As a homeowner, maybe you already know some of the benefits of installing a residential solar system: they are more environmentally friendly and cut costs on electricity bills. But have you ever considered if solar panels will have an impact on the value of your home?
Like any home improvement project, it’s important to research and carefully consider the costs and return of your investment. The good news is that solar panel systems offer not just immediate savings in electricity bills - but also an increase in your home value.
In this article, we’ll explore just how significantly solar panels might increase the value of your home, what factors might influence the value-add of solar panels,
How Much Do Solar Panels Increase Home Value?
Recent extreme weather events, and a focus on sustainable energy mean many more people are looking to solar energy to reduce their carbon footprint.
Multiple studies suggest that installing solar panels for home can not only reduce your home's energy costs, but also increase a property’s value.
Real estate website Zillow found that 80% of buyers say energy-efficient features are important when selecting their new home. They found that solar panel installations are seen as a ‘premium’ home feature for many buyers, as well as providing savings in electricity bills.
To calculate just how much solar panel systems might increase a home’s value, Zillow compared the sale prices for houses with and without solar panels between March 2018 and February 2019. The research looked at all transactions during these months, identifying which listings included information on the home’s solar panel system.
The Zillow research found solar panel installation can potentially increase your home’s value by up to 4.1% more than comparable homes with no solar panels. Based on the median value of a US home, that could mean an additional $9,274 on your home value.
This is an average - the actual increase in home value varies by state, and we’ll explore that in more detail further down in this article. But as a quick example, in New Jersey homes with solar panels can sell for 9.9% more than comparable homes without. Based on the median value of a New Jersey home, that could mean an additional $32,281 in value.
The Office of Energy Efficiency and Renewable Energy also reports that a solar system will likely increase the value of your home, stating buyers can be willing to pay a premium of approximately $15,000 for a home with solar panels.
Another study from Lawrence Berkeley National Laboratory considered the impact of resale value compared to the kilowatts of solar power that was installed. This study found an increase in the resale value of approximately $5,911 for each kilowatt, suggesting that the more kilowatts in your home’s solar panel system - the greater your home will increase in value.
Even small solar panel kits can have an impact. For example, the solar system for your family-sized home might be 4.8 kilowatts, suggesting an increase in home value of $28,372. Renogy’s solar panel calculator can help you determine your power consumption and the size of the solar panel system that meets your needs.
Here are some averages from the Lawrence Berkeley National Laboratory study:
Finally, the National Renewable Energy Laboratory reports home value increases $20 for every $1 reduction in annual utility bills. What would that mean for you? If your solar panel system reduces your annual electricity bills by $500, that suggests your home value could increase by $10,000. If your annual electricity bills are $850, your home value could increase by $17,000.
As these studies show, it’s almost certain that installing a solar panel system on your home will help to increase its value. It’s important to note too that as traditional electricity prices increase (as they likely will), the financial benefits of having solar power will increase too.
Still on the fence about the return of investment of solar panels for your home? For many homeowners, the cost of a home solar panel kit is much lower than the value-add it generates, making this a smart financial decision. The cost of installing solar panels has decreased significantly over the past decade, and by switching now you can still take advantage of some federal and state solar adoption incentives.
With the right solar panel installation, a solar panel system for your home will be an investment that will both increase the value of your home and decrease your electricity bills, right from the day of installation.
Factors That Influence the Value-Add of Solar Panels
While the research is clear that solar panels help homeowners both save money and increase their home’s value, there are factors that can influence their value-add. Here we’ll explore the impacts of geographic location, the cost of solar system installation, solar system output, and solar system age.
There are several factors that might influence the value you get from solar panels. Firstly, electricity bills vary greatly between areas. In areas with higher electricity bills, solar power installations also tend to add more to your home’s value because their financial benefit is greater.
Of course, where you live also impacts sun exposure and the amount of energy the sunlight can capture. This means the ROI on installing solar panels can be greater in some states, like Arizona than it would be in Washington. However, even states that get a lot of rainy or overcast days can produce enough sunlight to see value from installing solar panels - especially if you include a solar battery in your set-up.
Zillow’s research on how much solar panels increase a home’s value found the percentage increase varied between states. The states that saw the biggest increase in home value are usually those with higher energy costs, not the sunniest states who can produce the most solar energy. Zillow found the top 10 states with the highest increase in home value because of solar panels to be:
- 1. New Jersey: 9.9% or $32,281 for the median-valued home.
