Solar Panels and House Prices

Using a large sample of single family home sales in Sacramento and San Diego,  Sam Dastrup, Josh Graff-Zivin, Dora Costa and I document that all else equal — solar homes sell for roughly 3.5% more than non-solar homes.     This price premium is even larger in communities with more registered Prius vehicles (the environmentalist communities).    The capitalization of solar panels into re-sale values would be larger if the price of electricity increases and if home owners could “supersize” their solar panels to allow them to charge the electric vehicles parked in their driveways and perhaps their neighbors’ driveways. In this case, a solar home would become a local “gas station”.      We also document that liberal, environmentalist households are more likely to live in solar homes. In my earlier work, I have documented that such households are more likely to buy “green vehicles” such as the Prius.     So, liberal environmentalists cluster (i.e Berkeley) will enjoy a reduction in their carbon footprint as these households will be the guinea pigs installing solar to charge their next generation electric vehicles.   If there are enough of such “Berkeley types”, then product manufacturers may enjoy learning by doing effects which will lower price per unit of quality. In this case, we can begin to achieve the “green transition” even if we don’t enact carbon pricing.  Of Course, carbon pricing is the right policy and will accelerate this transition — but the theme I have sketched is an optimistic dynamic even in the absence of such incentive pricing.  Long live Berkeley!  You will see me there in August.

Author: Matthew E. Kahn

Professor of Economics at UCLA.

9 thoughts on “Solar Panels and House Prices”

  1. If there were enough “Berkeley types” then we’d elect politicians who take global warming seriously.

  2. For me, this is very interesting, since we are about to sign a contract to have panels installed on our roof.

  3. It will be amusing to watch the usual suspects attack this thread and argue that all of what they normally call unbreakable laws of economics (e.g. market price = true value) do not apply to a lower-energy manner of living.


  4. The problem with solar panels: They are like the PCs of the late 1980s: Dumb and heavy.
    And if you read science magazines, you know, they are constantly filled with the promise of what’s next: lighter, smarter, and agile to various angles.

    I suspect if you could do the mathematics on this, waiting for the next generation,is the shrewdest play of all.
    Meanwhile, smart liberal money should look to go here:

  5. koreyel,
    Those bulbs looked great, so I looked to see where I could buy a few for testing. “Available at retailers in October 2011” – which of course could mean October 2011, October 2014, or never. We’ll have to wait to see if that actually materializes at any price.


  6. I forget who it is – SolarCity? – but one of those outfits rents or leases the panels. This makes installing solar much less scary for the non-rich amongst us. Maybe we can all live in Berkeley some day.

  7. I’m not so fully impressed by the state of the green economy regarding individual “green” choices.

    After receiving a promotional email recently from the Sierra Club about investing in a home solar system, I went online to the installing company website and filled out the questionnaire which included my electric usage. The result was a proposal for a $16,000 solar system which would save me a whole $2 a month over my current electricity costs, if I were to buy the system and pay for it in monthly installments. Payback period is something over 29 years, with system life expectancy of just 25 years. I exchanged email with the proposal-writer who admitted that I don’t use enough electricity to justify a solar panel system.

    I conserve–I am careful about what I use; I have many compact fluorescent bulbs, etc. I, with a little effort, conserve significantly less electricity by putting all wall-wart power supplies on switches and by never leaving a light on when it’s not needed. Mea culpa.

    So conservation is the best new, green resource, so long as the solar systems are as expensive as they are.

    On the other hand, larger-scale solar systems which can feed power back into the grid, have an very different cost-efficiency profile.

    As for the Prius, I join with many others I know who consider this vehicle a great success of green marketing rather than a real green vehicle. I don’t think any cars can be green; cars are simply enormous users and wasters of all sorts of valuable resources, natural, economic and social, independent of their carbon footprints.

    The people I know who drive Priuses (often referred to hereabouts as Prii) seem to drive a hell of a lot more than people who don’t have them. A Prius thus has become a sort of license never to think about conservation (not just of fossil fuel, but of everything else associated with a car). I’ve cut way back on my driving so that I do just 3000 miles a year. My Mini delivers about 30 mpg and a Prius something over 49 mpg. Compared to a Prius driver who does 15K miles a year, I’ve got a much smaller carbon footprint.

    Prii have other environmental problems. If, as some assert, automobiles produce most of their pollution during extraction of resources for components and during manufacture, the Prius is significantly worse than most other cars. Evidently, making those big batteries is very nasty.

  8. So many typos in the above. I meant to say that I could consume even less electricity at home by switching off wall warts, thus mea culpa.

    I also typed that a Prius gets over 49 mpg; that should be over 40 mpg.

  9. Solar City and a couple others lease your roof for the purpose of siting solar arrays. Some estimates state that nearly half of all installations in the naughties were a result of such arrangements. Much better than forking over 5 figures in up-front costs. I am currently in prep with a couple trade journal articles about that very issue, and how to keep the business model viable. More venture capitalists are needed to capitalize this business model, especially with the coming new Building Integrated PV products coming to market soon.

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