The Value of Solar for Real Estate

Residential solar is having a banner year. In the first quarter of 2014 alone, the Solar Energy Industry Association (SEIA) reported that 74 percent of all new electric generating capacity in the United States came from solar power, elevating US solar installations to generate enough electricity to power 3 million homes. This was the same quarter that new residential solar installations surpassed commercial solar installations for the first time in history. 

In solar friendly states, many residential solar companies are quickly expanding operations to keep up with home installation requests. Solar’s generation capacity is only poised to increase, and with a myriad of financial and environmental benefits, it’s getting tougher every day for a business or homeowner not to consider solar as a real solution for the problem of containing their energy costs.

This is good news, and it also means good news for the real estate market. The old notion that rooftop solar installations required a considerable financial commitment or presented various infrastructure concerns has quickly changed with better knowledge by the real estate sector, the emergence of the solar leasing market, and third-party power purchase contracts. These new solar  financing options, and the decrease of solar installation and manufacturing costs, are all benefits of residential solar and explain why solar is now winning the battle in a growing number of real estate markets.

In fact, we have now seen evidence that the inclusion of solar panels on a home increases its value. In a study conducted by the U.S. Department of Energy’s Lawrence Berkeley National Laboratory, the selling cost of California homes increased by almost $25,000 with the addition of roof top solar panels. Solar panels make homes easier to sell and more a more desirable place to live. This is mainly because they lower a home’s energy costs and make your property less expensive to own.

As soft costs for roof top solar installations continue to decline, and as new and innovative approaches to financing and risk management are developed, commercial solar installations in particular are growing increasingly attractive and financially viable. Every businesses is looking to cut costs and many are investing more and more resources into rooftop solar installations that produce cost-competitive energy, and thus support  healthier profit margins, lower overhead energy costs, and gain a competitive edge. Larger industrial businesses with adjacent land also have the option of ground-mounted solar to meet industrial size power demands.

Residential solar installations provide similar benefits to homeowners, just on a smaller, although some argue more important scale, due to the aggregate size of the housing sector. As solar energy’s prominence continues to rise, efficiencies in solar system mounting (or racking systems) and solar panel manufacturing continue to lower costs. Coupled with leasing and financing mechanisms that help to reduce the burden of capital costs to a minimum and provide an appealing ROI to homeowners, residential solar installations have proven to protect utility customers from fluctuating energy costs and ease the burden of constantly rising energy costs, particularly in areas with relatively higher property values. In fact, some are viewing the savings from solar energy as a way to “cover” the higher property taxes on more valuable property.

What we’ve seen from both the commercial and residential sectors across the country is that the inclusion of solar is consistently a value-add to a property. As real estate values increase, consumer energy costs from solar decrease by using solar, as compared to the constantly increasing price of power obtained from public electric utilities. The day is quickly approaching when public electric utilities will hit a wall with their rate increases, and solar will be the clear go-to solution for most homeowners. 

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Lee Peterson is a licensed attorney and Senior Tax Manager for CohnReznick’s National Renewable Energy Practice. To date, Lee has been a critical tax advisor in over 10 billion dollars of renewable energy projects within the U.S. and its’ territories. He is responsible for thought-leadership and governmental affairs and his clients include the U.S. Department of Energy, Fortune 100 companies, state and local governments and domestic and foreign renewable energy project developers and manufacturers. Lee also advises the nation’s top financial institutions regarding their tax equity investment structures. Lee has published numerous articles in both the traditional and trade press, including, North American Windpower and Solar Industry magazine and he is regularly quoted in the media. Lee is also the author of numerous white papers on a wide range of critical renewable energy finance and tax topics and is a regular speaker at national professional education and industry events dealing with renewable energy policy, tax credit finance and federal and state tax policy. Lee volunteers hundreds of hours, pro bono, assisting non-profit renewable energy organizations, federal and state legislators as they seek to improve and implement new energy policies. For 10 years, Lee was an adjunct professor at Clayton State University and is a guest lecturer for the J. Mack Robinson MBA program at Georgia State University. Lee has also served as instructor for the State Bar of Georgia continuing legal education seminars.

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