Solar panels - PV Value estimated energy value

[Lee Lansford ASA]

True, but in the absence of support from paired sales, then PV estimate is a supported estimate of the impact. No one can prove it wrong if there are no nearby paired sales, and of course, the problem with paired sales in finding a true model match with making any number of unsupported assumptions about other items different between the two "pairs" and a single "pair" to me is basically no support at all.

"Bingo!" as to the reality of "paired sales". Sensitivity, too, has its limitations. We don't want to be "wild and crazy" in our approach, but the art of appraising is right up there with the science in the residential arena where the stock of housing is not highly homogeneous.

 

[George Hatch]

Solar installs have significantly different resale values by region. Consider what that means when it comes to selecting a cap rate. For properties which are being purchased by SFR buyers, not rental income investors.

Even cell tower leases have different (lower) values when bundled with the RE interests vs sold as a separate leasehold interest to an income-oriented investor. And the difference is profound.

If you're going to assume the cap rate in the boilerplate or off some dumbass broker survey will always be applicable regardless of the local market conditions then you might as well just skip the calculator app and use the adjustment factor in your ACME Universal Adjustment List. I don't think I've ever met a residential broker who even understands what a cap rate is, what it means or how to develop one. Heck, some of the bankers don't even understand cap rate development, despite the explanations that appraisers provide in a narrative report.

 

[Jaketnt]

Thank you all for your response and contribution.
Per PV Value, based on a 25-year energy production/rating of the panels (minus 4 years the system has already been in place), a 5.6 kW system that costed the homeowner $29K (with an estimated $7,400 Fed tax credit) yields a total accumulated value of $7K! that's 24% of the original cost. If I was to add those 4 years (treat it like a brand new system) it would probably add another $2K for a total accumulated value of $9K, which is 31% of the original cost. Does this sound like a reasonable adjustment (based strictly on an income approach) ?!

 

[George Hatch]

The OP is in California. The "there are no sales" situation doesn't exist here. There are sales involving solar and every one of them have have their own respective comps from which an appraiser can extract that adjustment factor. Even if the "have-solar" transaction isn't recent enough or directly comparable enough to present as S#4 in your subject's SC grid.

Going back to my Certified Green Appraiser course, while the instructor was running the "use this app because you can't do it via sales" talking point I went ahead and ran comps on 2 of the case studies they presented and found paired sales for each in no time flat. Maybe 5min in real time while he was telling everyone in the room that it couldn't be done. (Course participants had to bring their own laptop to connect to the internet, so I had access to the MLS).

The premise of "use this because you can't do it any other way " can only occur when none have ever sold in this region.

Appraiser: "Hey look, these two sales demonstrate this adjustment factor." Rinse/repeat a couple times and you can demonstrate a trend. All the app can do is show what those buyers SHOULD do if only they understood what the app is actually doing.​

 

[J Grant]

Thank you all for your response and contribution.
Per PV Value, based on a 25-year energy production/rating of the panels (minus 4 years the system has already been in place), a 5.6 kW system that costed the homeowner $29K (with an estimated $7,400 Fed tax credit) yields a total accumulated value of $7K! that's 24% of the original cost. If I was to add those 4 years (treat it like a brand new system) it would probably add another $2K for a total accumulated value of $9K, which is 31% of the original cost. Does this sound like a reasonable adjustment (based strictly on an income approach) ?!

Yes, 9k sounds reasonable for an income approach - it is still not market value because you have no idea if in an individual appraisal in a specific area the market is paying nothing, 10k, or 20k.
But by itself it is fine.

 

[djd09]

https://twitter.com/x/status/1937065708082385346

...

 

[alebrewer]

Do prospective pv buyers use pv calculators to estimate the value of the systems?

