Clean solar electricity and solar hot water system installed on a home in Porter, Maine

Many people ask us how solar affects a home’s resale value.  The quick answer – solar can be a huge asset when it comes time to sell your home, though there are a variety of considerations you should take into account.

Lower Utility Costs Equal Increased Value

Let’s look at the purely rational economics of a solar energy system.

In the 1998 Evidence of Rational Market Valuations for Home Energy Efficiency report (link, PDF Download) by The Appraisal Journal there’s a section they call the “Rational Market Hypothesis” which describes the relationship of market value to energy savings.

Using fixed (and very conservative) utility costs savings, compared to the cost of the investment, they are able to project an economic value for energy improvements:

Fuel costs may be considered just one of many complex factors affecting the decision to buy a home, but the same can be said about other determinants of home value—from number of bedrooms to the quality of local schools. In a rational, competitive market, the value of energy efficiency, like the value of any other housing characteristic, should reflect its marginal value to home buyers. If home buyers expect stable fuel prices, then the marginal value of energy efficiency in recent years should be $10–$25 for every dollar reduction in annual fuel bills. (emphasis added)

Note that this 1998 report reflects a very different energy situation than what we face today.  We would now argue that the $10–$25 value increase per dollar of reduction in annual fuel bills is only a starting place, as home buyers should NOT expect stable fuel prices for the future.

Over the life of a 30 year mortgage, the fuel cost/utility savings will rise dramatically as fossil fuel heating and energy resources become increasingly scarce.

In addition, purchasing solar electric is particularly attractive right now because solar panel prices have reached record lows, so the payback time is greatly reduced.

Solar as an Attractive House Feature

There is huge emotional value to a solar hot water or solar power installation in addition to the purely logical economic argument.  A renewable energy system makes a strong statement about your commitment to sustainability and the environment, which is increasingly desirable in the marketplace.

In a down market, a solar system may be the differentiator that makes your house attractive to potential buyers.

An recent article on sunpluggers.com featured a subdivision in Northern California that is using solar panels in its homes as a way to differentiate itself.

How successful is it?

“We are the bestselling project in the market right now,” [Hal Woods, president of privately owned CenterStone Communities] says. “All of our Phase 1 and Phase 2 are sold out. We expect to have the project complete in the spring of 2010. A number of other builders are scouting us and looking at the success that we’ve had.”

While the attractiveness of a solar system will vary depending on your location and potential buying pool, it stands to reason that interest and excitement about renewable energy will only grow in the future as the need to move away from fossil fuels becomes more critical, and all things “green” become more mainstream.

Both solar hot water and solar electricity are proven, mature technologies that will provide a payback for you as long as you live in your home, and a more competitive position should you need to sell your home.

Like all investments, the earlier you put solar on your house, the sooner you will reap the rewards.  As we sometimes say, payback doesn’t actually start until the system is installed!

Wall Street Journal journalist Gwendolyn Bounds wrote a story on solar hot water for homeowners – what the technology is like, how it works, and the quite impressive economics of investing in solar hot water.

Rather than tackling the environmental benefits of drastically reducing your oil consumption (since in many homes, a solar hot water system can eliminate boiler usage during summertime), the article focused on the great economic incentives for installing solar hot water.

In Maine, these incentives include a $1000 rebate from Efficiency Maine, as well as a 30% tax credit offered by the federal government.

This economics over environment approach is increasingly common – indeed, it’s consistent with the approach Obama took in the State of the Union – and seems to be steering the minds even of those still skeptical of global warming.

Bounds writes:

In the average home, harnessing the sun’s free energy for daily hot-water needs can be a more practical and affordable bet [than solar electricity]. Water-heating is the third-largest energy expense in most households, after space heating and air-conditioning, according to the U.S. Department of Energy. This year, Hawaii began mandating solar water heaters in most new homes, and cold-weather locales such as New York and Colorado are among the state leaders in installations.

A misconception in Maine is that it is too cold for solar, a fact that is totally untrue! In fact, Maine is far sunnier than Germany, the world-leader in solar installations. Today, a gray January day in Maine, our solar hot water tank at the shop reads a toasty 138 degrees.

Whether your motivations are environmentally or economically driven (or better yet, both!) we appreciate the Wall Street Journal’s efforts in presenting the facts about solar hot water to homeowners.

If you’d like some more information on the technology for yourself, take a look at our solar hot water page or contact us to talk about a free site evaluation at your home or business.

This low fossil energy home in Freeport has a 3 kilowatt grid-tied solar electric array that produces roughly 340 kwhrs of clean electricity per month. The solar thermal collectors at upper right produce enough domestic hot water for a family of four. You can see ReVision Energy’s workmanship up close on October 3rd when the home will be open for the Solar Open House Tour.

The price of solar electric panels in the global marketplace is dropping, and systems that were once out of reach are now a more affordable opportunity.

For solar electricity, the most costly component of the system is the photovoltaic panels. According to a recent article in the New York Times, “panel prices have fallen about 40 percent since the middle of last year. The price drops – coupled with recently expanded federal incentives – could shrink the time it takes solar panels to pay for themselves to 16 years, from 22 years”.

The cost reduction is due to two key factors: increased production of polysilicon, the raw material that enables solar panels to convert sunlight into electricity and a panel glut due to a decrease in worldwide demand as a result of the economic downturn.

Although many manufacturers are continuing to see profit losses in 2009, according to the New York Times, some “say that cheaper panels could be a good thing in the long term, spurring enthusiasm among customers and expanding the market”.

What does this mean for people in Maine and New Hampshire who want to invest in a grid-tied photovoltaic system for their home? The timing is perfect because you have the advantage of an all-time low installed cost combined with generous state and federal financial incentives. It is important to remember that grid-tied PV is the most reliable renewable energy technology (no moving parts anywhere in the system) that comes with a 25-year warranty and expected lifespan of 40 years. This means you can lock in your own electric rate for decades and reduce your CO2 emissions.

In Maine there is a $2,000 rebate for solar electricity. In New Hampshire there is a $6,000 rebate through the NH Public Utilities Commission and a $3,500 incentive if you are a NH Electric Co-op member. The federal tax credit improved in 2009, lifting the cap for solar electric (and solar thermal) installations. The federal tax credit now totals 30% of the total system cost.