Solar Value

[Elliott]

Or you could walk up to the T-Bill window at the Fed and make this investment, but your guaranteed to get your money back after 90-days.

 

[Meandering]

Oh come on

We need that homeowner's insurance increase for the DCF model to "prove" that value.

Uhmmm, Did the AI put that in their model?

Sorry, I've been laughing so hard I did not bother to look at their model.

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[Michael S]

You are ignoring the facts.

Read my reply with the correct numbers - stop being ignorant!

Again, I value your input - but that money is tied up for solar incentive, not kids to go to college...

I think you need to look long term, after the 15 year loan period.

The present value of $1.00 in 15 years depends on what discount rate you use. A 10-year T-Bond is yielding 2.07% while a 20-Year is at 2.52%, so the absolute minimum discount rate would be about 2.25% which represents the risk free rate. The present value of that dollar in 15 years at the risk free rate is $0.71. The dollar you'll hypothetically save 25 years from now is worth only $0.57. That is to say, a very risk averse investor would not pay anymore than $0.71 to receive a dollar in 15 years or more than $0.57 to receive a dollar in 25 years.

Now if we use a higher discount rate, say 5% or 8%, what you could probably achieve with a moderately risky bond/stock portfolio then your future dollar is now worth $0.48 or $0.31 in 15 years, and $0.30 to $0.15 in 25 years.

With the information you've presented thus far, I would say that a typical buyer would probably not pay an extra for your home unless the solar panels were provided free and clear. Even then they would be unlikely to pay much, if any, more for that feature.

The cases where I've seen solar panels provide a positive contributory value is when there is a long term (typically 20-years) agreement to buy the power at a fixed rate. This is generally only available to large installations with hundreds or thousands of kilowatts, usually on commercial properties. An investor would be willing to pay for that income stream as it is predictable. A residential buyer may be influenced by energy efficient appliances and similar features (water heater, HVAC, windows, etc.) but will probably not be willing to pay a whole lot more for them.

 

[Cigar]

Another thing appraisers have to realize is that solar panels broadcast a political message, a message that a lot of the population doesn't agree with, so installing solar panels limits the potential market for the home. An example: I was building a $1,000 a foot home in Silicon Valley for a billionaire, my long time tile roof contractor worked long and hard providing me with several estimates for various products, in the end the owner chose a very expensive Japanese tile that had the black color running throughout the tile, it came from a special clay pit in Japan, the Japanese company also made an identical looking tile that was made from red clay that had a black glaze that looked identical, my owner chose to pay the additional $100,000+ for the black clay tile. As I was building the home the tile contractor came to me and said he was taking a week off to study and take the test to add a solar license to his roofing license, would my owner like a quote to add solar panels to the roof? When I told the owner he responded: "He thinks I would want solar panels on my roof? Find another roofer I don't want a guy roofing my home that even thinks I would want solar on my roof." The roofer later called asking whatever happened to that house? I told him that I had to get another roofer because of his offer to put solar on the home, I have to agree with the owner, solar panels make a political statement totally unacceptable to many, I sure wouldn't buy a property with solar panels unless they were removed, it's just not a message that I would want to badge my home with.

 

[Elliott]

I once did the million dollar house that had beautiful Japanese blue tile with dramatic fluted ends....lasted about 15 years after they couldn't find the roof leaks and eventually got replaced with comp shingle. I was doing a house out in the sticks, the kind with a plywood counter top and an old sink dropped in, old reclaimed windows that were nailed in place. On the top of this guy's house was the same magical blue tiles. I asked him about it. Yeah he got a job hauling the stuff away and decided to put it on his own house.

 

[Meandering]

Thanks Michael,

I was just hoping for the insurance premium to compute all the costs against doing nothing.

this is not just a pure income stream with a reversion. Associated costs of solar panels are much higher than holding bonds or even land. Removal and disposal of the dead panels must be considered in the expenses and overall discounts.

This clip from a scientific study on the issue.

Today, with the purchase of several electronic items like televisions, customers
pay a recycling fee. A similar process of putting money into a custodial account for
future recycling can be implemented for solar panels as well. Such a program will enable
solar companies to implement a recycling program similar to the one implemented by
First Solar. If companies realize the importance of recycling, it will be easier for the
customers to understand why paying a recycling fee can be important and how recycling
can save companies money in long term.

http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.456.5648&rep=rep1&type=pdf

Since we never hear about custodial accounts for future recycling, we can assume it will be a lump sum cost at the end of the cash flows, which must be accounted for. Couple it with increasing real estate taxes at the end of the loan, per NY state law, and those "free and clear" savings are no longer "free and clear".

