The effect of residential solar photovoltaic systems on home value: A case study of Hawai‘i

Highlights

Estimates how much a solar photovoltaic (PV) system affects the price of a home on the island of O‘ahu.

A PV home is worth 5% more on average than a non-PV home, which translates to an increase of $35,000.

A more than full pass-through of a PV investment occurs because circuits in Hawai‘i have reached legal capacity limits.

Abstract

An investment in solar photovoltaic (PV) is considered a home improvement, and should be reflected in home sales prices. However, uncertainty about PV policies and information asymmetries may result in an imperfect pass-through. Hawai‘i serves as an illustrative case study to assess the impact of PV on home prices because Hawai‘i has the highest number of PV installations per capita nationwide. Applying a hedonic pricing model using home resale and PV building permit data from 2000 to 2013 for Oʻahu, I find that the presence of PV adds on average 5.4% to the value of a home. The value of PV exceeds total average installed costs because many of Hawai‘i’s electricity circuits have reached legal limits for PV installations and thus many neighborhoods could technically no longer install additional PV capacity. Therefore, the value of the system goes beyond its capital investment—on average, by $5000—to incorporate expected electricity savings.

Keywords

  • Solar photovoltaic;
  • Real estate prices;
  • Hedonic pricing model

JEL classification code

  • Q42;
  • R31;
  • D12

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