PV Increases Home Value
Financial analysis proves that installing a PV system on a home will increase the home’s value. The basic theory is that once that system is in place, the cost of operating the home each month decreases (because of the lower electric bills). Therefore, those monthly savings could theoretically go towards a slightly larger mortgage payment instead of the electric bill, with no change to the total monthly cost of ownership and operation.
Two sources provide thorough analysis and explanation of these concepts. First is a paper by Rick Nevin which appeared in the journal of the Appraisal Institute, with further discussion by Andy Black.
According to Mr. Nevin’s paper, the ratio of increased value to annual electric bill savings is 20:1. This means that if your electric bill is reduced by $1,000 a year, the home’s value should increase by $20,000! Mr. Nevin’s ratio was calculated using typical historical mortgage rates. With the cost of money being so much lower today, the ratio could go as high as 30:1.
Another way to evaluate the economic value of a PV system is to compare it to other home improvement projects. First of all, we have to remember that all projects to improve our homes have intangible benefits which may or may not translate directly into a higher home value. For example, think about the good times your family can have relaxing in your swimming pool, the enjoyment and convenience of a modern kitchen, or knowing that your PV system is creating clean power for your family’s use. These are all great things which are really priceless, and improving the environment we live in is a basic human instinct.
Home improvement projects usually do not pay for themselves in increased home value! It is surprising to learn that renovated bathrooms, kitchens, and many other projects usually return only 80%-90% of their cost. Building a deck or an addition will usually do just a little better than break even. These projects are started because of that desire to live in a better environment. A solar system on your home is better for the environment and pays for itself with increased home value from day one.