When you make improvements to your home, it’s smart to take into consideration how they will impact your home’s value. The conventional wisdom from HGTV and home improvement magazines is that updating your kitchen, renovating your bathroom, or building an addition are the smartest ways to increase the value of your property. But there’s another home improvement that you may not realize adds to your property’s value: installing a solar energy system on your roof.
Does adding solar panels to your home increase its value?
The simple answer is yes, installing solar panels on your home generally increases its value.
Perhaps you’re wondering why homebuyers are willing to pay so much more for a solar-equipped home. Most importantly, you can reduce or even eliminate your electric bill when you live in a solar-powered home. Solar panels can help you save money in the short term, and will protect you from increasing utility rates for the 25+ years that they generate electricity. And it doesn’t hurt that solar reduces your impact on the environment by producing emissions-free electricity for your home.
If you’re considering going solar as a way to improve the resale value of your home, remember that increased property value is only one component of solar’s financial benefits. That value doesn’t take into account the month-to-month savings you will see on your electricity bill – money that you can use to make other investments (like finally adding those granite countertops, or even investing in the stock market).
How much value can solar add to your home?
Multiple studies by Lawrence Berkeley National Laboratory (LBNL), a research laboratory funded by the U.S. Department of Energy, have shown that solar can improve the value of your home. LBNL’s 2015 Selling Into the Sun report analyzed sales of solar photovoltaic (PV) homes in eight different states over 11 years, with the goal of determining just how much value solar can add to your home. The finding: on average, homebuyers are “consistently willing to pay PV home premiums” of approximately $4 per watt of installed solar capacity. For a 6-kilowatt (kW) solar PV system, that means solar can add $24,000 to home resale value!
Another study, this time from Zillow in 2019, comes to the same conclusion – homes with solar panels sell for 4.1% more. The Zillow study notes that the percentage increase in home value changes by geography. For example, in the greater New York City area, solar-powered homes see a 5.4% increase in value, more than the national average increase.
Finally, a third study cited by the National Renewable Energy Laboratory (NREL) in the Appraisal Journal says that solar increases home value by $20 for every $1 reduction in annual utility bills. For example, a solar panel system that saves you $400 each year would add about $8,000 in value to your property. This is a slightly more complicated picture than the LBNL and Zillow studies paint, but still a good one for solar. The takeaway? The more your solar installation saves you on annual electricity bills, the more value it adds to your property.
The value of solar vs. other home renovations
According to EnergySage data, the average cost of a solar panel installation in 2015 was $3.70/watt, which means an average 6-kilowatt (kW) system had a $22,200 price tag (now, in 2023, that price has fallen to $2.95/watt, or $17,700 before incentives). Tax breaks and other incentives drastically reduce that cost – once you subtract the value of the 30 percent solar tax credit, your total solar installation costs were a little less than $12,400. The takeaway? When you sell your solar home, you’re recovering your solar costs and then some.
To compare the value of going solar to more traditional home improvement projects, EnergySage used the Remodeling 2016 Cost vs. Value Report, which evaluates project costs and resale value for a variety of home renovations. What we found: with many common home improvement projects, you won’t entirely recover your investment in increased property value.
So what’s the downside? Buying and installing a solar panel system on your home might seem like a more complicated process than other home improvement projects. However, you can use home equity loans and lines of credit to go solar, just as you can use them to make other updates to your property. Many solar financing options are low-interest, and most require zero money down. And unlike a disruptive home remodeling project, solar can typically be installed in a single day.
Compare your solar options to find the best one for your home
As with any other home improvement project, the best way to ensure that you’re satisfied with your solar installation is to get multiple quotes and compare your options. To get started, use a solar calculator that helps you estimate just how much you can save. Then, register your property on the EnergySage Solar Marketplace, where you can easily compare multiple quotes from qualified, pre-screened solar installers in your area.