The “Solar Panel” Effect on Home Sales

Our recent podcast on “conspicuous conservation” looked at the “Prius Effect” — that is, how valuable it is for green-leaning consumers to signal their devotion to the environment by driving an obviously-hybrid Toyota Prius. (BTW, you can also fake it with an “instant hybrid conversion kit.”) The episode was based on an interesting paper by Alison and Steve Sexton called “Conspicuous Conservation: The Prius Effect and Willingness to Pay for Environmental Bona Fides.” It included some talk about solar panels as well, and how some people mount them on the street-facing side of their homes even though the sun shines more strongly on the rear.

Now there’s a new related paper called “Understanding the Solar Home Price Premium: Electricity Generation and ‘Green’ Social Status,” by Samuel Dastrup, Joshua S. Graff Zivin, Dora L. Costa, and Matthew E. Kahn. PDF is here; from the abstract:

This study uses a large sample of homes in the San Diego area and Sacramento, California area to provide some of the first capitalization estimates of the sales value of homes with solar panels relative to comparable homes without solar panels.   Although the residential solar home market continues to grow, there is little direct evidence on the market capitalization effect.  Using both hedonics and a repeat sales index approach we find that solar panels are capitalized at roughly a 3.5% premium.  This premium is larger in communities with a greater share of college graduates and of registered Prius hybrid vehicles.

One point that’s made in the podcast is that some very green communities (the Bay Area in Calif., e.g.), where solar panels are in high demand, aren’t very good locales for solar energy — whereas a less-green community like Bakersfield is super-sunny. We have a proposed solar-panel-swapping solution to that…

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  1. James says:

    Ah, but have you ever been in Bakersfield in the winter? See the Wikipedia article on “tule fog”:

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    • Rossouw says:

      Hidden due to low comment rating. Click here to see.

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  2. Michael says:

    There’s no citation for the assertion that people install solar panels on the shady street side of their roof, nor any indication of how this is “known” or who knows it.

    Solar insolation is a key factor in determining the payback period for a home system (obviously) and no solar installer would ever recommend that someone install on the “wrong” side of their roof. I work for a solar trade association and I’ve never heard of this happening (which isn’t to say that it hasn’t).

    Most people install solar for primarily economic reasons. Absent any actual evidence, I’d assume that this is a tiny, tiny number of extremely wealthy solar customers who don’t care if their system ever breaks even. If these people even exist in any significant number, they certainly aren’t typical solar customers.

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    • caleb b says:

      “Most people install solar for primarily economic reasons.”

      Really? They might tell themselves that, but most houses that I see that have solar panels are 3,500 sq ft plus. I question that saving money is their primary goal.

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      • Michael says:

        Well, it’s unlikely that the houses you happen to have seen are a representative sample of the solar installations across the U.S., most of which (on a capacity basis) are non-residential. There was around 2,000 megawatts of installed PV at the end of 2010 and only 637 megawatts were on homes. The biggest growth in solar recently has been in commercial and utility-scale markets. With power-purchase agreements and solar leases, a lot of customers can be cash-flow positive right away.

        No need to convince yourself that you’re installing solar for economic reasons if your installation quote does it for you.

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      • BSK says:

        My school put them on the roof of the gym. There was some buzz about it and our Head mentioned it as part of our efforts to be green, but you can’t see them unless you’re on the roof or in a helicopter. Yea, the publicity is good, but we get tons of sun and have saved quite a bit of money already.

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      • Name says:

        Those big homes are expensive to heat and cool, hence the economic incentive to use solar power.

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    • DaveyNC says:

      Micheal, I think that if you stop and think about it, you may have just learned a way for your trade association members to sell a few more square feet of coverage.

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  3. JP says:

    It always bugs me when people take something that is for good and make a trend out of it. Once the trend is forgotten, the movement is too. Living “green” is good, but doing things like buying a Prius just to impress people is not.

