Home Value: Should I Install Solar?

[agraham999]

My wife and I would love to install a solar power system in our house, however I doubt we will be in our current home in Portland more than 5 years or so. That being said, if we install a solar electric system we won't recoup our investment over the next 20+ years.

However, I do see that installing a solar system would likely increase the value of our home, and I believe that you can get that value-add back from your taxes when you sell the home because that increase in value is tax exempt.

With other local/federal incentives, that seems like we could see a $10k investment in solar might return $20k in home value. Not to mention that it might make the home more attractive to future buyers.

Our realtor seems to agree that anything green is a good investment.

Can anyone shed any light on this?

No pun intended.

[lh_newbie]

With other local/federal incentives, that seems like we could see a $10k investment in solar might return $20k in home value. Not to mention that it might make the home more attractive to future buyers.

Our realtor seems to agree that anything green is a good investment.

From an investment perspective, I do not see how you could get a 200% return on it. While it will increase the resale of your home, if you invest $10K - you'll see some of that come back come resale time for sure - but the exact % is uncertain.

I believe we are entering a time that we'll see solar systems begin to come down in price. Thin film will be in the retail market by that time. Silicon prices will have come down with the new capacity increases coming online, driving down the manufacturing costs of silicon based systems. So what costs you $10K today may only cost $7K in 5 years.

Your best investment is always going to be decreasing your demand. Do you have an old HVAC system? Could you install a variable speed system that's higher in efficiency? Have you added attic insulation? Have you stopped air infiltration as best as you can (i.e. old recessed can lights literally have holes in them and aren't rated to have insulation touching them, gaskets around plugs/switches on exterior walls, leaky ductwork, etc)? What condition are your windows in?

I have heard it said for every $1/month you can decrease your utility bills is worth $10 in resale.

If your plan is to sell in 5 years and you want to make an environmental difference, my suggestion would be a 2-step program:

1. Immediately switch to a 100% renewable electric program if you can select your electric provider
2. Invest your money in efficiency

If you have a bunch of money sitting around burning a hole in your pocket, drop it into an investment, switch to renewable electric and use that in your next home to go 100% solar - as the money will not only grow over 5 years, but as I stated above, I believe solar electric will be cheaper then, so with the combo you may be able to buy 50% more electric generation by doing so.

We are quickly coming up to a point where solar electric will be a good investment, but I've run the numbers and think most folks can better invest their money in efficiency.

Brian

PS: To back up my claim, look at the chart on Solar Buzz. We are in the beginning of the price decrease - I believe the curve will increase it's slope before it levels off:

http://www.solarbuzz.com/

[agraham999]

lh_newbie:

To answer some of your comments and questions (thanks btw)...

I've read that with certain incentives from our state and federal government (and using an online calculator from the Oregon Energy Trust), we can get a $20k system in for about $10k.

So I was curious if that could be reflected by the home asking price. Plus I read somewhere that the cost of the system when the house is sold...is tax free or something.

I'm looking at a solar investment here as a way to increase the value of the home while also starting it down on a path for future generations.

As for the other things...

We use LED lighting, have a highly insulated home with double pane gas filled glass. Heated forced air (gas) in a highly efficient circular pattern with no leaks...we have the heat off in the guest bedroom and bath...and the house is about 1100 sq ft. We have a top of the line energy efficient Tromm washer/dryer. Home automation and dimmers keep power usage down. Timers on many lights and all bathroom fans. We do participate in the renewable energy program but it actually costs us more for our power. Programmable thermostat cuts out to 64º at 10:30 and we crawl into an electric blanket. This summer I'm installing a tankless water heater as well.

This was a 1970's ranch that was gutted to the studs and completely redone. Top to bottom...you set the heater to 70º and she'll hold there for 2-3 hours.

So I am doing everything we can to conserve...but I thought if my usage could meet what a solar system pumps out...I could see a almost non existent power bill and a jump in the home value.

[BobTrips]

You live in Portland (I'm assuming Oregon) so adding PV to your house might increase the sales price when you do sell. It might not have any value in another area. (Or even a negative value in some locales.)

Solar might not be the best investment, from a purely financial standpoint, but it's OK to spend some money to make yourself feel good. People do it all the time by buying clothes, new furniture, paying for trips, etc. (However, do attend to your future retirement needs before spending unnecessary 'feel good' money.)

I agree that your "$10k will add $20k" sounds unrealistic.

Start with your $10k expense. Determine how much rebate you can get from state and federal programs if they apply and are available.

Now you're down to $10k - rebate cost.

Then calculate what you're likely to save in electricity bills over the next five years. And how good PV would make you feel.

$10k - rebate - 5 years utility bill savings - feel good dollars.

