green energy have all come together to enable homeowners to go solar.
Solar panel and equity: A developing story
With more homeowners installing solar panels, the real estate value of the houses needs to be revised. This poses an interesting question for homeowners and people looking to buy houses – is there equity in solar panels?
Lawrence Berkeley National Laboratory (LBNL) first attempted to answer this question back in 2013. The research compared thousands of solar and non-solar houses in California and concluded that each 1-kilowatt solar array adds about $5,900 to the home’s resale value. But California was already the solar hub of the United States and it didn’t paint an authentic picture nationwide.
So the LBNL expanded their research in 2015 to better understand how solar panels influence the value of a house. The report found that home buyers were ready to pay $4 per watt of the solar array, leading to a premium of about $15,000. This gave appraisers and lenders clearer metrics to judge the real estate value of homes with solar panels.
Solar panel equity in recent years
In recent years, the equity in solar panels has only grown stronger. Today, buyers are specifically looking to buy solar houses and don’t mind paying a premium for that. According to a report by Zillow, houses that have solar arrays installed are being sold at 4.1% higher than non-solar houses. The rate is dependent on location but on average, this adds an extra $9,274 to these houses.
In New York City, solar-enabled houses are sold for 5.4% more than average houses and in San Francisco, the premium can go as high as $41,000. The coastal metros offer the biggest return in terms of solar panel equity.
Why are people paying more for solar houses?
It’s easy to figure out why people are making a shift to solar today.
- PV systems give homeowners a long-term energy solution that is also ideal for the future.
- Solar fulfills the high energy consumption needs of gen z and millennials without burdening them with exorbitant electricity bills.
- Solar arrays give more control to homeowners in terms of their monthly expenditure. People enjoy that sort of clarity and control especially if they’re looking to save.
How to calculate the equity in solar panels?
If you have installed solar panels on your rooftop, you should know how it adds to your house’s resale value.
Solar installation cost can be high in the beginning, but in just a few years, the investment starts paying for itself. It replaces or completely eliminates electricity bills and additional energy can be transferred back to the grid for a price. The repayment period for solar loans is generally around 10 years. The equity depends a lot on the dreaded depreciation as well. Generally, solar arrays come with a 25 years guarantee but it starts to depreciate ever so slightly each year after being installed.
A 5kW system costs around $12,000 and the depreciation rate is about 4% a year. So in 10 years, the depreciated value of a 5kW system would be $7,200. Suffice to say, the newer the system, the better equity would be.
Solar panels play a crucial role in home equity and people are looking at them as a long-term investment. Both homebuyers and homeowners should take advantage of the PV boom and be prepared for a sunny future.
