Residential Photovoltaic Energy Systems in California: The Effect on Home Sales Prices

Abstract

I ABSTRACTRelatively little research exists estimating the marginal impacts of photovoltaic (PV) energy systems on home sale prices. Using a large dataset of California homes that sold from 2000 through mid-2009, we find strong evidence, despite a variety of robustness checks, that existing homes with PV systems sold for a premium over comparable homes without PV systems, implying a near full return on investment. Premiums for new homes are found to be considerably lower than those for existing homes, implying, potentially, a tradeoff between price and sales velocity. The results have significant implications for homeowners, builders, appraisers, lenders, and policymakers.

Selling Into the Sun: Price Premium Analysis of a Multi-State Dataset of Solar Homes

“…In previous analyses, premiums for existing homes were found to be significantly larger than those for newly built homes, but the sample used was smaller, only for homes in California, only extended through 2009, and included homes with sales prices up to almost $3 million (Hoen et al, 2011;2013a). The present analysis enables a reexamination of this question by using a sample that is larger, more broadly distributed geographically, has more recent data, and uses homes no more expensive than $900,000.…”

“…Farhar and Coburn (2008) first documented the apparent increase in values for 15 PV homes inside a San Diego subdivision. This was later corroborated by strong empirical evidence from greater San Diego and Sacramento (Dastrup et al, 2012) and from a relatively large dataset of approximately 1,900 California PV homes (Hoen et al, 2011;2013a;2013b); these studies employed hedonic pricing models to estimate premiums. Finally, a case study of 30 PV homes that sold in the Denver metro area found evidence of premiums (Desmarais, 2013).…”

“…Because the evidence that PV homes garner a premium has focused on a relatively small number of California homes and a few in Colorado, there is need for further evidence of premiums outside of California and even inside California. There is also a need to analyze transactions that occurred after the recent housing bubble, the period from which most previous data had been collected and analyzed (Hoen et al, 2011;2013a;2013b).…”

“…Understanding whether observed PV premiums varied over this period would help illuminate how enduring these premiums might be. There also has been evidence that the new home market in California heavily discounted PV homes during the housing boom and bust (through 2009) in comparison to the premiums garnered by existing home sellers (Hoen et al, 2011;2013a). 3 Therefore, examining how new home PV premiums fared in relation to existing home premiums within an expanded dataset would be of interest.…”

“…Finally, previous literature suggests the need for more research on the market's depreciation of aging PV systems, especially for systems greater than 6 years old, which have not been well studied because of the immaturity of the PV market (Hoen et al, 2011;2013a;2013b). A clearer understanding of how the market depreciates PV systems would likely enhance appraisal techniques.…”