Multi-state residential transaction estimates of solar photovoltaic system premiums

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.