• Welcome to AppraisersForum.com, the premier online  community for the discussion of real estate appraisal. Register a free account to be able to post and unlock additional forums and features.

Value of a solar electric system

Status
Not open for further replies.

Truett Neathery

Thread Starter
Member
Joined
Feb 16, 2003
Professional Status
Licensed Appraiser
State
California
Visited a residence in the country here (Nevada County, CA) - has a solar system that supplies 100% of electrical needs through the local utility company (they bank excess kilowatts produced on sunny days and debit the account when the sun's not shining). Owner never pays an electrical bill.
Question: How much contribution to value is there? I only know his cost.

My electrical bill is about $50-70/per mo, but I use propane for heat and water heating.
This house does, too.
Any ideas?
TN
 

Edward OConor

Member
Joined
Apr 27, 2006
Professional Status
Certified Residential Appraiser
State
New York
IMHO I think that the financial formula for the "Present Value of Future payments" would be a reasonable and logical adjustment. A GA (or a net search) should be able to help you calculate the adjustment.

There were several posts about the difference on coop fees (the coops being = at all other levels), I believe that it is the same principle.

If I remember it has to do with the current payment (or savings), current interest rate and the time that the average owner keeps the house. It assumes that if the owner put the $XX.XX in a savings account. Electric bill savings X current interest rate X the average time an individual holds the property???
 

Truett Neathery

Thread Starter
Member
Joined
Feb 16, 2003
Professional Status
Licensed Appraiser
State
California
Savings

IMHO I think that the financial formula for the "Present Value of Future payments" would be a reasonable and logical adjustment. A GA (or a net search) should be able to help you calculate the adjustment.

There were several posts about the difference on coop fees (the coops being = at all other levels), I believe that it is the same principle.

If I remember it has to do with the current payment (or savings), current interest rate and the time that the average owner keeps the house. It assumes that if the owner put the $XX.XX in a savings account. Electric bill savings X current interest rate X the average time an individual holds the property???

Thanks Mr. Cooper - that's what I thought, too. Unfortunately, savings rates are so low that the cost of solar and also the tankless water heater far outstrips any benefit.
 

Restrain

Elite Member
Joined
Jan 22, 2002
Professional Status
Certified General Appraiser
State
Florida
I wish my light bill was that low. Thanks to deregulation (make that gouging), my light bill hits $400/month or more in the summer.
 

Elliott

Elite Member
Joined
Apr 23, 2002
Professional Status
Certified General Appraiser
State
Oregon
I wrote the PUC and asked why natural gas rate increased
14% year over year, when its cost is 20% less, in the
dead of winter. They haven't gotten back to me.

Solar is peachy, but does it go directly into the grid, or
those crapy lead batteries which are a bigger health/eco
hazard than nuclear? Electricity will be free after a few
years with Obama as president, except you'll only be able
to watch TV during the middle of the day or when the wind
is blowing.
 

MTREA

Freshman Member
Joined
Nov 5, 2008
Professional Status
Retired Appraiser
State
Louisiana
Couple of things to remember

I appraise a lot rurally and deal with solar systems (PV) probably about once every couple of months. The direction to the thread a couple of weeks ago is good advice, but a little off base. While they are getting more popular and more accepted, there are a couple of things to remember about giving them value.

1. You will be hard pressed to establish a market derived adjustment. Even in my area where they are getting more common, I have yet to be able to used matched pairs to conclude an attributory value for alternative energy systems. Because of this, most major banks/lenders will be uncomfortable with assigning value to them. While trying to use the potential utility bill savings over a certain period of time makes logical sense, it is not a market driven adjustment and therefore does not comply with typical appraisal guidelines. Some will argue solar systems are similar to new windows, high seer HVAC, extra insulation and other energy efficient upgrades that can be made to a home and can be valued similarly but in reality there is a flaw with that reasoning as well. Those items are market accepted and solar systems are not. The typical buyer recognizes those upgrades as desirable while the solar system is still not widely accepted.

2. By the time you factor in the cost of the solar system, and depending on the kind of system, the maintenance and battery replacement costs, it can easily be argued there is no savings or appreciation as a result. Solar systems are expensive and can be expensive to maintain. If 10 years from now we can do a study of solar equipped homes, I think you would find that very few have "made" money over those 10 years. Just by simple deduction, if the system cost $35,000 to install and the estimated average electric bill would have been $200 a month, it would take over 14 years to recoup the initial costs, let alone the maintenance or batteries.

In my experience and what I typically tell buyers / sellers / agents / lenders / underwriters, etc about solar systems is that it is an amenity for which the value or impact on marketability can not be proven with the available market data. While some will find it valuable, others will not.

IMHO It is one of those things that if someone feels so strongly that they need it, they should put their money on the line for it and not expect the bank to finance it for 30 years. Once it is widely accepted in the market and the impact on values can be derived, my opinion will change, but until then you really can't prove that it is worth anything.

I would actually appreciate anyone who thinks they can prove the value of a solar system in their market to contact me so that I can hear their experience.
 

Lloyd Bonafide

Senior Member
Joined
Jan 15, 2006
Professional Status
Certified Residential Appraiser
State
California
if the system cost $35,000 to install and the estimated average electric bill would have been $200 a month, it would take over 14 years to recoup the initial costs, let alone the maintenance or batteries.

After 14 years, it's probably going to be time to replace the system with another $50,000 system.
 

Elliott

Elite Member
Joined
Apr 23, 2002
Professional Status
Certified General Appraiser
State
Oregon
Mtea,
Thanks for the post. On road trips, I've driven by the remotest of
remote locations and I see a house that I know is no where near
standard utilities (like electricity). I see a solar panel a propane
tank and I have no idea how they do water (well there really are some
good gray water systems that are do-able), but I think, "great
location to have a remote second home, and they can have
enough power for a satellite tv, lights, and a microwave."
Would I buy it at the right price? With that view? Sure.
Is it marketable and lendable? No way.
 
Status
Not open for further replies.
Find a Real Estate Appraiser - Enter Zip Code

Copyright © 2000-, AppraisersForum.com, All Rights Reserved
AppraisersForum.com is proudly hosted by the folks at
AppraiserSites.com
Top

AdBlock Detected

We get it, advertisements are annoying!

Sure, ad-blocking software does a great job at blocking ads, but it also blocks useful features of our website. For the best site experience please disable your AdBlocker.

I've Disabled AdBlock
No Thanks