You’re probably here because you’re curious about how much more your home could be worth with solar installed on it. We’ve got you covered. 

We completed research on how homes are valued with energy upgrades like home solar panels. We found several sources of solid information on the subject and compiled them here. You may also be curious how to compute a rough estimate of your home value increase, so we crafted an easy-to-use guide, as well. 

In this article, we’ll review solar and home sale studies from around the country, provide home value calculation examples, and review valuation factors which affect the value of solar homes most. 

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Solar panels increase property value

Let’s start with a thought experiment. Say you were thinking about purchasing one of two identical homes, right next to each other on the same street. The only difference is that one of them has enough rooftop solar power installed on it to completely eliminate a $200 monthly power bill. The other has an empty rooftop.

That’s $2,400 a year in savings when buying the solar home instead of the one next door. Not only do you save big on electricity every year, you’re also reducing your carbon footprint and avoiding the impact of future utility rate increases by producing your own power. 

Logically, it’d make sense that the solar home’s value would be significantly higher than the home without solar panels. But, the question is, how much more?

The exact answer depends on a few factors we outline in the next section, but we’ll cover three studies which help get us to a ballpark range you can feel comfortable with first. 

Studies linking solar panels to home value increases

The Appraisal Journal cited researchers Ruth Johnson and David Kaserman who report, “Home value increases of about $20 for every dollar saved on annual energy costs”. 

So, in the case of the $200 monthly savings example above, you could expect the value of that solar home to be worth $48,000 more than it was previously ($200 x 12 months x 20 = $48,000).

For a second example, a study by the Lawrence Berkeley National Laboratory yields a formula of a $5,000 resale value increase for every kilowatt (kW) of solar installed. To get that same $48,000 home value increase from the Appraiser’s Journal with this calculation, you’d need a 9.6kW system (9.6 x $5,000 = $48,000). 

With average installation costs around $3,500 per kW upfront, you could have this size system installed for $33,600. That difference in value gained relative to your investment potentially nets you an arbitrage opportunity of $1,500 per kW of installed solar. 

That doesn’t even include the federal investment tax credit, which allows you to recover 26% of the cost of your home solar installation. Additionally, in some states, your property value increase is even exempt from additional property taxes

If you’re looking to sell your home faster and at a premium, it might be worth having solar installed first! You can expect a quick return on investment for this type of clean energy home improvement. 

Yet another study by the National Bureau of Economic Research estimated that home buyers gave a 4% premium to homes with solar energy systems installed than comparable homes without solar. 

While that estimate is simple, there’s a lot of unaccounted for variables. For example, it doesn’t take into account the size of the solar energy system. 

If you plopped a miniscule solar array on your home, you can’t confidently just point to this formula, do the math and tell your real estate agent, “Hey, the National Bureau of Economic Research said my home is worth 4% more now so let’s list it at this asking price instead”. 

To get to the same $48,000 increase referenced above in this 4% example, you’d need an initial property value of $1.2M. 

Obviously, most homes are not worth this much outside of California, and many will not need a 10kW solar system to zero out their electric bill. 

Use our home solar calculator to help you estimate home value increases

To quickly and accurately calculate how much solar you do need, we recommend using our solar calculator. That information, combined with the formulas above can also help you quickly estimate your expected property value increase with solar.  

In the section below, we provide an example of how to create a ballpark estimate of the value of your home with solar panels installed using our calculator and the above formulas. 

Our calculator takes the following factors into account in order to give you an accurate estimate of your installation costs and solar savings:

  • Your available roof space
  • Your utility company electricity rates
  • Available solar incentives

In our example, we use Zillow as well, to help you get a gauge on your initial real estate value without solar.

When you enter your address into a search engine like Google, you’ll quickly find a Zillow link to your property. On that page is a listed “Zestimate value”, or the amount your home would probably sell to a new owner for based on sale data from similar types of homes. 

Find out how much a rooftop solar system will cost you

Calculating a ballpark range for home value increase

Assume our calculator above estimates a 6kW solar panel system would be best for your energy bills of $120 a month. 

  • You could quickly estimate a $30,000 home value increase from the Lawrence Berkeley Labs formula (6kW x $5,000). 
  • From the Appraisal Journal article citation, $120 of monthly utility bill savings is $1,440 annually. Multiply that by 20 and you get an expected market value increase of $28,800
  • Finally, using Zillow and the National Bureau of Economic Research study, consider you have a Zestimate of $550,000 for your property. A 4% increase in home value would be $22,000

In this way, your ballpark estimate for a 6kW would be anywhere from a $22,000 to $30,000 increase in home value.

Factors which change the relationship between solar and home sale prices

There are a couple of factors that will affect the price of your home sale, including the age of your PV system and your location.

Age of the PV system

If you installed your solar power system in 1995, you can’t expect to garner as much home value as a photovoltaic system installed in 2020. Solar modules are way more efficient than they used to be, and as such, are more valuable the newer they are. 

The calculations above assume the solar panel installation has at least 20 years of good life left in the system. In the case of the Appraiser’s Journal formula, that’s why they used the multiple of 20. 

Your location

Solar panels last in excess of 25 to 35 years, and depending on where you live, they can be income-producing and cost saving assets. Utility costs vary widely across different regions, as do other solar policies, such as solar property tax exemptions. 

Listed below are important geographic variants on home value increases with solar power. 

Availability of solar performance-based incentives 

Some states have performance-based solar incentives. They pay you for the amount of renewable energy you produce on an ongoing basis. If you’re fortunate enough to live in one of these areas such as Massachusetts or New Jersey, your home solar system will be worth a lot more. 

Explore where you can qualify for these incentives by checking out our performance-based solar incentives resource. 

Electricity costs

Some areas of the country have much higher utility costs than others. Solar is worth a lot more in areas like New York and Hawaii, since they do a better job of offsetting higher utility bills. 

Solar system ownership status

If a home has solar panels on it, but the current homeowner doesn’t actually own the system because of a solar lease, the home value will not be much higher.

That’s because the panels are not actually part of the property, someone else owns them! Even though electricity bill savings will be present, at any time the leasing company can remove their panels if they wanted to. 

A new buyer would also not qualify for any local solar incentives like renewable energy certificates, since those were forfeited to the leasing company upon system installation. 

Solar recordkeeping for home sale

When it’s time to sell your solar home, it’s a good idea to have records available for prospective buyers to view. You’ll want to have proof your solar installation was completed by a reputable installer and that it was permitted properly. 

You’ll also want to keep records of your system’s warranty information and ideally power bills which show before and after proof of your energy savings. Keep those materials in a safe place, and work with your real estate agent to ensure they’re well communicated when it’s sale time. 

This will help you preserve the maximum value of your property. 

Final thoughts on home value increase with solar panels

If you’re considering installing solar and also contemplating a move in the next few years, do it. 

Not only are you going to save a bunch of money on your electricity bills in the short term, when it comes to selling your home, you can expect your home solar panel installation cost to be more than recouped in full. You can also expect your home to sell faster. 

After all, solar is a smart, sleek investment. When shopping for a home, why wouldn’t potential buyers want a more energy efficient home?

Find out how much you can save with solar