End Of Life Solar

[Renee Healion]

Yes, people should not use tools they do not understand. And instructors should not teach what they do not understand. By rights, those instructors, the sponsors of the class, and the accrediting authorities approving the class should have to answer for it. And if you attended and saw it first-hand, I hope you got your money back.

 

[Meandering]

I couldn't possibly image entire industry sections growing up to direct appraiser opinions in certain directions.



The information is out there. It is not a Cassandra effect. It is a known fact and one that must be addressed, even if nobody mentioned it in a class.

And not only is the chemical information out there, so is the "newest" technology and efficiency rates, when compared to the "old" technology of solar panels. And it's not like anyone was taught in class to gather the exact data of what type of solar panel is installed on the property being appraised, because that stuff is just too complicated for buyers, or some other reason.

But I get it.
The AI wrote a class.
Denis did a study and wrote a paper
So that's the end of the topic.




EXPOSURE TO CADMIUM:
A MAJOR PUBLIC HEALTH CONCERN
World Health Organization


Occupational Safety and Health Administration
Cadmium

Cadmium telluride photovoltaics
Cadmium telluride (CdTe) photovoltaics describes a photovoltaic (PV) technology that is based on the use of cadmium telluride, a thin semiconductor layer designed to absorb and convert sunlight into electricity.[1] Cadmium telluride PV is the only thin film technology with lower costs than conventional solar cells made of crystalline silicon in multi-kilowatt systems.[1][2][3]

On a lifecycle basis, CdTe PV has the smallest carbon footprint, lowest water use and shortest energy payback time of all solar technologies.[4][5][6] CdTe's energy payback time of less than a year allows for faster carbon reductions without short-term energy deficits.

The toxicity of cadmium is an environmental concern mitigated by the recycling of CdTe modules at the end of their life time,[7] though there are still uncertainties[8][9] and the public opinion is skeptical towards this technology.[10][11] The usage of rare materials may also become a limiting factor to the industrial scalability of CdTe technology in the mid-term future. The abundance of tellurium—of which telluride is the anionic form—is comparable to that of platinum in the earth's crust and contributes significantly to the module's cost.[12]
https://en.wikipedia.org/wiki/Cadmium_telluride_photovoltaics

Advantages and disadvantages of amorphous solar panels
Unlike many other thin-film panel options, amorphous silicon panels use very little toxic materials. When compared mono- or poly-crystalline solar panels, amorphous panels use much less silicon. Amorphous solar panels are also bendable and less subject to cracks than traditional panels constructed from solid wafers of silicon.

The ongoing challenge with amorphous solar panels is their low efficiency. Due to complicated thermodynamics and the degradation of amorphous silicon, among other factors, amorphous solar cells are less than half as efficient as mono- or poly-crystalline solar panels. Amorphous solar panels offer around a 7% efficiency rate, while mono- and poly-crystalline panels have efficiency ratings of anywhere from 14% to 20%+. Attempts to raise the efficiency of amorphous panels by stacking several layers, each in tune to different wavelengths of light, has proven somewhat effective, but the overall efficiency of these types of thin-film panels is low compared to other options.
https://www.energysage.com/solar/10...-panels-amorphous-cadmium-telluride-and-cigs/
Toxic Chemicals in Solar Panels
The toxic chemicals in solar panels include cadmium telluride, copper indium selenide, cadmium gallium (di)selenide, copper indium gallium (di)selenide, hexafluoroethane, lead, and polyvinyl fluoride. Additionally, silicon tetrachloride, a byproduct of producing crystalline silicon, is highly toxic.
https://sciencing.com/toxic-chemicals-solar-panels-18393.html

Overall CdTe solar cell performance was significantly improved after the discovery of a cadmium chloride (CdCl2) vapor treatment. This annealing process is accomplished in the presence of oxygen at temperatures near 390°C after the CdTe layer is grown on the CdS layer and prior to the back-contact deposition. The CdCl2 treatment has positive effects on the CdTe solar cell, such as growth of larger CdTe grains and the passivation of defects.

For more information on cadmium telluride solar cells, visit the Energy Basics website.
https://www.energy.gov/eere/solar/cadmium-telluride

Consider the hours of education toward understanding income capitalization and any income generation from solar panels.


https://www.myappraisalinstitute.or...px?grp=ALL&fcosw=C&stcode=&chptrid=#classroom


.