From CoPilot:
Yes, prospective buyers of solar photovoltaic (PV) systems often use PV calculators to estimate the value of the systems.
How PV Calculators Help Prospective Buyers:

• Estimating Energy Production and Savings: These calculators can estimate the amount of energy the system is expected to produce, which helps buyers understand how much they could save on their electricity bills.
• Assessing Financial Viability: PV calculators assist in evaluating the financial benefits of solar by projecting long-term energy savings, potential tax credits or rebates, and the system's overall cost.
• Determining System Size and Design: By considering factors like electricity usage, roof orientation, and sunlight levels, the calculators can help determine the appropriate system size and panel arrangement.
• Calculating Payback Period and ROI: Many calculators provide estimates for the payback period (the time it takes for the system's savings to offset its cost) and the potential return on investment (ROI).
• Understanding Environmental Impact: Some calculators offer an estimate of the reduction in carbon emissions, allowing buyers to see the positive impact of their solar investment on the environment.

Examples of PV Calculators:

• PVWatts Calculator: Developed by the National Renewable Energy Laboratory (NREL), it's a widely used tool for estimating energy production and value.
• PV Value™: This tool, embraced by the Appraisal Institute, helps determine the present value of energy a system can produce.

Limitations of PV Calculators:
While helpful, it's crucial to be aware that online solar calculators have limitations:

• Accuracy depends on accurate user input: The results are only as precise as the information provided by the user.
• May not fully account for site-specific factors: Factors like shading, specific roof characteristics, and local regulations might not be fully captured by online tools.
• Results can vary between calculators: Different calculators might produce different estimations, as seen in the example comparing Project Sunroof and EnergySage.

In summary, prospective PV buyers often use PV calculators to get a preliminary understanding of the system's potential value and make more informed decisions. However, it's recommended to consult with solar professionals for a detailed site assessment and accurate quotes before making a final investment.


Seems to me there's no real requirement to understand DCF so long as all they're doing is inputting information... (which is all they're doing). And they ARE doing that.

 

[J Grant]

Do prospective pv buyers use pv calculators to estimate the value of the systems?

From CoPilot:
Yes, prospective buyers of solar photovoltaic (PV) systems often use PV calculators to estimate the value of the systems.

A buyer for a PV system, who already owns a house and is adding it, is not the same buyer for a house , with some houses already having a solar panel system installed. Do the buyers for houses use the PV calculations to determine how much more they might pay for a house with solar panels? I doubt it...unless evidence shows it. Maybe for some buyers. IDK

Market Value-based adjustment is for the contributory value that buyers actually pay, extracted from prices. Paired sales., talking to RE agents, and seeing area demand should answer the question.
If one wants to play solar panel salesperson and do a PV calculation and compare results to what the RE market returns, that would be an interesting comparison.

 

[alebrewer]

Do the buyers for houses use the PV calculations to determine how much more they might pay for a house with solar panels?

Why didn't you just ask that question?

From Copilot:
do home buyers research pv value prior to buying a house with solar panels?

Yes, home buyers generally research the value of a PV (photovoltaic) solar panel system when considering buying a home with solar panels installed. They want to understand the potential benefits and costs associated with the system, and how it impacts the overall value and expenses of the home.
Here's why and what they consider:
1. Financial Benefits:

• Reduced electricity bills: Home buyers are attracted to the idea of lower or even eliminated monthly electricity costs. They research the system's expected energy output to estimate potential savings.
• Net metering: They investigate whether the home's location and utility provider offer net metering, allowing them to potentially sell excess energy back to the grid and receive credits.
• Increased property value: Studies show that homes with solar panels generally sell for a higher price than comparable homes without them. Buyers are willing to pay a premium for the long-term benefits and energy savings.
• Return on investment (ROI): Buyers consider the payback period of the system - how long it will take to recoup the cost of the solar installation through energy savings.

2. System Condition and Performance:

• Age and condition: The age and maintenance history of the solar system are important factors. Buyers want to ensure the system is in good working order and has remaining lifespan.
• Energy production data: Information about the system's historical energy production provides insight into its real-world performance.
• Quality of installation: The reputation of the installer and the quality of the components used can affect the system's longevity and performance.

 

[Terrel L. Shields]

otal accumulated value of $7K! that's 24% o

Not unusual. The rest you can chalk up to functional obsolescence.