Are you comfortable with gambling that amount against how the local market values installed PV?

Do you really need to put that money to work towards your retirement?

Nothing is guaranteed, but with some numbers in hand you should be able to make a decision that you can live with.

[lh_newbie]

If there are $10K in rebates for a $10K system, so you are paying $10K out of pocket for a $20K system, that doesn't mean you can turn around and sell the system for $20K. The next person would value the system at what it would cost them ($10K).

Now, in 5 years that same size system may cost $15K due to silicon shortages being gone + economies of scale + competition. Let's say the federal rebates are also gone. The system has depreciated over the 5 years of use and things are never worth what they were new, so let's say you get $8K to $10K in resale value + your savings over 5 years. If this scenario plays out, then yes, you made a decent investment.

It is my understanding that you don't pay property taxes on the value of the solar system. The cost of your solar system also goes into the "cost basis" of your home, but you'd still be subject to capital gains if you made more than $250K in your home if single or $500K if married (assuming this was your primary residence for 2 of the last 5 years).

Brian

[lh_newbie]

I forgot to add... that it sounds like you're already a very consious person. If the money isn't a big issue, then just go ahead and put the system up already. If you spend $10K on a system, it's not like you're likely to lose your investment anyhow. Even if you lost $1-2K over 5 years, I suspect based on the depth of your post that you're fine with that considering you're doing "the right thing" by deploying solar.

Let us know what your final decision is.

Brian

[agraham999]

The thing is...once you start down this path and see some results...you kinda want to keep going as far as you can...and feel comfortable with. There would be something psychologically pleasing about getting a $0 power bill, but I'm pretty happy just seeing it drop as well.

[mikebeavis]

Using the DSIREsite I found the following programs that will apply in Oregon...

Residential Energy Tax Credit: for PV, $3/watt personal tax credit, up to a maximum credit of $1,500 per year, but excess may be carried over for up to 5 years, not to exceed $6,000 in total.

Renewable Energy Systems Exemption:

Summary:
ORS 307.175 states that the added value to any property from the installation of a qualifying renewable energy system may not be included in the assessment of the property’s value for property tax purposes. Qualifying renewables include solar, geothermal, wind, water, fuel cell or methane gas systems for the purpose of heating, cooling or generating electricity. This exemption is intended for end users and does not apply to property owned by anyone directly or indirectly involved in the energy industry.

Small-Scale Energy Loan Program: you can take advantage of state-run low-interest loans for PV installation.

Energy Trust - Solar Electric Buy-Down Program (for Pacific Power and PGE customers): state rebate program pays $2/watt (for Pac. Power) or $2.25 (for PGE) up to maximum rebate of $10,000 for residential installs.

Then of course you can use the Federal 30% tax credit if you install the system this year, because it remains to be seen whether the federal tax credit will be extended (the Senate just included it in a larger bill but Bush may veto that bill). The federal tax credit does allow for carrying forward excess credit into succeeding years.

So to the math. I'm going to assume a $20,000 system will include about $8,000 (40%) in labor and $12,000 in system costs. If that's relatively accurate, you should be able to purchase something similar to Mr. Solar's 1,944-watt system (link).

Your total federal tax credit will be 30% x $20,000 = $6,000. You can only claim $2,000 of that each year but you can carry it forward to succeeding years.

Your state tax credit would allow for 1944 watts x $3/watt = $5832. You can only claim $1,500 each year but you're under the $6,000 maximum so all of it can be claimed.

The buy-down program, if you're paying Pacific Power or PGE for your electricity now, would provide 1944 watts x $2/watt = $3,888 ($4,374 for PGE). The nice part of this is it's a rebate you can get after the installation in a lump-sum.

Your $20,000 system will thus be reduced to about $16,000 after the rebate comes in. Then you've got about $12,000 worth of tax credits to claim over the next 3-4 years. Before you sell the house in 5 years you'll have gotten the gov't to pay for about $16,000 on your $20,000 system. The cost to you is $4,000. With interest on a low-interest loan, maybe it actually costs you $5,000. Going with Mr. Solar's estimate that in Oregon you'll get about 205 kWh per month out of this system, at 12 cents per kWh, you'd have benefited by $0.12 x 205 kWh x 60 months = $1476 worth of electricity in the 5 years before you sold the house. That leaves about $3,500 unaccounted for. My guess is you'd easily make that much "extra" on the sale of the house for having a $20,000 system installed, even if it's 5 years old and a savvy buyer knows it actually costs less than $20,000 to have one installed in your area.

All in all I'd say it's probably a good move, if you take advantage of all the programs available (and assuming your electric company is Pac. Power or PGE).

