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Good For the Environment & Your Property Value

Homeowners considering solar will at some point wonder, “What happens if I want to sell my home?”

The answer to this question depends largely on how you ended up going solar. When you own your solar system, it can transfer to the next owner easily — after all, it’s an asset that belongs to you. If you’ve leased your system, you might encounter a few hiccups, as it still belongs to the solar company, and they’ve put a lien on the system. (ease of transferability is one of the key differences between solar ownership and leasing.)

Homeowners who own their solar system are in luck — repeated studies have found that solar ownership has a positive impact on your property value. Just like a renovated kitchen or a finished basement improves the value of the property, so does the clean energy system producing free electricity for decades. In fact, solar’s positive impact on home value is well-enough established that Fannie Mae and Freddie Mac instruct appraisers to include its value in real estate appraisals for mortgages. So not only do consumers perceive value in dramatically reduced electric costs, but the appraisal rules for government-backed mortgages (which most are) allow it to be factored in the same way other home improvements are.

In fact, solar ownership does more for your home relative to the cost than most home improvements. While a prospective buyer might prefer a yard to your in-ground pool, everyone who buys the home will use electricity — and it’s easy to calculate the value of electricity, which is given a set rate by the utility. Saving $200 a month by not paying an electric bill is an immediate benefit any homeowner would appreciate.

So roughly how much does a solar system improve your property value? Two recent studies give us a pretty good idea.

Solar 101

Benefits of Going Solar

In a study funded by the U.S. Department of Energy, Lawrence Berkeley National Labs researched the sales data of nearly twenty three thousand homes spanning eight states between the years 2002 and 2013. Approximately four thousand of these homes were equipped with a solar system, all of which were owned by the homeowners. At the time, this had been the largest study to date to evaluate the impact that solar systems (and more broadly, energy sustainability features) had on home values.

The study “compare[d] premiums with contributory value estimates derived from the present value of saved energy costs.” In other words, they wanted to determine how much more home buyers were willing to pay for savings on their electricity bill. This study included New York, and specifically Long Island; given its high electric costs, Long Island was home for “about 40 percent of all systems installed in New York,” as reported by the New York Times when discussing the study.

The conclusion? Home buyers were willing to pay a premium for a house with a solar system already installed. The value added was approximately $4/watt for an average sized system. The study found a 3.6 kilowatt (kW) system brought in roughly $15,000 on top of the normal sale price. By extension, a larger house with larger electrical needs could foresee a 7.2 kW system bringing in $30,000 extra. Not bad for a system you’d finance with the money saved on your electric bills.

But it’s been a few years. Surely there’s a more recent study? Of course there is.

Most folks who monitor their home value are familiar with the real estate app Zillow. Just like when you use their app to filter homes for characteristics — year built, square footage, school district, etc — they’re able to analyze trends in their data to determine which features sell and for how much.

Zillow studied the “solar premium” added onto home values by comparing homes listed and sold in a one year period — between March 1st, 2018 and February 28th, 2019. They controlled for attributes like the numbers of bedrooms and bathrooms, the square footage, location, and property age. They found that the sale premium varies greatly by market; Riverside, California saw an increase of 2.7% on average. Nationwide, the solar premium was 4.1%.

For New Yorkers, though, the news is even more promising: the study found that in the New York City metropolitan area, which includes the five boroughs and Long Island, the average increase was the highest in all the regions studied. The solar premium here in New York was 5.4% on average, which translated to an extra $23,989 compared to the same home without solar.

The sensibility of home buyers echoes that from the 2015 study. Most things in downstate New York cost more than elsewhere, and electricity is no exception. On the other hand, solar systems provide free electricity, and those savings will add up. As the article notes, “[For many homeowners], these future savings are worth spending a bit more money up front.”

Your electric meter is easy to find. It’s most likely outside of your house. If you go outside, take a look at where the electric wires meet your house. They’ll connect via service wire to the weatherhead, which connects to a service mast (usually encased in PVC or steel), which then connects to a metal box called the meter pan. Right there, in the middle of your meter pan, is the electric utility meter.

For a long time, all electric meters had one job: keep track of the electricity flowing into the home. That way, at the end of the billing cycle, the utility would know how much you used and they’d send you a bill. After all, electricity is an energy carrier; many utilities burn coal or natural gas to produce it and those fossil fuels cost money. Here in New York State, we have quite a bit of hydropower and some nuclear power, too.)It also costs money to maintain the grid and pay the utility employees. The more you use, the more you pay.

With renewable energy systems on the rise, traditional electric meters are being replaced. In the past, electric meters had analog dials (these meters were encased in a tempered glass bubble to keep the dials safe). Those meters are gradually being replaced with digital smart meters. These meters can be remotely read, so the utility meter readers don’t need to worry about locked gates or barking dogs.

Smart meters can also track electricity moving in two directions — to the house, which is traditional, and from the house, which is new. Again, renewable energy systems by default backfeed the electric grid. When you use electricity, the meter moves forward like normal. When you produce electricity, the meter moves backwards.

So with a solar system and a smart meter, the number on the meter will fluctuate. At the end of the billing cycle, the meter reader will check how the number compares to the number from the previous cycle. In other words, they’ll check your net consumption, hence the phrase “net meter.”

You can read this on the meter itself. If you live on Long Island, the meter will say LIPA. That stands for Long Island Power Authority. There’s a history behind this, but suffice to say they’re a public entity, and they’ve contracted the Public Service Enterprise Group on Long Island, or PSEG LI, to service Long Island’s electrical needs.

