[RE-wrenches] Value of PV system to a home

Wed Mar 23 07:22:38 PDT 2011

Having just gone through the home buying and appraisal process, I can tell you first hand that appraisals aren't worth the toilet paper they are written on. It's all about CYA and conjecture. My best friends are real estate agents and bankers, and I hate to say it, but the whole industry is screwed up. Appraised values are not based on anything real at this point. Reason has left the building. Most homes around here are appraised and sold at far less than the cost of new construction. (as a side note, if you have a pile of cash sitting around and want to make lots of money, buy a home in SW Florida NOW!)

The bottom line is that homes and home improvements are worth exactly what someone is willing to pay for them. What's most important to our industry is the _perceived_ value of improvements. People pay more (or too much) for a home because it has granite countertops or Kohler toilets or a nice mahogany tree in the yard. You won't get an appraisal bonus for a lifetime fiberglass Marathon water heater over a 15 year old rusted out traditional tank, so why would you get a bonus for a solar water heater? Both are better and theoretically save money in the long run, but an appraisal would not consider either.

As an industry, we would be well served to focus on solar improvements and energy savings as an "obvious bonus" to the home buyer, and not try to put an arbitrary dollar value on it. But, if you insist, here is the way I like to think of it as a former finance major and someone who wants to sell solar projects:

A PV system that provides a home with $100 per month in energy savings can buy a 30-year fixed rate mortgage today at 5% valued at $18,628.16. That's your value. Simple. Verifiable. You can make the assumption that degradation and maintenance will be offset by increasing energy rates to keep things simple. The Excel formula is: =PV(0.05/12,360,-100) or =PV(APR/12,360,-SAVINGS). Using this methodology, $1 of annual savings is worth about $15.52 in "appraised value."

The PV (present value) in the formula is a kind of pun I suppose!

Jason Szumlanski

Fafco Solar 

From: re-wrenches-bounces at lists.re-wrenches.org [mailto:re-wrenches-bounces at lists.re-wrenches.org] On Behalf Of North Texas Renewable Energy Inc
Sent: Wednesday, March 23, 2011 9:41 AM
To: RE-wrenches
Subject: [RE-wrenches] Value of PV system to a home

While the Appraisal Institute model is about the only widespread reference point available, it too lacks strong credibility due to the perception that it's out dated information and nothing else confirms its conclusion. Many in the anti-RE realm point to the fact that F/F&FHA don't support the premise that energy saving has real value and use F&F as a valid reason, along with the "...no credible evidence" argument, not to. 

F&F are private mortgage investment corporations that are supported with taxpayer money, money that kept them from collapsing under the weight of their own bad mortgage investments. Their dislike of any pro-renewable program [PACE comes instantly to mind] is grounded in their perception that the low risk design that makes PACE so desirable to cities and homeowners is a financial risk to the private investors returns. 

The logic is: homeowner with PV defaults, taxing authority bonds are exempt from risk, investment banks are left holding the bag, investors lose pennies. 

Those investors lobbyists pushed back up the chain of authority to, among other things, seriously wound California's own voter approved and taxpayer friendly version of PACE. As usual the taxpayers lost much of the the momentum that had brought them so close to creating another national standard for renewable energy financing without taxpayers having to foot the bill before the investment cartel pulled the rug out from under us. 

The FHA, being nothing more than a hand-puppet for the mortgage industry, nodded in agreement and brandished their rubber stamp of approval.

The factual and irrefutable data proving beyond any doubt that homes & businesses with PV are worth more should be an immediate goal for the RE industry. While that proof, if it even exists, might not open the investment floodgates, it would however open more doors for investors which moves our industry a step closer to reaching critical mass.

my 2¢

Jim Duncan

PV installer & financial know-it-all 

	From: Jamie Johnson <jjohnson at spefl.com>

	Keith & Joel,

	The old metric was $20 in value for each $1 saved in energy, however the Appraisal Institute has not supported that valuation metric for some time now and neither has Fannie, Freddie or FHA.

	Using the gross sales price that the customer paid for PV as a valuation number was also shot down.

	And unfortunately most regional MLS databases don't provide a category for solar electric, solar hot water or solar pool heaters, so that makes it difficult for an appraiser to use the sales comparison approach.

	A year ago I began developing a valuation model for PV for the Appraisal Institutes Educational Committee and they are now incorporating parts of it into their training programs on "valuation of sustainable buildings" for appraisers.  Earlier this year DOE awarded a grant to Sandia Natl Lab to essentially do the same thing for the Solar America Cities program (soon to be the Solar America Communities program) and they have since picked up my work on the valuation model.

	A proof of concept spreadsheet (which takes all of the fun out of it) and pdf explanation of the valuation model should be released this summer.  I will provide the download link to the list when it is available.  

	It's important to note that any valuation model for PV needs to be accepted by Fannie, Freddie and FHA before it is relied on and quoted by the PV industry.  There are currently ongoing discussions between FF&F, AI and DOE on PV valuations and hopefully they will resolve the PV valuation issues for loan transactions soon. 

	Jamie Johnson

	NABCEP Certified PV Technical Sales Professional PVTS012911-44

	NABCEP Certified Solar PV Installer 031310-118

	General Manager

	SOLAR POWER ELECTRIC

		-------- Original Message --------
		Subject: [RE-wrenches] Value of PV system to a home
		From: Keith Cronin <electrichi01 at yahoo.com>
		Date: Tue, March 22, 2011 2:57 am
		To: RE-Wrenches <re-wrenches at lists.re-wrenches.org>

		Hi

		Was wondering if anyone has any new data points on the additional value a PV system adds to the home?

		If someone spends $X for a system and saves $Y a month/year, how is this being calculated?

		Do we have actuaries with enough empirical data to suggest what the numbers would look like?

		Realizing alot has to do with location, current cost per kWh of electricity etc.

		Could have swore there were some studies done to imput the value of two homes on the same street, one with solar and one without- for some granular details on the delta in values.

		Thanks

		Keith

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