How Much Is Solar Worth on a Home?
One of the biggest questions that people have when it comes to solar energy is…how much is it actually worth? It’s a valid concern. Why invest in something if it’s not going to be a worthwhile asset? In this blog post, we’ll detail how to value a solar home so that you can understand how much it’s worth when it comes time to either buy or sell.
How To Value a Solar Home
There are two ways to determine the value of your solar system. The first way is to take the value of the equipment installed on the home and subtract the depreciation of the function of the solar and solar inverter.
There are two major parts to a solar system: the solar panels and the solar inverter. The function of the inverter is to change the power the solar produces in its natural state of direct current or DC electrification into an AC or alternating current– the type of power we use in our homes which powers anything you plug in that doesn’t have a battery.
While it’s likely that solar will last for many decades, the life of an inverter is shorter. The most common reason for a solar system to stop working is due to a dysfunctional inverter. Inverters usually have a 10 or 25-year warranty and are showing a similar lifespan to the warranty life. The life of the solar and the inverter should be taken into account when calculating the added value of solar to a home from an asset valuation.
Alternatively, you can value a system with an electrical bill offset value. This is how most solar sales people demonstrate the value of a solar system when selling solar to a homeowner. It’s calculated from the offset of the electricity that the solar system will produce over a given period of time. When looking at this amount of money in terms of 10, 25, or even 50 years the amount becomes very significant and you could buy a low cost home with it. For the purpose of the life of a single homeowner, we take the offset value for the homeowner for a term of 10 years at the cost of electricity from the local utility provider. The reason for this valuation is that the local utility is the next best option for homeowners to get their power. The reason for the length of time is the average person will own that home for over 10 years.
For most solar homes with systems that are owned and less than 15 years old, the difference between valuing the system with the offset value or asset value will be very minimal. The difference is where the solar system is located. Due to varying sunlight hours, cost of installation and local utility prices of a solar system will have different values in different states.
The cost savings of having a solar system on your home can be significant. My solar professionals aim to save a homeowner 20-50% off their average utility bill. This isn’t possible in every situation but this is the primary reason why solar has seen large-scale adoption. This is made possible with two different types of financial vehicles. A solar loan or a leased solar system. Either option will typically have terms of 20-30 years. The other route is when a homeowner self-finances a system or pays cash. This will result in no ongoing monthly payments for their solar system but, rather, a large upfront payment.
Depending on what a homeowner paid for their solar system and what the cost of electricity from the local utility company is, the break-even point for most homeowners is 7-10 years. Exchanging the cost of 30 to 50 years worth of electricity for 7-10 years worth of electricity is the primary driving force behind going solar. The difference between the two is a very large number, typically well over six figures. The only exception to this is leased solar with escalating yearly payments.
Solar will generate, on average, 24 hours worth of electricity in about 8-10 hours. So as not to waste that energy and be able to use it when needed, a homeowner's best value is to store it.
We saw what happened to the electrical grid in the winter of 2021 as millions of homes across Texas turned on their heaters during an usually bad ice storm. The extreme cold and unusually high power surge caused the grid to fail when people needed it most. The grid went down for days, leaving millions without power, water and gas in the bitter cold of a very severe storm.
This shocking event shined a light on the problem with distributed power. It’s susceptible to extreme weather and energy spikes. Many homeowners and experts alike are concerned that the events in Texas foreshadowed challenges to come as we face an increase in both of these power obstacles.
With this, we can definitely see the value not only in our wallets when it comes to solar, but in peace of mind and safety when it comes to harsh weather events as well. Be safe. Be solar. Contact Spark to learn more.
