Solar power is generated by converting sunlight into electricity, either directly with the help of Photovoltaic (PV) solar cells, or indirectly utilizing concentrated solar power (CSP) systems, which use lenses or mirrors to focus a vast area of sunlight into a small beam.
The value of any property that gets electric supply from solar panels is generally very high. This is due to the following advantages in installing a solar power system in the house:
1) The cost of electricity supplied by the grid is relatively high when compared with solar energy.
It means that if the property gets its electricity from the solar power system, there is no need to get power from the grid or power requirement from the grid is reduced.
If no power is drawn from the grid, there is no need to pay any energy costs to the grid. On the other hand, if there is reduction in power requirements from the grid, it will result in overall savings in energy costs.
2) Solar power systems are insulated from future increases due to inflation, as the increases are approved by the Department of Public Utilities.
3) Solar power systems are eligible for accelerated depreciation for the purpose of tax. This results in appreciation in value for the property very fast.
4) Properties powered by solar energy have much higher resale value, to the extent of 17%, than the properties without solar power system.
Many surveys have indicated that properties that use solar energy were sold at an average of 20% faster than the properties without solar power systems. According to the assessment of Nevin, Bender and Gazan published in the Appraisal Journal, the benefits of installing a solar energy system in a property can be easily expressed in financial terms.
As validated by the Appraisal Institute, a solar energy system enhances the value of a home by $20,000 for every $1000 savings in annual operating costs. The underlying justification is that the savings from the reduced operating costs can be utilized on a higher mortgage without any change in the net monthly cost of ownership.
The percentage of costs recovered in a solar energy system is much higher than in any other property improvements. In other words, most of the solar systems will recover its investment much faster than any other asset; in fact, recovery far exceeds 100% of the cost.
The savings from a solar energy system is so enormous that even according to the conservative estimate; return on investment over a period of 25 years is expected to be between 220% and 350%. This reduction in costs may be much more substantial if power costs from public utilities continue to move upwards.
The latest comprehensive study by the National Renewable Energy Laboratory (NREL) on the homes across various subdivisions constructed by several California builders revealed an interesting comparison between homes using solar power and those not powered by solar energy.
It showed that solar-powered homes were sold 20% faster and 17% more than the corresponding non-solar-powered houses. In a specific subdivision alone all the 257 solar-powered homes were sold within a year, 2 years earlier than anticipated. Certain interesting facts came to light during discussions with the home buyers.
If solar power system was already installed in the house and its cost was included in the purchase price, buyers were likely to opt for a house with a solar power system.
However, if the seller is to yet to decide about setting up a solar power system at the time of purchase, the buyer dropped the idea of buying that house altogether. The homes that utilize solar energy fetched a price of anywhere between $380,000 and $500,000 and in view of the heavy demand, some homes were sold as high as $600,000!
Another interesting aspect about the property with solar energy system is that even when the system gets old the property is expected to appreciate in value corresponding with the increases in electricity rates. For instance, the higher the increase in electricity tariff, the greater will be the appreciation in value; the ratio being as high as 20 to 1.
With the passage of time, solar energy systems get old and can generate power only at 80% of capacity up to 25 years, resulting in accelerated depreciation for the equipment. It is for this reason solar power equipment carry a warranty for 25 years till the end of their useful life.
Home buyers will be prepared to pay at least 100% of its original cost so that they can retrofit the solar power system considering the ever increasing electricity rates. On the whole, the present or future owner of the property will be assured to get back their investment on solar power system, if an occasion arises in future to sell it.