 

[George Hatch]

Yes, people should not use tools they do not understand. And instructors should not teach what they do not understand. By rights, those instructors, the sponsors of the class, and the accrediting authorities approving the class should have to answer for it. And if you attended and saw it first-hand, I hope you got your money back.

1. I voiced my objections during the course as far as I could without being disruptive
2. I consumed the instruction, only a fraction of which was aimed squarely at the valuation process - most of the hours consisted of identifying what the different elements are and how they work together.
3. It is important to me to be able to recognize what I'm seeing when I run into these elements. I already know how to value them. I've been appraising for a long time.
4. I've attended lots of CE courses that covered material I already knew, or which contained material I didn't agree with. Neither of those situations means the course is actually bad.

And
5. That particular course was free (sponsored by a local utility) so there's no refund to request even if I was a dissatisfied customer - which I'm neither dissatisfied nor a customer. I simply disagreed with their preferred valuation methods - for cause.

 

[Renee Healion]

Marion, you can trivialize my efforts over years to deepen and expand my skillset and it will roll off me. I am done saying these systems are here, what are peer appraisers doing professionally when they encounter them in their ordinary course of work. I know what I am doing but what others are doing matters to me because they are not just bidding against me but are setting client expectations of appraiser qualifications.

I don't have to justify myself to anyone except those directly related to my work. What I have seen on this forum, is appraisers, many posting publicly under their own names, tossing off hot takes based on no direct experience. Just opinion.

When I ask what other appraisers are going to do, I am not asking how to do the work, here. For that I have taken all the coursework available to me, for starters. When I mention a study, it is because I have read the study, have spent hundreds and hundreds of hours reading everything I can and trying to keep current. I do the work. I talk to buyers, designers and builders. Installers I research the databases on installations, where, how much, and draw my own conclusions. I keep up with the regulations and have posted changes here. I did not "take a class" or just read a paper by one of our own. I did read Denis' paper when he posted it and noticed that the opinions were flying in minutes, before the posters had the time to open the file, let alone read it and see what he did. Just opinion.

I am not asking permission here for myself, I am asking that other appraisers use tools and their brains to develop their adjustments when handling properties with these systems and not fake it. Bank reviewers tell me "appraisers are just adding $2,000-4,000 for these systems". Oh really, well I guess that that is the new $20/sq. Ft. GLA, good, I guess, for decades and any type of improvement! Good thing I have done all this to meet my own standards, if that is the standard.

Further, I sense some contempt for res appraisers. The issue is not that doing this work is outside of residential scope, it is that GSE work has so confined residential appraisers that their skills have atrophied. GSE work has domesticated appraisers-birds so that they can no longer fly. I just cannot accept that they like life in crates.

If you have power, use it. If you have skills, sharpen them, and use them. If you want to roll on doing 5 townhouses a day, do that and die rich, but not everyone wants to live their life that way. I am appalled that George posts that he would have to teach practicing res appraisers how to use a GRM! I do not doubt it, nor his good intent, but that that exists is disheartening.

If I mention a DCF model to just put it on the table, you have suggested I would use it blindly, as though the inputs are not for the appraiser to be developing. If I mention a study, George bats it away as though I am repeating something I just heard about. (If there is something showing that underwriters are signing on in numbers, then that is good to know because those nervous cats are signing their names to the file, like the appraiser signs hers. It is support for appraisers.)

As for pollution, please know that I am not writing in support of it. I have lived in a house which had lead pipes, and a blizzard of asbestos, the friable kind. I hope we live and learn, though it is more and more work to hope that we are not just making new versions of old mistakes, but just another source of future pollution is not something I need to worry about when I am appraising what buyers and sellers are doing as of my effective date. I just must take care that my work is defensible and supported by using recognized methods. If you want to criticize the methods and the technology, then learn more about both as they are used here and defenestrate them. I will happy to watch.

So, carry on.

 

[George Hatch]

You're getting the wrong message here. I'm not telling you what methods to use or not use; I'm telling you that you shouldn't use a method or application you don't understand. You CAN take the income courses we take for what we do but that's not the only way to build that competency. There are other ways to do it, one of them being to do it on your own.

