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Solar Nexus - Where Solar Meets Real Estate

November 4, 2015

Almost daily, someone asks me about solar and how it interacts with residential and commercial real estate – whether it’s worth it, does it appraise up, and ways to implement it.

 

In this post, I’ll answer some of the questions I get asked routinely about the nexus of solar and real estate.

 

HOW CAN I OWN OR BUY SOLAR?

There are several ways to have solar energy and the good karma you get from it. 

 

BUY – You can buy the solar array, inverters and meter outright.  You call a solar provider who sells systems, they spec one for you, you write the check, and BOOM!  They install a solar system that’s yours, all yours.

 

POWER PURCHASE AGREEMENT (“PPA”) – This is the solar lease of the 21st century, and a couple of years back, over 80 percent of new residential solar customers here in Colorado used PPAs.  Basically, a solar provider installs a system on your roof.  They own it and all the solar credits (“RECS”) that accrue from it, and YOU purchase your electricity from them at a specified rate that locks in for 20 to 25 years (depending on the agreement).  That rate is usually less than what most customers pay for electricity, AND it hedges the risk that your electric rates will rise since they’re fixed for the duration of the agreement.

 

OFF-SITE – More and more, utilities are allowing customers to take credit for solar energy that’s generated at other sites like community solar gardens.  And some bleeding-edge cities like Boulder, Colo., even allow this for energy code compliance.  Some people and businesses have small rooftops, and this allows anyone to purchase solar, non-fossil-fuel energy even if you can’t generate it on-site.

 

HOW MUCH DOES SOLAR COST?

That depends on where you are, the utility rebate landscape you’re subject to, and the solar providers in your area.  A rule of thumb is $3 per watt (including both hard (material) and soft costs (design and permitting)).  So let’s say you have the room to install a 6 kilowatt system (a large-ish size I see installed a lot), that’s 6,000 kilowatts times 3, or $18,000.  This website can help you find local rebates, too.

 

CAN I GO "OFF-GRID"?

Technically, "off-grid" means that you're completely independent of your local utility.  (Think of folks living waaaay out, without power, gas or water.)  What I believe most people mean when they ask this question is can they generate everything they need on-site, thus canceling out need of utility electricity? This is known as "net-zero" energy use, and yes - it is possible.  We have clients who build homes like this routinely.

 

IS THERE A TAX BENEFIT FOR SOLAR?

Currently, yes.  The Federal Renewable Energy Tax Credit allows for a 30 percent tax credit for solar systems owned and installed.  So in the 6 kilowatt system above, you'd get 30 percent of that back - or $6,000.  The net cost of that solar array would be $12,000.

 

THIS IS SET TO EXPIRE AT THE END OF 2016.  I believe Congress will renew it, but it may be a last-minute pass.  If you want to take advantage of this, I highly recommend you do it now so you don’t get caught in the crunch in 2016.  

 

DOES SOLAR ADD VALUE TO A PROPERTY?

The short answer is yes, and it can be a significant amount based on the energy generated.  There are several ways to calculate that, including using HERS ratings that capture the energy generated over time.  I’ve written a lot about this.  Please read my previous blogs about green appraisals, or reach out for help.

 

 

IF I SELL MY HOUSE, WILL I GET MY MONEY BACK ON A SOLAR SYSTEM?

You should.  Again, this is a complex topic (see “green valuation” blogs).  Work with a real estate broker who understands the complexities of green homes and buildings.  And demand that you have a green appraiser who gets it, too.  By appraisers’ own rules, they’re not allowed to take assignments with renewable energy unless they’re trained and tested in the valuation impact.

 

IS MY HOUSE A GOOD SOLAR CANDIDATE?

One quick way to find out is through Sun Number or Google Earth.  Both give quick looks at your rooftop, and Sun Number gives you a 1-to-100 score on how good your solar exposure is.  Google Earth gives a decent snapshot of how clear your southern and eastern exposures are.  If you’re not sure whether solar will work, call a solar provider to explore it further.

 

HOW MUCH SOLAR ENERGY DO I NEED?

Look at your utility bills and your electric use in "kilowatt hours."  Multiply that by 12 for a rough offset.  You can also look at the PV Watts solar calculator on the National Renewable Energy Laboratory's website if you really want to get in the weeds.  Any solar provider will have final say on this, though, and they'll do the system sizing calculation.

 

IS SOLAR UGLY?

If you think solar’s ugly, you may be confusing solar electric (PV, photovoltaic) with solar hot water systems.  The hot water systems that are propped on rooftops at cockeyed angles usually come from the 1970s and '80s – first wave solar.  And what I hear about those Carter-era systems is that clients LOVE ‘em.  They’ve worked for decades and continue to. 

 

If you still think solar’s unattractive, compare it to a $400 energy bill.  I think those gorgeous, blue panels start to look pretty sexy by comparison.

 

REACH OUT if you have questions.  I'll also help you determine thumbnail solar feasibility for free if you mention you read this blog.

 

 

IMAGES:  TOP, solar panel closeup - Architerials.com.  MID, the sun - NASA.gov.  BOTTOM, Clarkson Green 6.25 kW solar array in inner-city Denver - SolarCity's Andrew Ehrnstein.

 

 

 

 

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