Potential electric company rate increases can be offset by opposing insurance and tax increases.

It's a shell game with the magic nut being the savings.

Maybe it works down there in Sunnyville. But up in the great white north, nobody is building cheaper panels due to reduced access to necessary direct sunlight, over sufficient hours in the day. Because the costs of panels nor their efficiency with ambient light is not increased for location, this impacts the profitability of the undertaking based on geography, and then becomes a micro location issue impacted by off site shade contributors.



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[Cigar]

Down at Stanford they are working on several new technologies involving nanotechnology that will make solar panels obsolete, some involve roof tile, others windows, and still others the paint on the walls, the only question is which technology will win and when, but when it does these ugly roof panels will be removed just like the failed solar thermal panels were.

 

[nicholz12]

So, talked to my house insurance company they indicated they base the increase in the house insurance premium on the cost of the PV system, if attached to the house, if you own it and the sf dwelling. As an example I gave them a PV cost of $15000, for my 1100 sqft ranch they indicated about a $50 increase/yr. Of course they said, it's just a ball park estimate.

 

[Meandering]

Governor Cuomo Announces $175 Million in Awards for Five New Clean Energy Projects
Wind, Biogas-to-Power, Fuel Cell and Hydroelectric Large Scale Renewable Projects to Add Clean Energy to State’s Electric Grid

September 23, 2015
Projects (in order of size):

• Ball Hill Wind Farm, Western New York: RES America Developments Inc. will build a 100 MW wind farm in Chautauqua County, in the towns of Villenova and Hanover.
• Orbit Energy NYC, New York City: Orbit Energy Inc. will build a 9.6 MW anaerobic digestion biogas-to-electricity facility in Staten Island that will use food waste and other organic materials provided by area restaurants, supermarkets and food manufacturers.
• Lyons Falls Mill Hydro, North Country: Northbrook Lyons Falls LLC will add 5.2 MW to an existing hydroelectric facility in Lewis County, resulting in a total installed capacity of more than 11 MW.
• Morgan Stanley Headquarters, New York City: Morgan Stanley will install a 790 kilowatt (kW) fuel cell in its Manhattan offices, where the technology’s low-emissions generation will contribute to load reduction, system reliability and cleaner electric power.
• Fulton Unit 2, Central New York: Erie Boulevard Hydropower, L.P., a subsidiary of Brookfield Renewable Energy Group, will install a new 560 kW minimum flow turbine at a hydroelectric facility in Oswego County. This unit will generate electricity using minimum flows required by the project’s license, making use of this energy resource while protecting the environment.

The projects were competitively selected through the RPS process which continues to provide price stability and greater long-term certainty to contractors through contract terms of up to 20 years. This is the second solicitation for 20-year contracts. The weighted average award price for this 10th Main Tier solicitation is $24.57 per megawatt-hour of production over the 20-year terms of the awarded contracts.

In total, NYSERDA’s ten RPS Main Tier solicitations have funded 69 projects, generating more than 5.3 million megawatt-hours of renewable energy annually.

This protects the environment and supports the State’s goal to reduce greenhouse gas emissions by 40% while generating 50% of its electricity from renewable energy sources by 2030.
Successful initiatives already launched as part of REV include:
NY-Sun,
NY Green Bank,
NY Prize,
K-Solar,
and a commitment to improve energy affordability for low-income communities.

The state will meet it's goal by 2030 through large producers of renewable energy. By then, they won't need to pay residential solar panel owners squat.

So let's think about that.

15 YEARS FROM NOW Mike will have 1 year of "free and clear of the loan" energy savings, and the state will have met it's goal, but of course, locally for Mikey, that goal might be met sooner, so he may not receive net metering over the remaining life of the loan, or remaining life of the panels.

And he'll still have to pay to get rid of those solar panels, his real estate taxes will be higher, his homeowner's insurance will be higher.

Mikey, welcome to the bottom of the food chain.

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[nicholz12]

Questions; now that the AI has produced that DCF analysis are we as sf residential appraisers going to held accountable if we don't complete a DCF analysis?
What If we only analyze using the Comp Sales Approach, can we be brought up for negligence by a state board?
I haven't had one class in DCF. Shouldn't the AI instructors and people that teach appraisal courses be teaching this to residential appraisers?
If this is an income stream how is this not a mixed use property or something other than a sf res dwelling.?
Does the 'typical' buyer look at a home with a PV system as income property or simply a way to reduce electric bills?
Down the road, say a year or two from now, say the owner of the house w/ the PV system sells and loses money will the appraiser that has given a substantial adj for the PV system because the appraiser used the DCF analysis then be held accountable even if the utilities start changing net metering percentages or adding additional fees etc ?