As for smearing SFR appraisers, that's not true either. If most of them don't understand the application it is not a smear for me to point that out.

Now I've made my case for why I don't think DCF analysis is a good tool to use for residential markets, namely that the buyers and sellers don't generally translate the savings directly into the premiums they pay for the properties. But that's just one segment of the market. I also do non-residential properties where the net income is a big part of the valuation, so in those situations a DCF or income multiplier becomes a lot more relevant.

We run into billboards (provides supplemental income), cell towers (provides supplemental income) and other property features where these techniques are more commonly used by the buyers and sellers of the properties. But that's the thing - we're using the same or similar methodologies the participants in the market are actually using because what we're measuring isn't the income (or the cost) of the feature itself, but the market's *reaction* to that feature, which is most appropriately measured directly by looking at those transactions. This is a point that (IMO) isn't being adequately conveyed in some of the discussions we are having on using these different valuation tools.

 

[Renee Healion]

I'm telling you that you shouldn't use a method or application you don't understand...

I understood you the first time you said that.

 

[George Hatch]

Lemme put it this way

If we want to know what the contributory value is of a larger lot in an SFR appraisal we will commonly conduct a separate land sale analysis, consisting of properties that are not among the direct comps we are using for the SFR, and well extract the lot size adjustment factor from those land sales; importing the *market derived* adjustment factor for use with our dataset.

If we want to know what the market rents for an income property are, we seldom rely solely on the income data that the comparable sales report. What we usually do is conduct a separate rental survey consisting of rental comparables, most of which haven't even been sold recently. Our conclusions with the rents are *market derived*.

If we want to know what the prevailing GRMs or cap rates (or discount rates) are in a market segment where the direct comps don't all have them or the data is inconsistent we will run a survey of other transactions, consisting of properties that might not be among the most similar sales that we present in the sales comparison.

So what do you think we do when we run into a billboard lease or a cell tower lease? We don't try to pull that variable out of our direct comps in the Sales Comparison because "there's not enough data for that", meaning we're almost never going to find "most recent, proximate and similar" comps for the house that also have the cell tower.

What we do instead is conduct a separate analysis of other properties with those features and compare their pricing to their respective comps; and import the resulting adjustment factor into our analysis. THAT is an adjustment we can support using actual market data, and not relying solely or primarily on a generic mathematical model or the results of some study that was performed on the opposite side of the nation.

Like I said before, in terms of appraising there's nothing special about solar as a feature when compared to most other features. Parts is parts. So I don't consider it a particularly strong argument that we need to develop some exotic valuation model than none of the market participants in that market segment are using to come up with a value they *should* pay if only they knew what they were doing. We have other alternatives that we know how to develop.

The easy button may be expedient, but in my view there's little difference between arbitrarily relying on "the list" vs arbitrarily relying on "the app" or "the study". Just because we put the monkey in a silver suit doesn't make him an astronaut.

TL;DR version is that I am in no way trying to discourage SFR appraisers from taking these assignments or telling anyone that only the CGs should be doing them. Just the opposite. I'm telling you that SFR appraisers already have all the competency in the conventional valuation tools that it takes to isolate these adjustments. They just need to work the process.

 

[Renee Healion]

A DCF is one tool. Why would any good appraiser rest their opinion on the use of one tool? If you’ll notice I have been saying that these systems are prevalent here and increasing (I hope prospective buyers are paying attention to regulatory changes affecting utility pricing structure). For their very prevalence, we can expect a growing pool of data from which to develop sales comparisons. Res appraisers be will staying in their lane!

Any mention of any tool or method, or even the adoption by homeowners, in a thread sets off a round of naysaying with the subtext that appraising properties means the appraiser must be a true believer and a credulous embracer of (not so new) technology. Denis posted his study, which, as I recall, relied on sales data. That was the beauty, it was routine tools used diligently and very carefully with data which can be uncovered. Even that set off a new round, not at him, but at the very idea. Appraisers are just resistant, even to someone who is just trying to do their job with the best information and generally accepted methodology.

