Solar Value

[George Hatch]

As for the cash flows, it would be hard to get a good read on the trends for energy prices over the lifespan of the install. We can assume they will go up but they might actually go up a lot faster than anyone can imagine. But by the same token the fees attributable to the connectivity of the grid will probably increase, too; and it's *possible* those increases will be at the different rate than the electricity usage itself.

Let's say a grid-connected electric bill for a house is currently $200, of which $50 is for the connectivity fee and the remainder is the actual usage. If the average annual rate of increase over 30 years for the power is 3% but the average rate for connectivity is 4% the higher rate of the latter increase offsets the rate of increase of the former. Whereas the connectivity element started out at 1/3 of the grid-payer's bill it ended up being 44.5% of the bill by the time they got to the end.

These unknown and unknowable future variables are what detract form the utility of this sort of analysis and what render it an alternative of last resort in an appraisal, particularly if there actually are sales data from which to extract the actual reactions of these buyers to this amenity. Regardless of what number the DCF produces it would never outweigh a market-derived adjustment that was actually extracted from comparable sales data - past or present - either from within the subject's market segment or a competing market segment.

 

[Meandering]

The suggested solution of approaching the contributory value from an income perspective via analyzing all income and expenses is not new - it's a standard approach to the valuation of income streams that has been in use since long before any of us got into the appraisal business. The AI and its predecessors have offered a full range of instruction on how to perform such analyses for many years.

Suggesting that it could be used as a primary approach to value in an assignment involving a property type for which the Income Approach is never otherwise used by the typical buyers/sellers is ....interesting.

At the extreme comparison, it would be akin to using the Cost Approach to value an outdoor swimming pool in Fairbanks, Alaska. Somebody may fervently believe the amenity has a value in the market, and maybe it does; but it's costs of construction and its desirability to maybe 5 people in town may not be indicative of that market value to the typical buyers of the property.

But the income is not guaranteed or secured and must be stabilized to the market, and by law,
can not be profitable, as these are restricted by law not to produce more than needed, to avoid a commercial enterprise.

So when we get to NOI,

it zero's out.

No profit allowed.

Ooops.

What discount will someone pay for an income stream that is not an income stream, but the lower bills of someone else who may not have a similar need of electric or lifestyle as you?

Nuttin honey
.

 

[George Hatch]

One other factor in the analysis of which I am unsure is what the economic lifespan of such an install would be in this location as compared to other locations in the sunbelt areas that are not subject to such extremes in weather conditions.

 

[George Hatch]

But the income is not guaranteed or secured and must be stabilized to the market, and by law,
can not be profitable, as these are restricted by law not to produce more than needed, to avoid a commercial enterprise.

So when we get to NOI,

it zero's out.

No profit allowed.

Ooops.

What discount will someone pay for an income stream that is not an income stream, but the lower bills of someone else who may not have a similar need of electric or lifestyle as you?

Nuttin honey
.

Maybe. Maybe not.

Partisan politics and the vagaries of the general economy will surely play their roles in this unfolding drama. All it takes it a POTUS who assumes the role of benevolent dictator to decide for us all what's in our best interests.

 

[George Hatch]

Absolutely and demonstrably wrong. A thing has a cost, it may not have a value that a willing buyer of your home will pay.

Fixed. As appraisers most of us we see examples of this on almost a weekly basis - people spending money they can't recover upon resale. It happens a lot.

Moreover, and we apparently can't repeat this often enough for the OP, appraisers DO NOT assign values to properties or amenities. We observe and report how the typical buyers and sellers react to these things. We don't have the discretion to tell the market what to do or to drive the market up or down. And thank goodness for that.

 

[Meandering]

Actually,

Long Island was hit pretty hard by Hurricane Sandy. Many homes were lost, and now have been replaced.

I was wondering how an appraiser could find out from the utility company,

how many homes before Sandy, had solar panels, and how many rebuilt homes replaced their solar panels.

I did not see many replacements down at Seaside in NJ, but admittedly I did not travel every street.

Maybe some appraisers local could fill us in on what they see.

 

[Meandering]

Maybe. Maybe not.

Partisan politics and the vagaries of the general economy will surely play their roles in this unfolding drama. All it takes it a POTUS who assumes the role of benevolent dictator to decide for us all what's in our best interests.

the POTUS has already played dictator in all this and screwed it up.

Homeowners are not classified as electrical generators, nor suppliers, even though they send some Ks into the grid. They are not commercial enterprises, and can not profit from their solar panels.
consequently,
They are not under the control of the PUC.

$100 says, there will be no net metering on Long Island in 5 years.

You in?

.

 

[Meandering]

Summary
NOTE: As of January 1, 2014, Long Island is served by PSEG Long Island, replacing Long Island Power Authority (LIPA).


Although PSEG Long Island’s net metering policy is not governed by the State’s net metering law, the provisions are similar to the State law. Net metering is available for residential, non-residential, and farm-service PV and wind energy systems, farm-service, and residential micro-CHP and fuel cell systems. Eligible systems are subject to the following system capacity limits:

• Residential: Solar and wind systems up to 25 kW, micro-CHP and fuel cell systems from 1 - 10 kW
• Farm-Service: Solar systems up to 25 kW, wind systems up to 500 kW, and anaerobic digester systems up to 1 MW
• Non-residential: Solar and wind energy systems up to 2 MW

Net metering will be made available until overall solar, agricultural biogas, residential micro-CHP and fuel cell system enrollment reaches 150 MW and overall wind enrollment reaches 15.3 MW (0.3% of 2005 peak electric demand) although the utility may expand this limit at its discretion. The 150 MW limit for non-wind systems represents such a change, as the former limit was set at 51.2 MW, or 1% of utility's 2005 peak demand.

Customers on tariffs that include demand charges will only be billed for the measured maximum kW demand actually supplied by PSEG Long Island during the billing period. Ownership of renewable energy credits (RECs) is not addressed in the net metering tariff; however, PSEG Long Island retains ownership of any RECs produced by systems that participate in its solar and wind energy rebate programs.

http://energy.gov/savings/pseg-long-island-net-metering

I give it 5 years or less. Darn shame the homeowners don't even get to keep their RECs. I hear that's were the real money is.

 

[Randolph Kinney]

Governor Brown just signed into law a bill that won't count homeowners who have installed rooftop solar panels toward the 50 percent renewable goal.

That means utility scale solar is the only thing that counts and that means net metering is going away.

http://www.latimes.com/politics/la-...e-change-renewable-energy-20151007-story.html

 

[Meandering]

We went through this same game in the '70s. Why anyone thought it would be different this time is beyond me. We went through this game again for the same reason, to boost economic activity, boost GDP numbers, recapitalize banks and provide foreign manufacturing jobs. Nothing here is/was/has ever been, for the benefit of the sheeple.

Do the cash equivalency on a personal loan of $15,000 at 3.5% when a personal loan interest should be closer to 6%-7%. It is an incentive to purchase.

Appraisal principals do not go out the window with the sunshine.