Solar panels

[Lee Lansford]

What is your opinion of solar panels and adjustments?

Adjust when appropriate (e.g., owned). An adjustment may be "0" any other number positive or negative.

 

[B1trying]

How does the income approach work if you pay $200 to 250 a month payment for 10 to 15 years. All you are doing is substituting one payment for another. At 10 years you have lost 25% efficiency and by year 20 50 to 75% loss of efficency. This is what I have been told by the manufacture of one solar panel company. Others fairly similar. So if you pay them off at 10 years and you get roughly 10 years of 50 to 75% savings on your electric paid by solar. This is a good deal? This is the aluminum siding salesman from 1965 at your door. I see these things on manufactured homes, houses that are only worth 100K (old crappy houses in poor section of town). This will end soon in Florida. Now that we got a ton of them out there in the market and next hurricane that comes thru will change this. Home owners insurance has almost double in this year in FL due to roof claims. What do you think 35k in solar panels on top of the 10k roof is going to cost to repair after a hurricane. Also insurance in fl in now dropping people that have roofs older than 10 years old. So who pays every 10 years to uninstall and reinstall to replace shingles? These are little fly by night companies running around selling these things. Value on them in NW Fl thru paired sales analysis resulted in a 10k adjustment for them. They have to be paid off to refi or sale.

 

[B1trying]

I see them on lower income properties the most. Less educated buyer in my mind is who is falling for this.

 

[shrubberyvaluation]

I see them on lower income properties the most. Less educated buyer in my mind is who is falling for this.

35K financed when your property is worth around 100k seems crazy (I assume they are not paying cash). Things happen and people move. For most people an older mobile home is not their dream forever home. The salespeople tell them of the savings, but not of maintenance costs. I am not an expert on solar panels but I imagine it costs money to maintain them in addition to the expenses to move them when replacing or repairing a roof.

 

[B1trying]

They tell me that the company will come out and remove them and put them back on when you need a roof. What if you get a crappy installer and have to have it reroofed in a year. What are they going to say. We have had a lot of this reroofing after the hurricane with all the sorry labor that comes in the market. These companies that are selling them in Fl are small mom and pop business's not some major corp that is going to be here in 10 to 15 years. They are not impact rated like the windows have to be in alot of areas. They are saying insurance co are saying they are covered but they are not included in the cost estimate to build in there software. So you have 300k house and it's insured for 300k replacement cost and you put a 35k system on it and it burns down. Is it insured? I don't think so. Your insurance would have to go up to cover them. You are asking for additional coverage with them. I get owners just shrug their shoulders. These are the same people screaming the insurance co screwed them on the hurricane damage and they expect it will be ok. They don't read the policy until the storm knocks there house down and they trying to figure out how much they will get. And they are ugly to boot. My wife will tell you she is not living in any house with that crap on the roof. Nothing like rolling up to a high end house with roof covered in them. It sure takes away from the architecture of the house.

 

[George Hatch]

It doesn't matter what you or I think of these installs. What matters is how the buyers and sellers in that market segment are reacting to them.

But to your other points, you're right. These online models don't take into full consideration the effects the interest rates have on the payment. Or the effects of inflation on both the value of the dollar you spent to buy the asset in 2022 vs the value of the dollar that comprises your payment for it in 2032. Or the rate of inflation in the grid power bills against which you're comparing your solar payments.

If the long term energy inflation rate is higher than the general rate of inflation in the CPI and the model is either overestimating or underestimating that different rate then that will be of effect on the analysis.

There's a lot going on in those analyses, some of it effectively obscured from the users. And not disclosed as is necessary when an appraiser performs such an analysis. When I run a DCF that includes projections of gross income - expenses = net income over a long holding period it usually takes me ~2 pages of narrative to summarize and explain the different assumptions I'm using and why I'm using them. These online models don't do any of that.

 

[djd09]

PG&E claims home solar is racist, wants to gut program​

Next year, your solar panels could cost you more than your monthly internet or cable TV bills, that’s because PG&E is trying to increase their bottom line by tying home solar to racism. The utility is claiming rich, white people are the primary installers of rooftop solar, so they should lose their economic benefit.


Rooftop solar is taking $3 billion a year from PG&E’s revenue, their estimate. Everyone else benefits from clean rooftop solar, but the utility companies.


This is not a joke.


PG&E and two other California utilities have proposed a new $90 per-month “solar connection fee,” along with an 80% reduction in the payment solar panel owners receive for energy sent back to the grid (called net metering). You would essentially be paying PG&E for your own solar power.

PG&E claims home solar is racist, wants to gut program

OPINION by REUBEN LY Next year, your solar panels could cost you more than your monthly internet or cable TV bills, that’s because PG&E is trying to increase their bottom line by tying ho…

calcoastnews.com

looks like it should be a negative adjustment

 

[OSU Beavers]

Solar panels are either owned and attached (fixture), or they are lease to own, and attached (trade fixture). Fixtures are real property. Trade fixtures are private property

Ideally there should be a strict relationship between the income savings of a solar array and the value thereof. Since there is some market resistance to the panels by a significant portion of the buyers, it is likely a functional obsolescence accrues to the panels, in other words the income savings capitalized by some means does not necessarily resolve itself into an exact equal of a contributory value in sales.

Thus, the income approach to be accurate must be judged against an extracted value in exchange. That's the hardest thing. OTOH, it is certainly possible providing you have a few sales to extract a contributory value where you also can estimate the savings. In that case, a sinking fund calculation can be reversed to determine the safe+risk rate. I prefer Hoskold over Inwood but basically both do the same thing - a sinking fund calculation.
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You need to factor in that the panels degrade by 0.5% per year and the inverters wear out faster.

 

[Charles West]

I have never understood the concept of generating electricity from a roof top solar system. When you start with an average 20% efficiency rating in a laboratory which immediately begins to degrade upon installation it simply makes no sense from a financial/investment standpoint. Couple in yearly maintenance and you are valuing something other than dollar savings. Putting on a good roof system and generous insulation is a much more positive input for savings. I put two flue dampners on my fireplaces and magically reduced my winter heating bills over a $100 bucks a month. The dampners cost less than $1,500 installed.

 

[Terrel L. Shields]

panels degrade by 0.5% per year

Which is why in a DCF you'd factor that in by setting the life of the panels at 20-30 yr. And in the sinking fund it is the life span anticipated rather than the length of the loan that counts. That's why to value the impact correctly using a sinking fund, actual sales are needed to gauge the real market discount and develop the cap rate. Then you can apply that rate to any array of any size - so you are not applying the same "adjustment" for a $20k array or a $80k array. The savings dictates the market reaction.

In the 70s a spate of "solar" water heating on roofs were sold. I had a friend who had one on his roof from the time he built the house until he died about 10 years ago. I bet they are still there and I bet they still work. water circulated through pipe via simple water pressure and warmed on the roof under a covered box with black painted copper tubes that preheated water going to the hotwater tank.