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PG &E Power Outages - Impact on Home Value?

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Bert Craytor

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California
Pacific Gas & Electric announced earlier this year that they would start turning of power in dry high wind conditions in various parts of California, but it didn't occur to me how close to home it would hit. But, on second thought, it does make sense.

Large areas of the San Francisco Bay Area are going to be hit with power outages today - in addition to many other areas of California. The outages could last up to a week.

Many people in this area absolutely need electric power for one reason or another. Many run websites from their home, and need continual electricity to maintain them. Oh, then of course there are the refrigerators and freezers.

I think we are already seeing an impact on values in areas surrounded by dry forests. However, the final outcome will likely be far worse as time goes on. California will keep getting drier and hotter.

1. Solar Energy can replace some of the power, but you need expensive batteries and installation which can cost $15K+. And such batteries can only provide back-up power for at best 6-8 hours of use.

2. Natural gas and diesel generators are going to be needed by many. Even these will not provide the electrical energy that could be provided by the grid. But they can suffice for most. Such generators cost $10K-$25K, plus installation. Also, perhaps more importantly, they incur fuel and maintenance costs. Some estimates are that generators could cost $100/day to run. Not to forget that automobile gas and diesel in California costs twice the national average. Natural gas is about the same as the national average. Thus I would assume most in California will opt for natural gas generators to supplement batteries.

This link includes a zoomable map that is pretty good:



3. Eventually there may very well be restrictions on the use of diesel and natural gas generators, as they are noisy and polluting. In fact, this goes without saying in California. Who is going to invest $15K+ in a system, when they don't know if the state is eventually going to outlaw its use?

Conclusion: Eventually, homes that are located near large forests, subject to such power outages, could have their values reduced by as much as $50K-$100K+, -- to be clear IF AND ONLY IF there are no upgrades to mitigate the problem. For example, a home on a large parcel could have a small solar energy farm that actually sells electricity to neighbors, possibly by recharging batteries (e.g. Tesla Powerwalls https://www.cleansolar.com/battery-storage-g/?gclid=EAIaIQobChMIsbzNj6OP5QIVUhh9Ch07cg65EAAYASAAEgI-RfD_BwE)

The final impact won't be known until all the regulations have been generated.

--- Oh yes, there is the small issue of fire insurance, State Farm and other insurance companies are terminating many policies in these areas and, of course, refusing new applications.
 
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ucbruin

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Mar 11, 2014
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Certified Residential Appraiser
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Massachusetts
PG &E Power Outages - Impact on Home Value?



Isn't there a mathematical formula for that????

If not....
Get cracking....
 

Addie

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Mar 22, 2018
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State
California
It already happened long ago. I live in a city that is rule 20 and the city runs and owns its own electric grid. Home prices much higher than Bordering towns with PG&E.
 

CANative

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Jun 18, 2003
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Certified Residential Appraiser
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California
It already happened long ago. I live in a city that is rule 20 and the city runs and owns its own electric grid. Home prices much higher than Bordering towns with PG&E.
Riverside?

I live in Ukiah. It has its own power generating system for properties within the city limits. Outside the city limits, it's PG&E. We're on a "wait-and-see" right now but do not expect power outages even though we use some PG&E transmission lines.

People are concerned and the gas lines were crazy yesterday. Pricing trends have been stable for years. Most people have mixed feelings about the planned outages.
 

Bert Craytor

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Jun 27, 2017
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Certified General Appraiser
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California
It will take a while for this to play out.

One unknown factor is a kind of fear of the unknown and/or a desire to keep life simple and stable. To some as yet unknown extent, many will want to avoid economic and other risks of living in or near forests, and will opt only for homes that are located in areas safe from forest fires. It's going to be a change in social psychology. It will help save the forests. In fact, we might presume some planners are favoring policies that curtail the spread of urbanization into forested areas. - For example, I expect this is what is happening with fire insurance. We need more evidence to create a formula for the impact of this on home prices.

There will be more technological adaptation. There will eventually be more battery recharging locations for Tesla Wall batteries and the like. It would take a sizable investment in Tesla batteries to completely replace the grid in outages. But 4+ batteries with a nearby charging station might make that possible. Batteries could also be rented. It certainly wouldn't be cheap. In fact, it might be too expensive to make sense, and we may simply need to wait for more innovation. In any case, the infrastructure is not there yet.
 

CANative

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Jun 18, 2003
Professional Status
Certified Residential Appraiser
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California
You're talking stigma Bert and the thing with stigma is that people forget and life goes on and then back to normal.

Getting reasonable insurance in the SBNF is already the subject of many bitter debates and feelings and people are extremely fearful of fire... to the point of marking people who light a BBQ or smoke in their cars with a scarlet letter. But you can't blast people out of rural areas, urban forests, and other such communities.
 

Mark K

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Jan 27, 2004
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Certified Residential Appraiser
State
Indiana
The rooftop solar should save them all!

For now, its mandated for new construction. Soon, mandatory retrofit in the affected areas if the solar companies and the politicians in their pockets have their way.

As far as insurance companies refusing to write policies...I suspect that the state will have to come up with a system similar to Florida's hurricane insurance. Its not cheap but its available. People want to live in high risk areas and their policy premiums should reflect that risk.
 

CANative

Elite Member
Joined
Jun 18, 2003
Professional Status
Certified Residential Appraiser
State
California
The rooftop solar should save them all!

For now, its mandated for new construction. Soon, mandatory retrofit in the affected areas if the solar companies and the politicians in their pockets have their way.

As far as insurance companies refusing to write policies...I suspect that the state will have to come up with a system similar to Florida's hurricane insurance. Its not cheap but its available. People want to live in high risk areas and their policy premiums should reflect that risk.
That's already happening and is a sore subject on the SBNF FB groups (San Bernardino National Forest - e.g. Lake Arrowhead, Big Bear, etc.) The cost is very high and some cannot afford to pay it. $6,000+ per year from what I've been reading.

I'm not sure why you feel you have to mock solar PV systems (to which you get a "yuck, yuck" from another forum member.
 
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