In New York City, your utility is the Consolidated Edison Company of New York, or Con Ed. They service NYC and Westchester County with electricity, gas, and steam services. They’re a private entity. In any case, that’s why you get gas bills and electric bills from the same company.

Solar systems produce electricity, and not natural gas, so this type of net metering will not affect your gas bill. It only affects your electricity bill.

Electricity is measured in different units depending on how much is being moved. The smallest unit is a watt-hour. Homes use quite a bit of electricity, so their level of electricity is measured in kilowatt-hours (kWh). Commercial properties and solar farms would be measured in megawatt-hours (MWh), and so forth.

If you take a look at your electric bill, and search around, it will tell you how much electricity you used in kilowatt-hours. They will also tell you the rate you pay for each kilowatt-hour within certain thresholds. Whenever you turn on the lights, watch TV, plug in devices, and so on, you’re drawing kilowatt-hours from the electric grid; your electric meter measures them and you’ll be sent a bill at the end of the billing cycle (which is usually around a month long).

The electricity produced by a residential solar system is also measured in kilowatt-hours. When the sun is shining on a clear day, your solar panels will produce quite a bit more than you’re using. The digital net meter will monitor all the kilowatt-hours going into the grid and the numbers will count backwards. You probably aren’t using this energy because you’re at work or at school. The utility gives you a credit for these kilowatt-hours.

When you come home from school or work, and start using the appliances in the evening, the net meter will count forwards again. Your kilowatt-hour usage is measured against the kilowatt-hours your system produced during the daytime.

The utility doesn’t measure this on a daily basis. They’ll still look at your utility at the end of the billing cycle. They’ll check your net electrical usage (kilowatt-hours going out versus kilowatt-hours coming in) and they’ll send you the appropriate bill.

It’s possible that your system will have produced more electricity by the end of the billing cycle than what you used. You won’t lose this energy; in fact, both PSEG LI and Con Edison will continue counting your kilowatt-hour credits in your favor against your usage in the next billing cycle.

For example, let’s say in one month, your solar system produced 1,000 kWh. Your household consumption was 800 kWh. Your net consumption was -200 kWh; in other words, your solar system produced an extra 200 kWh more than what you needed that month. Your utility will credit your electricity account those extra kilowatt-hour credits for the next month, if you need them. It will be indicated on your bill as your “energy bank”.

Let’s say the next month your solar system produces another 1,000 kWh. However, your home uses 1,200 kWh. In this case, the utility will include the 200 kWh credit from the previous month. In this case, everything evens out, and they wouldn’t charge you for electricity, because your net consumption was zero.

If you happen to have additional excess electricity produced in the second month as well, you won’t lose the first month’s excess. Both PSEG LI and Con Edison will continue accumulating your kilowatt-hour credits until the end of the year. That’s where they differ — more on that later.

Net metering is especially useful for regions like the northeast, which have four distinct seasons. Solar systems in New York State produce more energy in the spring and summer, on average, than they do in the fall and winter. Net metering allows you to carry your excess power from the “bright” seasons into the “dark” seasons so your year-round average bill remains low.

It’s quite common that people don’t have excess power at all. You’re still being credited for your kilowatt-hour production either way. For example, if your solar system produces 800 kWh, and you use 1,200 kWh, the utilities will bill you for the difference — 400 kWh.

Your electric utility bill will be reduced by your solar system. How much you are paying for your solar system — which might vary depending on whether you’re financing or leasing your system — would depend on your arrangement with your solar contractor. If you’re currently reviewing your options, you might want to review how solar ownership works compared to solar leasing.

Con Edison and PSEG LI treat net metering the same on a month-to-month basis. In other words, your solar system’s kilowatt-hour production is measured against your household’s kilowatt-hour consumption in the same way.

Each utility sets their own rates per kilowatt-hour consumed, so their respective customers don’t pay the exact same charges. For example, if your solar system produced 1,000 kWh and your home used 1,200 kWh in that month, you might owe a different amount depending on where you live. However, if the reverse were true — your solar system produced more than you used — then in both cases, you wouldn’t be charged for electricity. This is because a kilowatt-hour is a unit of measurement, while the price-per-kilowatt-hour is determined separately.

Bear in mind that both utilities charge a basic service fee. This is a daily fee to remain connected to the grid. It’s unavoidable, even if your solar system produces more power than you use year-round. Check your bill for details.

There is an important distinction between Con Edison and PSEG LI. At the end of the billing year, Con Edison will write you a check for the wholesale rate of your kilowatt-hour energy bank (if you have excess energy remaining) plus 6.6%. The wholesale rate will be less than what you normally pay for electricity, but it may help cover the basic service charges. At the end of your billing cycle, your energy bank is returned to zero.

PSEG LI is contracted by LIPA, which is a public entity and isn’t subject to the same regulations as Con Edison. They changed their net metering policy in 2018; now, PSEG LI continues crediting your energy bank for excess solar energy for a 20 year period, after which it’s returned to zero. They no longer write checks, unless your system was registered prior to the policy change.

There are benefits and some drawbacks to both policies, but as mentioned above, each utility uses a blanket net metering policy for all properties within a class (e.g. residential solar) so customers simply must accept the policy for their territory. On the one hand, it’s nice to receive a check at the end of the year; on the other hand, since solar panels can degrade in efficiency over time, it’s nice to have an ongoing energy bank for 20 years. Then again, some customers use up all their solar energy anyway, and simply enjoy their solar systems for the considerable energy savings over time.

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As purveyors of solar energy on Long Island, we believe in the power of empowering our local communities through our daily actions. From our monthly career and networking events to NY State Solar Gives Back, our team always seeks to engage with Long Island communities. If you would like to connect to partner, please email us.

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