There’s another reason why you should consider solar panels, and it’s not just because it’s good for the environment. According to a study from the Lawrence Berkeley National Laboratory, you can increase home value with solar panels by roughly $14,300 on average.


Homes that come with a solar panel system sell for 3.74% more than non-solar houses. Combine that with the perk of energy savings, and the results seem to the point that solar panels are a sound investment.


The LBNL study analyzed the sales of homes with solar panels in eight different states, and it determined that some buyers, especially those looking to buy property in California, were willing to pay a premium of up to $15,000 for a home with only an average-sized solar panel.

But these trends are sure to expand beyond California soon. According to the Solar Energy Industries Association, a new residential solar system is added in the U.S. every 90 seconds, counting to a total of 1.5 million systems all around the country. Because they are becoming increasingly popular, solar panels will have more of a say in a property’s selling value.


Homeowners also get a tax incentive should they decide to install a solar panel system. These additions, while increasing the value of the home, aren’t added to the property taxes calculations in some states. Other modification, such as adding a kitchen to your home, will definitely have you paying more in property taxes each year.

How Solar Panels Work


Solar panels harness the sun’s power and turn it into electricity. There are two different types of technologies capable of this, called photovoltaics (PV) and CSP.


PV is the most known option. They are the panels you often see on rooftops or fields. When the sun shines on a panel, the cells of the board absorb the photons from the sunlight, creating an electric field across its layers and causing electricity to flow. PV is the optimal solution, for house’s residential purposes.


CSP, or “concentrating solar power” is ideal for very large power plants. It features mirrors that reflect and concentrate sunlight on receivers that collect solar energy and convert it to heat.


Understanding the Perks of Solar Panels


You can increase home value with solar panels: we’ve established that already. But, there’s more to this equation than just that.


When talking about solar panels, you will often also hear about the solar payback, which is the return on your investment. The solar payback accounts for the amount of time it takes a homeowner to pay for itself through saving energy essentially. 


Now, there are a lot of different factors that may affect the solar payback. For instance, it is virtually impossible to absolutely guarantee all homeowners will get a 100% return on their panel investment. Plus, the timeframe in which the payback may come through can be challenging to assess as well. It much depends on the size of the solar panel system, roof space, and, ultimately, how bright the area you reside in is.


It’s most likely why solar panels are far more popular in sunny California than they are in other states where the weather might not be too advantageous for such an investment. However, it’s important to note that solar panels will absorb energy even on cloudy days, albeit at a much lower rate than under sunny circumstances.

Saving Money


How much money you’ll save with solar panels dramatically depends on how much energy your household consumes, sunlight strengths, as well as the size of your system and how much power it can generate. Moreover, even with solar panels you still rely on the electricity rates set by your utility, and how much you’ll be compensated for the extra solar energy you send back to the grid. The National Utility Rate Database contains current electricity rates in all areas of the country.


However, data shows that in some parts of the U.S., solar is already competing with the alternatives sold by local utility providers. Since 2009, the cost of installing solar panels has steadily dropped, and experts say these current costs will continue to decline, and solar will become more and more affordable.


Increase Home Value with Solar Panel


Nothing is as straightforward as it seems when it comes to the real estate market. Studies have looked deep into the subject of how solar panels may affect the value of a property, and although some have definitively concluded they do have a word to say on a home’s final price, there are a wide variety of factors to consider.


For instance, while homes that contain a PV system sell at a higher premium, the amount may depend on the size of the panels in question. Interestingly enough, buyers aren’t necessarily concerned with the wattage output of the system, meaning the degree of power of panels, as they were with the physical size of them.


So, homebuyers seem ready to pay more for a home with a larger solar panel system, regardless of its efficiency or the degree to which it can cover the energy needs of a household.


Here are some other things you should know about how you can increase home value with solar panels:

1. New Systems Are Worth More


The study also notes that new PV systems sell better than older models. New solar panels are made from more efficient materials, possibly have more warranty time left, and are less likely to need any interventions soon. Potential buyers generally prefer homes with newer systems.


The more a PV system ages, the less valuable it is, regardless of its performance or power.


2. The System Must be Owned


The premium only applies if the PV system is owned, and not leased. If the solar panels are leased through the developer, it’s unlikely that it will have any effect on a property’s market value. It’s far more likely for the potential buyers to require the owner to pay off the lease instead.

So, all these perks only apply if you own the PV system. Then, you can put your house up for sale at an increased value.


Valuing the Solar System


Even if you understand how the solar system impacts the value of your property, many homeowners can still struggle to pinpoint the cost of the PV system, whether they are in the position of selling or buying a property.


According to the Solar Energy Industry Association, there are three methodologies to consider when trying to determine the value of a residential solar system:


  1. The Income Approach


This method values a PV system on the estimated income it will generate for the owner, over the estimated lifespan of the solar panels. This method of determining the system’s worth based on how much it could save is the closest to an individual’s intent of purchasing solar panels, so it also the best option for estimating its value, both for buyers and sellers.


2. The Cost Approach


This approach refers to the cost to reproduce or rebuild the current solar system with quality components and consistent size. While it can be one of the most reliable cost valuations, because the value of solar systems can depreciate over time, sellers might not get a good return on investment if the solar panels are old.

3. The Comparable Sales Approach


Buyers can compare the selling prices of homes with solar panels with those without these systems to pinpoint a price difference and determine value. You have to compare homes with similar specification, the most notable difference being the presence (or lack thereof) of solar systems for the estimation to be accurate.


SEIA recommends sellers and buyers to use the income approach when trying to estimate a home’s value. This method is the most appropriate to determine the initial selling price because it includes the amount of energy saving benefit. The other two methodologies, while also reasonably accurate, may also depend on governmental incentives, quality of components and installation, and other factors to determine the value.


A recent study conducted by the Sandia National Labs and Energy Sense Finance found the home appraisals in California, Arizona, and Massachusetts generally matched the values obtained from an Income Approach calculation. Home buyers or sellers can usually use this method for their initial value estimation.


The evidence we currently have on hand seems to suggest that it is, in fact, beneficial for homeowners to install solar panels, as it is beneficial for buyers to look for properties containing them.


The best time to sell your home is right after the solar system is in place to give your home an excellent value boost and not worry if the PV system has depreciated due to aging. But even if you don’t, you can still get a return on investment over the years through the money you’ve saved on traditional electricity bills.

Installing Solar Systems


Homeowners benefit from a variety of financial options when trying to go solar. As a general rule, it is a lot cheaper to install your PV system than if you lease the panels.


If you’re looking to buy, some solar loans can lower the up-front costs of the system, and in most cases, the monthly payments will be smaller than your regular energy bill. These loans function the same as any home improvement loans. You can even get subsidized solar energy loans with lower interest rates in some states.


Summing up


There is no question that you can increase home value with solar panels as they can lower energy bills. However, most studies seem to show that state-law is one of the critical factors in determining how much solar panels can increase home values.


States that actively encourage homeowners to go solar have essentially created a profitable market for these homes to be sold in. By offering these incentives, they have made solar panels more widespread. Therefore, people understand their necessity, know the perks, and are more likely to look for (and pay more for) a home with a solar system, than in other states.