Think Solar Panels Add Value To A Home?  Think Again!

Solar panels are now very popular and have been installed in over four million homes in the U.S.   They are touted as being energy efficient, good for the environment and save you money in electricity costs.   But the big question, does it add value to a home?    Well, it depends.  Let’s start with how they work.

How Do Solar Panels Work in A Home?
Solar panels are also called solar photovoltaic (PV) panels.  They take good old sunshine and convert it to usable electricity.    Believe it or not, the first solar cell was invented in the late 1800’s – so this technology has been around for a long time.   They were first used in satellites in space – far, far away!

These panels are primarily made up of silicon solar cells.  Silicon is an element that is a non-metal with properties that convert sunlight into electricity.  (Silicon is the material used to make semiconductors).  When sunlight hits the silicon cell, the electrons inside move and thus starts the flow of electricity – this is known as the “photovoltaic effect”.   The electrons will need special wiring and casing to convert to electricity. 

The wires then bring the electricity to an inverter, which converts the electricity from DC to AC.  With the electricity converted to AC, then it travels to the breaker box and from there it is distributed throughout the home. 

Advantages of Solar Panels
There are many advantages to solar panels, and they are the main reasons why homeowners decide to install them in their homes.  These are:

• Renewable Energy Source – it is clean and can be obtained from anywhere on the earth wherever the sun shines
• Lowers Electricity Bills – one will use less electricity supplied by your local utility company.
• Different Uses – in addition to photovoltaic use, or electricity, it can also be used for heat (solar thermal), distilling water, and future other uses – where the technology is being developed.
• Lowers Maintenance Costs – solar panels typically last about 20 – 25 years.  Once they are installed, cleaning them twice a year, and replacing the inverter every 5-10 years, is pretty much it for maintenance.
• Future Technology – this technology is continuously evolving, it is still in its infancy stage, and it is believed the effectiveness and efficiency will continue to increase.
• Government and Tax Incentives – there are various federal and state level tax incentives.    On the federal level there is the Residential Clean Energy Credit, a homeowner can get as much as 30% tax reduction for panels installed between 2022 and 2032 on your federal income tax. 
  • In NJ, there are various programs and incentives, where you can get tax credits and rebates.   Depending on usage, you can get energy credits, tax emptions, reselling excess energy for tax credits, and more.
  •  In PA, there are also various programs and incentives, where you can get state tax credits, rebates under the Pennsylvania Sunshine Program, among others.

As always, check with your tax advisor, solar panel company, and state agencies for specific information on these programs.  Keep in mind that they may expire, depending on local legislative rulings.  (source:  Forbes.com)

Disadvantages of Solar Panels

• Installation Cost – there is an initial upfront cost, depending on the type of lease agreement or sale you have with the solar company.   Also, keep in mind that you might need to have a new roof installed before you install the solar panels, which is recommended.  Sometimes, the type of agreement you have may absorb the cost of the new roof – but check with the solar company.  Remember – always read and understand the agreement, including reading the fine print!
• Weather Dependent – of course, you need sun in order for the panels to work.  Without sun, no solar electricity!
• Shelf Life – although the panels can last 20-25 years, there have been instances where it lasts 15-20 years, depending on the installation and the panel type.  It is best to shop around and compare companies and panels.  Buyer beware!
• Transferring to a New Buyer – keep in mind, if you are installing solar panels, think about what will happen if you decide to sell the home.  If they are leased, will the new buyer agree to continue leasing them or can you take them with you to the next home.  What I am seeing is that not all buyers want these in their home, because it is an extra payment that they do not want to make, if it is leased.  As a seller, that lowers your pool of potential buyers and that may not fetch you the highest price for your home.  On the other hand, if you take them with you, you will need to ask that question with your solar company to have them removed and reinstalled in your new home.  When they get removed, make sure that the roof is not damaged.  That is something you need to think about before you sign any lease or sale agreement. 
• Curb Appeal – sometimes the quantity of solar panels on your roof can seem unsightly and lower the curb appeal.  It depends how they are placed on the roof.  Also, there is a lot of equipment usually placed on the side of the house that can also appear unsightly to a potential buyer.
• Landfill – the panels themselves are not biodegradable and are filling up landfills throughout the world.  This is something that many people are finding out and it is not very environmentally friendly.  However, there are companies that are developing solutions to recycle the panels and avoid taking them to the landfills.  What makes this difficult is that the panels include toxic materials. (source:  climatebiz.com)

