Installing solar panels is a smart investment that can not only save homeowners money on their electricity bills but also increase the value of their homes. California is home to the second-highest average residential electricity cost in the nation, at 29.84 cents per kWh. Luckily, solar panels allow homeowners to drastically reduce their electricity bills. But, the benefits of solar energy do not stop there.
According to a 2019 study by Zillow, homes with solar panels in the United States sell for an average of 4.1% more than comparable homes without solar panels. This may seem like a minor increase, but it can translate to thousands of dollars in added value for homeowners. For the median US home value ($412,000 as of September 2023), that translates to an additional $16,892 in your pocket.
There are many reasons why solar panels can increase the value of a home in California. One reason is that solar panels can significantly reduce homeowners’ electricity bills, which can be a major selling point for potential buyers. Electricity prices have increased by an average of nearly 3% per year in the U.S. over the past decade, with even greater increases in recent years. In California, this increase is even higher. Average electricity costs in California have increased over 6% in the past decade and have jumped over 12% just from August 2022 to August 2023, making homeowners search for ways to reduce their energy bills.
Another reason why solar panels can increase the value of a home in California is that they are becoming increasingly popular and are seen as desirable amenities. As more and more people become aware of the benefits of solar energy, the demand for homes with solar panels is always growing. According to the National Renewable Energy Laboratory, for every dollar saved on electricity bills through solar energy, the value of your home increases by $20. Additionally, a study from Lawrence Berkeley National Laboratory correlated an increase in resale value of approximately $5,911 for each kilowatt of solar power that’s installed. While it may seem like a large investment at the beginning of the process, solar panels typically pay for themselves within nine to twelve years– so the savings will begin to pile up before you know it.
Finally, there is currently a 30% federal solar tax credit (Solar Investment Tax Credit, or ITC) for all homeowners who install solar panels before 2032. This credit drops to 26% in 2033, 22% in 2034, and expires in 2035. Therefore, investing in solar panels sooner rather than later will lead to the most savings in the long run. Nobody likes paying federal taxes; the ability to claim 30% of the installation cost of a residential solar energy system as a credit on federal taxes will dramatically ease the burden on your wallet during tax season.
It is important to note that the value solar panels can add to a home will vary depending on several factors, including the size of the solar panel system, the location and orientation of the home, and the local climate. In general, solar panels are most effective at increasing the value of a home in sunny locations with high electricity prices. Orange County, CA, averages 284 sunny days per year – well above the national average of 205 sunny days per year. This, combined with the exorbitant electricity prices in California, makes solar energy a wise investment for any homeowner. However, even in less sunny locations, solar panels can still be a cost-effective option when paired with energy storage systems that allow homeowners to store excess solar energy for use during times when the sun isn’t shining.
Overall, installing solar panels is a savvy investment that can increase the value of a home in California. By reducing homeowners’ electricity bills and appealing to buyers who are looking for environmentally friendly amenities, solar panels can be a valuable addition to any home.