A study conducted by a team of researchers, led by the U.S. Department of Energy’s Berkeley Laboratory, found that homebuyers are willing to pay more for homes that have installed solar photovoltaic (PV) energy systems. The research (Selling into the Sun: Price Premium Analysis of a Multi-State Dataset of Solar Homes) estimates a price premium of approximately $4 per watt of PV installed. For a typical PV system, the research team found that this translates into a price premium of $15,000.
According to the study, more than half a million of the nation’s homes had a PV system as of 2014.
The paper used data involving 22,000 home sales in eight states, of which almost 4,000 contained PV systems. The authors used hedonic regression pricing models to estimate values for individual home features, controlling for home characteristics and neighborhood factors.
The research also examined the difference in the price premium between newly built and existing homes. The estimates indicate a small, but statistically insignificant, difference between new and existing residences with PV systems. For new homes, the estimated premium was $3.58/watt, while for existing homes the premium was $4.51/watt.
The research team speculated that one possible reason for the observed difference in the solar price effect was related to the section 25D power production tax credit, which allows a 30 percenttax credit for solar systems installed in new and existing homes. Because this credit is claimed by the homeowner/homebuyer (and not the builder), the PV system’s benefit is allocated between the higher willingness-to-pay and the tax benefit, which is worth approximately $1.26/watt on average according to the paper.
The paper also found a declining price premium with PV system age. For new systems, the premium effect equaled $5.90/watt and $2.60/watt for systems 6 to 14 years old.
With respect to system size, for systems up to 10kW, larger PV systems adds value to a home. Above 10kW, price increases appear to flatten according to the authors, although they acknowledge that more research is needed.
The study adds to existing market research that suggests that the presence of energy-efficient home features is among the most important concerns for prospective home buyers. For example, 2013 survey data from NAHB indicated that four of top requested home items involved energy use. Additional NAHB industry survey data indicated a growing number of builders installing PV systems in new homes.
View this original email on NAHB’s blog, Eye on Housing.