I’d like to take a closer look at exactly how a solar PV system can increase the value of your home. I’ve mentioned this phenomenon previously, but I recently read this article, cited a study by the Lawrence Berkley National Laboratory and I want to dig deeper. I’ll try to keep the math as simple as possible.

According to the study, a California home that gets a PV system installed increases its value by between $3.9 - $6.4 per installed Watt. So, a CA home that adds a 4 kW solar PV system will increase its value by between $15,600 and $25,600. Let’s split the difference and say the house increases its value by $20,600 with this 4 kW system.

The average installed cost of a residential PV system in California in the first part of 2010 was somewhere from $7.30 per Watt (source) and dropping all the time.  It’s possible to get a residential system installed in California today for $6 per watt if you shop around and spend wisely. Using this $6 per Watt figure, that 4 kW system would cost you $24,000 up front.

Spending $24,000 to increase your home’s value by $20,600 is not a bad deal when you consider the monthly savings on your electricity bill. You could close the gap between those two numbers with electricity savings in just a few years, depending on electric usage and utility rates. Assuming an average of 5.5 Sun Hours per day in California (source), this PV system could generate 8,000 kWh of energy per year. California has some of the highest electric rates in the country, averaging 15.3 cents per kWh so far in 2011. At this rate, your PV system would be completely paid off in 2.75 years.

This however, is before incentives. Many states offer 30% rebates (see incentives in your area here), bringing the total of your $24,000 system down to $16,800.  The federal government also offers a 30% rebate, taken after the state rebate.  This brings the total down to $11,760. The government will often pay for over half of your solar system right off the bat, leaving you with a much more doable figure.

You can spend $11,760 to increase your home’s value by $20,600.  On top of this, you get a greatly reduced monthly electric bill. It is easy to get loans for the up-front cost with monthly payments lower than your monthly electricity savings. That means that for zero up-front cost, a homeowner can add $9,000 to the value of their home and save a few bucks every month. It is mind-boggling that so few American homeowners are jumping on these incentives while they last.