- 2. Pennsylvania: 4.9% or $8,589 for the median-valued home.
- 3. North Carolina: 4.8% or $8,996 for the median-valued home.
- 4. Louisiana: 4.9% or $7,037 for the median-valued home.
- 5. Washington: 4.1% or $15,916 for the median-valued home.
- 6. Florida: 4% $9,454 for the median-valued home.
- 7. Hawaii: 4% or $24,526 for the median-valued home.
- 8. Maryland: 3.8% or $10,976 for the median-valued home.
- 9. New York: 3.6% or $10,981 for the median-valued home.
- 10. South Carolina: 3.5% or $5,866 for the median-valued home.
It’s also wise to research your area’s solar incentives and rules. All American homeowners are eligible for the federal solar tax credit, but many states and municipalities offer rebates and other financial incentives that you might qualify for.
If you’re a California resident, you may already be aware the state requires solar panels on all new homes as of 2020. Interestingly, many developers began using solar panel systems on houses prior to this, citing demand from homebuyers. California residents with older homes may find themselves struggling to compete in the housing market in the future if they don’t have solar panels.
Some states also have performance-based solar incentives where homeowners are paid for the amount of renewable energy their solar panel system produces. States like Massachusetts or New York have these incentives and therefore solar panel systems may be worth more.
Lastly, another important geographic factor is understanding how appealing solar panel systems are for homebuyers in your area. Do homebuyers in your community understand solar panels and the benefit they can get from them? If not, they may not be willing to pay a premium for them.
Total cost of solar system with installation
The total cost of a solar system with installation can have an impact on your home’s value. If a buyer sees the benefit of solar power and will save money by buying a house that already has a solar system, it will make your home more valuable.
There is one very important caveat though. Some homeowners choose to lease solar panels from companies, meaning they don’t actually own them. Leased solar panels won’t increase your home value by much because they aren’t considered part of the property. While the future homeowner would benefit from lower electricity bills, they may be discouraged by other factors. These could include: needing to take over the lease, the leasing company being able to remove the solar panels at any time, and possibly not being transferred any local solar power financial incentives with ownership.
Solar system output
As we looked in-depth earlier in this article, a larger solar system that generates more energy is likely to increase your home’s value by a higher percentage.
If you’re considering the size of your solar panel system, bear in mind the findings from both the National Renewable Energy Laboratory and Lawrence Berkeley National Laboratory research. Both sources reported that with an increase of solar panel kilowatts or an increase of electricity bill savings, the home value also increased.
Use a solar panel calculator to determine your energy needs, and then consider your potential home value increase - you may choose to install a solar system with bigger output.
Solar system age
Just like any addition or improvement to your home, solar panel systems do have a limited lifespan. Solar panels can last upwards of 25 years but they don’t last forever. Older solar panel systems won’t increase your home’s value as much as a newer one simply because of the added costs for the buyer.
Future homebuyers will consider that an aging solar panel system produces less energy, and may incur added costs of solar power maintenance such as repairing or replacing parts.
Are Buyers Looking for Homes with Solar Panels?
A question many homeowners are asking is - are buyers looking for homes with solar panels?
There is research to suggest that solar panels are enticing to homebuyers. The Zillow Group Consumer Housing Trends Report found that more than 80% of homebuyers said energy efficiency was a priority. A report from the National Renewable Energy Laboratory suggested houses with solar panels sold 20% faster and for 17% more.
And this seems logical. Consider this scenario if you were a homebuyer: there are two near-identical houses in the same location. The most significant difference is that one has solar panels installed which will dramatically decrease your electricity bills. With those projected savings, plus the incentive of being environmentally friendly, wouldn’t you choose and pay more for the house with solar panels?
If you’re considering solar panel installation for your home, it’s well worth doing some local research on the impact it will have on your home’s value.
Broad research tells us solar panel installation will see your home value increase - sometimes fairly significantly. There are some factors to take into account such as geographical location, the cost of your solar power installation, and your solar system’s age and output. But overall, a solar panel installation is a good investment for your house, your electricity bills,s and a good decision for the environment.
So if you’re deciding on whether to invest in a solar panel system for your home - and also planning to sell your home in the near future, our advice is to go for it! Switching to solar power is a great return on investment that will provide you with electricity bill savings from day one, and you’ll likely recoup any installation costs when you sell.