The New Solar Economy: Harnessing the Power of the Sun
As consistently as the sun rises each day, so do our hopes of harnessing the power of renewable energy in order to reduce our need for oil, natural gas, coal, and nuclear power. In the past two decades we have taken significant strides toward that goal. Every Tesla and Prius you see on the road, along with every wind farm, dam and solar array you drive past, represents less demand for traditional fuels. However, while the increasing use of renewable energy is evident, the path forward is unclear.
Starting in 2020, every new home constructed in California will be required to have some form of solar capacity. While residential solar can result in monthly savings in utility costs, there are other costs to consider that challenge the obvious financial benefit. In addition to the upfront price of the solar system, other costs must be considered such as financing costs, installation costs, and the ongoing cost of maintenance, repairs, and cleaning. Add in a greater home value which leads to a bigger assessment, along with higher property taxes and more to insure. Compared to the average $35 monthly savings in utility costs, the financial advantage of solar is simply not clear.
Furthermore, the impact of solar on property values is not straightforward. A new financing option for renewable energy, Property Assessed Clean Energy (PACE), introduces more complexity to property values because the loan is attached to the property rather than the individual. This means that if a PACE property is sold, the PACE loan either goes along with it or needs to be paid off prior to sale. Figures from ATTOM Data Solutions show that in mid-2018 the typical home was owned for a little more than eight years. With a PACE term of 20 years, we can expect that many PACE properties will be sold one or more times. While the concept of solar is attractive, these complexities pose challenges to more broadly increasing renewable energy usage.
So, how do we move forward in effectively harnessing the power of the sun? Public utilities, with their inherent economies of scale, have the power and the incentive to deliver new approaches to power generation and distribution to the masses. With renewable energy technology becoming increasingly efficient and improvements to financing coming, we can begin to imagine a world where renewable energy is cheaper, more attractive, and more common.
To learn more about the dynamics of our changing energy economy and how ATTOM data can uncover key insights to understand its impact on the property industry, contact us now!
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