I argue for more learning, how can you as an instructor object? More learning about the systems first because with some effort they can be readily apprehended by most decent appraisers. And who owns which benefit (or no benefit, fine). It took a bit before posters were even distinguishing between leased and owned. And then about use of various tools which we should all be familiar with and maintain competency in using.

I am actually very cautious. No sane appraiser wants to be on the edge of something new, so I waited until it was not new before applying anything I had been learning. I started that some years ago before having to park the last part because of the demands in time and money of the designation thing.

I appreciate the exchange, but I must go shopping, which I hate. My car is totaled so I need to buy another car or I will be spending all my time reading and learning and none of it doing. I am currently distracted by weighing the 2-star safety rated crates that seem to meet my price point.

As if to prove my distracted state, I now see your last post. Thank you, George.

 

[hastalavista]

Just for clarity, the study Renee & Marion reference was completed using the most common tool available to residential appraisers: Paired sales analysis. It was supplemented by a market-participant survey; agents/brokers that were involved in sales that had a PV or significant renewable/energy-efficient feature. DCFs were not part of that analysis.
However, I used the DCF for my own "reality check" and the DCF results were consistent with the paired sales. When I say "consistent", I mean most systems indicated a NPV of $20k to $40k which was pretty consistent with the 2% premium the study found, and certainly within the range (near zero to 3.5%) that the individual pairings indicated.
I now have a 'peer-reviewed' data base that I can use as supplementary support. It won't be good forever unless I update it.

When I do these systems for "live" assignments, I do three things:
A. Look for direct sales to pair. Sometimes I find them, sometimes I don't.
B. Run a DCF assuming I have enough information about the system (and as I've said, it is generic).
C. Complete a market-participant survey for that market. If the comps don't have the system, I still ask the agents how they think such a system would impact the sale. Some give me an answer, others say they have no clue (honest agents).

This is the level of due diligence I perform in my market where the expectation is that such features/components will be credibly and competently evaluated. And, as I've said many times before, in my markets, where the adjusted range can be a $40k to $80k spread, it is a no brainer (for me) to consider the amenity's impact on value in the reconciliation, and use it as rationale to pick a point higher on the adjusted range than lower. This isn't "fudging" the numbers. This is what the reconciliation is all about.
And you can bet that in Sunnyvale, Menlo Park, or Mountain View (ground zero for the high-tech industry, Mountain View has a median home price of $2,500k), the reconciliation is higher than, say, Stockton, where the range is likely tighter than $80k. This makes intuitive sense because the Stockton demographic has less ability to purchase such an amenity than the Mountain View demographic.

I'm not a "go-green" guy for green's sake. I am a "will it really return on my investment?" guy. Most people are. If it does, than I'll consider it. If it doesn't, I'm not apt to make a decision based on a social-awareness motivation especially when I'm not convinced what I'm considering is a solution to the problem, whether I think there is a problem or not.
I am an appraiser, however. And this is data. In my markets, it should be analyzed; the techniques used and the results concluded are like any of our other tools/results: their confidence level is going to be dependent on the quality of the data (factual and assumptions) and the quantity of the data.
YMMV.

 

[George Hatch]

This is the level of due diligence I perform in my market where the expectation is that such features/components will be credibly and competently evaluated. And, as I've said many times before, in my markets, where the adjusted range can be a $40k to $80k spread, it is a no brainer (for me) to consider the amenity's impact on value in the reconciliation, and use it as rationale to pick a point higher on the adjusted range than lower. This isn't "fudging" the numbers. This is what the reconciliation is all about.

I usually rank my subject in the range of the adjusted value indicators based on whatever factors I think are in play. I usually weight homes with solar features higher in the adjusted range even when the data might otherwise be inconsistent or inconclusive. But when it's obvious there is no discernible difference then I go with that.

WRT green issues I aspire to do my job professionally and report what the participants are actually doing. I'm not a greenie, but I recognize that it's important to some people just the same way as some people are enamored with granite rather than tile, or peek views from the upstairs bedroom.
I recognize that different market segments in my region are sometimes doing different things, so each situation has to be evaluated within that context.

As for the DCF, I would anticipate a well-developed DCF aimed at a Bay Area market where everything is north of $2M would include a slightly different set of assumptions than a DCF for a $100k inland market. It is those different assumptions that produce the different results, same as occurs in every other application of yield capitalization.