Efficiency Rate of Solar Panels

When you are evaluating different solar panels, you need to look at their efficiency rate.  The efficiency rate is calculated based on the energy from sunlight that is converted into electricity.  An efficient solar panel is one that generates more electricity and uses up less space.  Efficiency rates vary from 15% to 23%, depending on the type of panel.  The newer panels are more efficient, using newer technology. 

Also, solar panels lose efficiency over time.  So, a 20-year-old panel is less efficient than a 1-year-old panel.  They lose efficiency by about 0.5% a year.  So, if thinking of buying a home with solar panels, find out the age of the system and you can have an idea of their efficiency. (source:  corporate.enelx.com)

Sometimes you will see an efficiency calculation converted into kilowatts (KW).   This is done by taking the panel wattage or “Pmax” (each type of panel has a panel wattage) in watts (W).  Then multiply by the efficiency rate (the %) to determine the Effective Wattage in KW. 

Types of Solar Panels
There are three main types of solar panels:

• Monocrystalline Solar Panels – or “mono” panels.  These are the most commonly used for homes and are the most efficient.  They are mostly installed on roofs. They have a lifespan of about 25 years.  There are two types of “mono” panels:
  1. Passivated emitter and rear contact (PERC) panels – used on roof tops.  They have an extra conductive layer on the backside to increase energy absorption
  2. Bifacial panels – used on the ground leaving both sides exposed.  They absorb light on both faces at a higher rate than PERC panels. 
• Polycrystalline Solar Panels – use older technology and are more affordable but are less efficient.
• Thin-Film Solar Panels – these are the least efficient of them all and are used in large industrial solar installations where they have a lot of space, like those solar farms you see from the road.   These panels are also used on commercial buildings.  They have a shorter lifespan.  These are the least expensive. (source:  thisoldhouse.com)

How Buying or Leasing Impacts Home Value 

Now that you have some background information on solar panels, the big question is how does it impact the value of a home?  Well, it depends. 

According to Jeff Otteau of Otteau Group, Inc (real estate analysts), “Solar energy panels contribute to value at a rate of about 80 times the monthly energy savings, provided the system is owned and not leased.  For example, a savings of $100/month equates to $8,000 in value.  But to calculate the value-added, the seller will need to be able to demonstrate the actual savings in utility expenses.”

So, what does that mean for a seller?  If you are interested in installing solar panels, are you going to lease or own?  If they are leased, they probably won’t have much of an effect on the value of the home.  What I’ve seen with my buyers is that some do not want to look at houses with panels because they don’t want to take on an extra payment on top of the mortgage payment.  I’ve also seen other homebuyers buy a home with solar panels and they are happy with them.  Solar panels are typically a neutral factor unless they are unsightly and detract from curb appeal, and thus may even lower home value. 

Now, if the panels are owned, and if they are remaining on the home after the sale, calculate the cost savings from the utility company, and you can determine how much value they can add to the home and how much energy cost you will be saving and inform the potential buyers.  Also, negotiate the cost of installation and maintenance with the potential buyer depending on the age of the system.

 If the system is less than 10 years old, preferably less than 5 years old, then it will add more value to the home.   Technology is changing rapidly with the newer systems having solar collectors embedded inside of the roof shingles.  Thus, making them less noticeable and having more curb appeal.    If they are directly facing the road, the adverse effect on curb appeal can in some cases eliminate the beneficial effect of the electricity savings. (source:  Otteau Group, Inc).

So now you have more info on solar panels!  This should help you make a more educated decision on whether to buy a home with solar panels or not.

If you want to see whether this is a good option for you and and if you or someone you know is thinking of selling, feel free to reach out to me here: (Click Here).  Let’s chat to see if now is the right time to start your homebuying journey.   Or what things you’ll need to get lined up to get you ready to buy a home in the near future!  😊