    Does anyone know of the impact of buying a new hybrid, over just keeping your old car? You know the reduce and reuse part.

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    • kevin says:

      I don’t “know” but I know a friend to works in renewable energy policy, and she says to keep your car or – gasp – just buy a small gass burning car like a Mini or a Honda Fit and it is better anyway.

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    • James says:

      Except that most of the time that’s a false comparison. The decision is not “Shall I buy a new hybrid or keep the old car?”, it’s “I’m going to buy a new car, what should I buy?”

      Then you need to remember that the old car generally isn’t destroyed, it goes into the used car market, and will most likely be resold several times over its useful life.

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    • Better than JP says:

      Considering the horrid gas mileage that old cars get, the sooner they get replaced by more efficient vehicles, the better.

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      • JP says:

        I wasn’t stating a fact or opinion. I asked the question: Does anyone know of the impact of buying a new hybrid, over just keeping your old car? Apparently not.

        At any rate, my car which is not old averages around 35 miles a gallon. There is no way that replacing it with a hybrid is better for the environment. The materials used to make the new car and the processes to get them along with the manufacturing process would far outweigh the benefits. None of this covers the issue with manufacturing and disposing of batteries. Many people bought Hy-Brids for tax purposes or to feel better about themselves. I know of no one personally that “needed” a new car.

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      • Ava says:

        People who chose to buy Prius when they need a new car do exist. My husband and I are two of them. We needed a new car because our 80’s Honda was finally completely dead. We decided to buy a used Prius because of the good gas mileage, good general quality of Toyota on consumer reports, and the fact it was a “green” vehicle was also attractive to us.

        We weren’t going to get rid of the Honda when it was still a viable car just to feel good about having a Prius, but when the time to upgrade came, it made sense to us to get a fuel-efficient vehicle economically and as part of our overall desire to impact environment less (for the same reason, we don’t eat meat, we recycle, we try to conserve on heat/energy usage in the house etc.)

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      • James says:

        Old cars get horrid gas mileage? Sort of depends on the car: a good many have better fuel economy than most of what’s on the road today. Just for instance, I used to own a mid-80s Honda CRX which would get 40-45 mpg, even the way I drove it. My current Honda Insight is 11 years old, and is getting 79 mpg on the current tank. (Try beating that with anything but a Tesla!) There are plenty of others from the ’80s, ’70s, and even ’60s that will handily beat new car fleet averages.

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    • DaveyNC says:

      “Living “green” is good, but doing things like buying a Prius just to impress people is not.”

      Wait, so one’s intent is more important than the effect?

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      • REal says:

        The effect is more important than the intent. I’m sure thats what the original poster was saying.

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  4. adam says:

    this proposition is premised on the idea that people go solar to feel good, as opposed to save money. while there’s often a mix of motivations, the fact remains that residential solar in CA makes for very good personal economics. it’s a business, not a cause.

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  5. Joe says:

    Altruism means that you are truly sacrificing. Consequently the greens who purchase Prius cars may be conspicuous conservation buyers but they are not altruists. They are getting emotional benefits and reduced transportation time benefits. The browns on the other hand are rational conservation buyers. The difference is that they are not influenced by Hollywood celebrities displaying their conspicuous conservation purchases. The browns are grounded in reality and look for economic benefits. They shrug off the touchy feely stuff for solid fact based cold economic benefits. So you won’t find browns buying electric cars, wind mills, or solar cells. Simply put, with today’s technology these just don’t make sense.

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    • James says:

      “The browns on the other hand are rational conservation buyers.”

      Not really, or at least not by my definition of a brown: being someone who deliberately makes anti-green choices, even though those choices cost more or are less convenient than what the non-ideological people in the middle would do. As an example, the people who refuse to give up incandescent bulbs, even though CFLs save money and give better light.

