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Multi-state residential transaction estimates of solar photovoltaic system premiums

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Listed:
  • Hoen, Ben
  • Adomatis, Sandra
  • Jackson, Thomas
  • Graff-Zivin, Joshua
  • Thayer, Mark
  • Klise, Geoffrey T
  • Wiser, Ryan

Abstract

As of the second quarter of 2016 more than 1.1 million solar photovoltaic (PV) homes exist in the US. Capturing the value these PV systems add to home sales is therefore important. Our study enhances the PV-home-valuation literature by analyzing 22,822 home sales, of which 3951 have PV, and which span eight states during 2002–2013. We also, for the first time, compare premiums with contributory value estimates derived from the present value of saved energy costs (income approach) and, separately, the replacement cost of systems at the time of sale (cost approach) to examine market signals. We find home buyers are consistently willing to pay PV home premiums across various states, housing and PV markets, and home types; average premiums equate to approximately $4/W or $15,000 for an average-sized 3.6-kW PV system. We find that a replacement cost net of state and federal incentives is a better proxy for premiums than gross installed costs, and that the income approach is a good signal if it accounts for tiered volumetric retail rates. Other results include detailed premium analyses for PV home sub-populations.

Suggested Citation

  • Hoen, Ben & Adomatis, Sandra & Jackson, Thomas & Graff-Zivin, Joshua & Thayer, Mark & Klise, Geoffrey T & Wiser, Ryan, 2017. "Multi-state residential transaction estimates of solar photovoltaic system premiums," University of California at San Diego, Economics Working Paper Series qt1w50b3p6, Department of Economics, UC San Diego.
    • Handle: RePEc:cdl:ucsdec:qt1w50b3p6
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    References listed on IDEAS

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    1. Dastrup, Samuel R. & Graff Zivin, Joshua & Costa, Dora L. & Kahn, Matthew E., 2012. "Understanding the Solar Home price premium: Electricity generation and “Green” social status," European Economic Review, Elsevier, vol. 56(5), pages 961-973.
    2. G. Sirmans & Lynn MacDonald & David Macpherson & Emily Zietz, 2006. "The Value of Housing Characteristics: A Meta Analysis," The Journal of Real Estate Finance and Economics, Springer, vol. 33(3), pages 215-240, November.
    3. Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb..
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    5. Ben Hoen & Ryan Wiser & Mark Thayer & Peter Cappers, 2013. "Residential Photovoltaic Energy Systems In California: The Effect On Home Sales Prices," Contemporary Economic Policy, Western Economic Association International, vol. 31(4), pages 708-718, October.
    6. repec:bla:scandj:v:81:y:1979:i:2:p:154-73 is not listed on IDEAS
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    1. Lan, Haifeng & Gou, Zhonghua & Yang, Linchuan, 2020. "House price premium associated with residential solar photovoltaics and the effect from feed-in tariffs: A case study of Southport in Queensland, Australia," Renewable Energy, Elsevier, vol. 161(C), pages 907-916.
    2. Bishop, Kelly C. & Kiribrahim-Sarikaya, Ozgen, 2024. "Energy-efficient investments in housing," Regional Science and Urban Economics, Elsevier, vol. 107(C).
    3. Grazier, Emma, 2022. "Beyond the Solar Home Price Premium: Solar as a Neighborhood Amenity," 2022 Annual Meeting, July 31-August 2, Anaheim, California 322312, Agricultural and Applied Economics Association.
    4. Gillingham, Kenneth T. & Watten, Asa, 2024. "How is rooftop solar capitalized in home prices?," Regional Science and Urban Economics, Elsevier, vol. 107(C).
    5. Paolo Bragolusi & Chiara D’Alpaos, 2021. "The Willingness to Pay for Residential PV Plants in Italy: A Discrete Choice Experiment," Sustainability, MDPI, vol. 13(19), pages 1-13, September.

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