Investing in a residential solar panel system save you thousands of dollars on electricity bills, protect you from blackouts, and lower your carbon footprint. But what happens if you sell your property? Do solar panels increase home value? It turns out, the answer is yes!
In this article, we’ll explain how much a solar system can increase the value of your home, how that increase might affect your property taxes, and whether buyers are interested in homes with solar panels. After reading this article, you’ll be able to decide if photovoltaic (PV) panels are a sound investment for your home.
How Much Do Solar Panels Increase Property Value?
Home improvement projects such as remodeling and renovation can add value to your home—and installing a solar energy system is no different. According to a 2019 study by real estate information company Zillow, homes with solar-energy installations sold for 4.1 percent more on average that comparable homes without solar panels. With the median value of homes in Florida being $405,489, that’s an increase of $16,625!
An older study by the U.S. Department of Energy’s Lawrence Berkley Laboratory analyzed almost 22,000 sales of homes, nearly 4,000 of which contained PV systems in eight states from 2002 to 2013. The team found that buyers are willing to pay an average of $15,000 more for homes with solar installations, or approximately $4 per watt of PV installed.
Other studies have concluded that the increase in home value correlates with long-term savings on electric bills. For example, the National Renewable Energy Laboratory (NREL) conducted a study in 2008 which found that, for every $1 of savings on yearly electric bills, home value is increased by $20. If most solar customers save an average of $1,500 per year on utility bills, that’s an increase of $30,000 to the value of your home.
While these studies vary in their findings, one thing is clear: Installing a residential solar system will, in most cases, raise the value of your home substantially.
Factors That Affect Home Value
While a residential solar system will likely raise your property value, the amount of value the system adds to your home is dependent upon several factors. The state you live in, your local utility rates, and the size and quality of your solar system can have an impact on your property value.
Location of Your Home
The location of your property can have a big impact how much value a solar system will add to your home. Some states are behind the times when it comes to solar energy, lacking incentives such as net energy metering (NEM) for solar customers. As a result, investing in solar energy in these states may not be a profitable decision.
In contrast, there are several states that have clearly defined solar laws and offer a wide range of incentives to support the solar industry. According to the Solar Energy Industries Association (SEIA), these 10 states have the largest solar markets based on solar energy capacity:
- North Carolina
- New Jersey
Solar energy is popular in these areas because the state governments have clearly defined laws that support the growth of the solar industry. They may also provide incentives which serve to lower the cost of solar energy installations. For example, Florida offers a wide range of solar incentives, including full-retail net metering, property tax exemptions, sales tax exemptions, and utility rebates. So, if you live in Florida or another one of these top solar states, investing in a PV system will likely be a profitable move.
Local Utility Rates
Saving money on electric bills and becoming energy independent are some of the most appealing perks of owning a solar system. And with net metering, you can earn credits from your utility company to save even more money and shorten the payback period of your solar system.
In areas with notoriously high utility rates, owning a residential solar system is a wise decision. States such as Florida, California, and Colorado have some of the highest electricity rates in the nation, so a solar-powered home likely will be much more attractive to buyers in these locations.
States such as Florida also are prone to power outages due to hurricanes and other weather-related events. Therefore, solar-powered homes in these areas may sell for a higher price because buyers would benefit from the energy independence that solar power can provide.
Age and Size of Solar System
The age of the solar system is an important consideration for potential buyers and may affect the value of your home. Most solar panels are designed to last 25 years or longer, but they typically become less efficient over time. As a result, a home with a newly installed solar system will provide many more years of savings compared one that is older.
What’s more, an older solar system may no longer be under warranty, and could cost buyers lots of money in repairs and maintenance fees. At Lake Mary Solar, we provide a 25-year warranty on our solar panels, including parts and performance of the system. So, you’ll have plenty of time to get the most value out of your solar system.
The size of the solar system also can factor into your property value. Based on the findings of the NREL study mentioned above, the greater the output of the solar system, the higher the increase in home value. However, because many states have placed caps on how much solar energy you can sell back to the grid, installing an oversized PV system won’t save you extra money and likely won’t increase your property value.
In general, it’s best to install a system that will offset most or all your electricity costs, but don’t go any bigger unless you plan on increasing your electricity usage in the future. To find out what size system is right for you, check out our solar calculator.SOLAR CALCULATOR
Ownership of the Solar System
Whether or not you are the legal owner of the solar system also can determine how much money buyers are willing to pay for your home. Purchasing the system outright is the most profitable option for the seller and is most convenient for the buyer.
If you’ve leased your solar system, this can complicate things for the buyer. You’ll either need to transfer the lease to the buyer or have them opt for a lease buyout and pay the remaining amount upfront. Depending on the age and size of the system, a buyout might be very costly. Therefore, buyers might be more inclined to purchase a home if the owner has already bought the solar system outright.
Check out our article on solar panel financing to see which option is best for you.
Are Buyers Looking For Solar-powered Homes?
Sure, a solar system will probably increase your home’s value, but are buyers even interested in homes with PV panels? The answer depends largely on your location and how educated consumers are in your area on the benefits of solar energy. But recent market data seems to indicate that most buyers do prioritize energy efficiency when home shopping.
A survey conducted by Zillow showed that nearly one in two (48 percent) of homebuyers listed energy efficiency as a desirable home characteristic. A study by NREL supports this data, indicating that solar-powered homes sell 20 percent faster than those without PV panels.
Do Solar Panels Increase Property Taxes?
If you aren’t planning on selling anytime soon, making upgrades to your home might not be the best investment, as they can result in higher property taxes; however, this isn’t usually the case with solar energy.
Many states have passed laws that prevent homeowners from being penalized for investing in solar power. For example, Florida provides a 100 percent property tax exemption on residential solar installations. That means you won’t have to pay any additional property taxes if your solar panels raise the value of your home. The Sunshine State also offers a sales tax exemption on solar products, further incentivizing the switch to solar energy.
Currently, 36 states offer property tax abatements, and 25 states provide sales tax exemptions; however, the percentage of exemption varies by state.
Conclusion: Do Solar Panels Increase Home Value?
With perks such as long-term utility savings, energy independence, and numerous solar incentives, investing in a PV system is a smart move for most homeowners. And based on the studies listed in this article, there’s a good chance a solar system might even raise the value of your home without adding to your property taxes.
If you still aren’t sure if a residential solar system is the right investment for you, get a quote from Lake Mary Solar and contact us today. Our Florida solar contractor is eager to address all your questions and concerns.Get a Quote