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      • Bob Nicholas says:

        Yes, CFLs use less power, but they hardly give off “better” light. Humans respond best to radiation that is as close as possible to the sun with respect to both color temperature and color rendering index. No technology today offers better light than incandescent bulbs in this regard. CFLs also contain mercury, which has a negative impact on the environment. Solid-state lighting is the best solution for those who are environmentally conscious, but the cost of good quality LEDs is too much for many to afford.

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      • James says:

        “Humans respond best to radiation that is as close as possible to the sun with respect to both color temperature and color rendering index.”

        That’s true.

        “No technology today offers better light than incandescent bulbs in this regard.”

        That’s dead wrong. Natural sunlight has a color temperature in the 5500-6500K range; incandescent bulbs run around 2700-3300K, much closer to the “natural” light of candles & oil lamps. You can see this yourself (or at least I can): light from incandescent bulbs is much yellower than sunlight – unless, of course, you live in a major city, and think that the light you get, filtered through dust & smog as it is, is natural daylight.

        “CFLs also contain mercury, which has a negative impact on the environment.”

        The amount of mercury in a CFL bulb is trivial. In fact, given the typical US generation mix, more mercury would be released into the environment from burning coal to generate the extra electricity needed to run an incandescent, than if you broke the CFL at the end of its life and let the mercury it contains escape.

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      • Bob says:

        You are absolutely correct about the color temperature issue. I had only meant to assert that incandescents have the best CRI. CFLs hit the mark on CT, but have poorer CRIs. They have been improved dramatically in recent years, however. I think many people have issues with giving up incandescents due to the fact that many early CFL consumers may have tried a low CT CFL with very poor CRIs (~60). This would mean that many colors would look “off” compared to incandescents at a comparable CT. Given that CFLs have increased CRIs in the 80s means that consumers would not have to give up near as much, but it may take some convincing that colors won’t look weird compared to what they are used to seeing in incandescents. At some point people are just going to have to deal with it, since energy efficient lighting will most likely never have a perfect blackbody spectrum.

        Regardless, as you said, it is hard to believe that consumers still insist on using a light source with a luminous efficiency of only ~ 2% when CFLs can offer five times that efficiency. Anyway, I am rambling now, so I will end it with that…

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  6. SFCeltic says:

    My parents live in the SF East Bay right next to the fog belt.

    They have a net zero bill on electricity usage from their newly installed solar panels. Prior to that the were getting $375+ electric bills/month.

    As soon as I am forced to re-roof my home I will also install solar panels.

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  7. Rob says:

    The primary reason for all of our installations in Orange County California have been for financial reason’s. Our customers are saving anywhere from $60,000 on a modest size home to $250,000 on large home in twenty five years with an average payback period of seven years. Our customers are enjoying 9-24% guaranteed ROI’s on the only home improvement available that pays you back. We recently had a customer forego putting solar on the front of the home for the lower production rear facing orientation and they will only save $200,000 instead of $230,000 in energy costs. The environmental benefits of producing clean renewable energy is a by product of making a wise financial decision. It’s sunshine, it’s free, it’s a no brainer-folks!

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  8. Paul says:

    Solar panels are economical when as a taxpayer I spend several dollars for each of yours! It’s called gaming the system. Solar/wind energy makes me and my country poorer. There are cheaper ways to clean the environment.

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    • pawnman says:

      Nuclear power comes to mind.

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    • Tim says:

      You spend 72x more in oil subsidies than you do in renewable energy subsidies, so actually you are paying much MORE to pollute the planet than the clean it. The US government pays exxon mobil $1.07 for every $1.00 they spend in oil exploration…and this company says they will curtail exploration if we eliminate subsidies that fund their stock dividends.

      Solar subsidies are paid to homeowners, who in turn fuel their local economies. Solar sales create green jobs in your neighborhood, and those dollars get spent 3x over locally. Your gift to oil companies goes to exectives, then to shareholders, who reinvest and do NOT fuel local economies.

      So, dear boy, the thing that’s making “your” country poorer is your continued propping up of carbon technology, not green technology.

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