[deepcsuf]

My wife and I would love to install a solar power system in our house, however I doubt we will be in our current home in Portland more than 5 years or so. That being said, if we install a solar electric system we won't recoup our investment over the next 20+ years.

However, I do see that installing a solar system would likely increase the value of our home, and I believe that you can get that value-add back from your taxes when you sell the home because that increase in value is tax exempt.

With other local/federal incentives, that seems like we could see a $10k investment in solar might return $20k in home value. Not to mention that it might make the home more attractive to future buyers.

Our realtor seems to agree that anything green is a good investment.

Can anyone shed any light on this?

No pun intended.

Hi,

Solar is an excellent investment for a home. The Appraisal Journal suggests that a home value increases by $20 for every $1 reduction in annual energy bills. For example, a solar energy system that saves a home owner $400 per year would add $8,000 to the value of the home.

Many service providers or people selling you solar never factor in the increase of the value in the home into the picture, and this is a shame because the rate of return on a system is typically very high but sellers typically dont understand how to sell a system.

Please check out the source of this information.



This is a clear indicator that solar is one of the best investments you can make, not just financially but if you add in the social benefits as well!

[agraham999]

Thanks for the detailed post mikebeavis. It is a tough decision. Our long term plan is to build a house from storage containers and use solar on that...so this home is really a stepping stone to that in 5 years or less...so not sure which direction to go.

My bet is that the value of renewable energy in a home is only going to increase as we struggle with energy concerns. So if you move into a home that is already wired for solar and wind...you might just be the most attractive house on the block...and might be the tipping point over another home.

[deepcsuf]

Thanks for the detailed post mikebeavis. It is a tough decision. Our long term plan is to build a house from storage containers and use solar on that...so this home is really a stepping stone to that in 5 years or less...so not sure which direction to go.

My bet is that the value of renewable energy in a home is only going to increase as we struggle with energy concerns. So if you move into a home that is already wired for solar and wind...you might just be the most attractive house on the block...and might be the tipping point over another home.

Right on....just like any product or service, how is your product (your house) doing to be different from the rest of the inventory (other homes) on the market. It’s already documented that homes with Solar PV or Solar Thermal sell much faster than homes without. Going solar instantly differentiates your home.

[mikebeavis]

Thanks for the detailed post mikebeavis. It is a tough decision. Our long term plan is to build a house from storage containers and use solar on that...so this home is really a stepping stone to that in 5 years or less...so not sure which direction to go.

My bet is that the value of renewable energy in a home is only going to increase as we struggle with energy concerns. So if you move into a home that is already wired for solar and wind...you might just be the most attractive house on the block...and might be the tipping point over another home.

No problemo...how much of your utility bill would an average of 205 kWh/month cover?

[inkabinkaboo182]

A solar hot water heater would be much cheaper, but still prevent a lot of energy from coming from the utilities and save you a lot of money.

I would look into solar hot water before solar panels if I were you.

[agraham999]

Thanks for the detailed post mikebeavis. It is a tough decision. Our long term plan is to build a house from storage containers and use solar on that...so this home is really a stepping stone to that in 5 years or less...so not sure which direction to go.

My bet is that the value of renewable energy in a home is only going to increase as we struggle with energy concerns. So if you move into a home that is already wired for solar and wind...you might just be the most attractive house on the block...and might be the tipping point over another home.

No problemo...how much of your utility bill would an average of 205 kWh/month cover?

Well we're at 673 and dropping each month...13kWh from last month and I'm sure as summer and spring roll around, if we can keep off the AC, we'll see it drop significantly as longer days and no heat mean less power for 4-5 months. The 673 was $63.16...it would cut a little over a third. That's about $20 a month or 240 a year. If we can reduce our usage more, which is possible, I think we could see ourselves around 400kWh a month...maybe slightly less if you average.

[SoCalSolar]

There is something else to consider. If you can afford the solar system - reasonably scaled to the home for significant results - it has more intrinsic value in addition to whether you will acutally make your money back or not.

Yes, it will certainly differentiate your home on the market - which is important in any housing market. You will likely get more for your home vs. similar homes in your area as well due to the system.

BUT - Whomever purchases your home may or may not be an alternative energy enthusiast. When they purchase the home with a (assuming) grid-tie solar system they will see the benefits each and every month of the year on their electic bill. They will likely be pleased. They will likely tell others how pleased they are. ...they will (knowingly or not) spread the word that alternative energy is good and doable. It will have a positive impact on our nations energy grid each and every day the sun shines - whether you live there or not. The new owner may not care at all about the system, but it will be there pumping electricity into the grid... every day the sun shines. Every day. Hard to beat that.