abakus solar USA logo
abakus group India

The Importance of Solar Installation Appraisal

 

What types of things does a typical person do to their home before they sell it? Or better yet, what types of improvements does an investor make to a property he purchased for resale? Granite counter-tops, a privacy fence, added parking spaces, additional offices… these are all improvements to property, both residential and commercial, which have an immediate effect on the value. These improvements are often done because of the return on investment they generate at resale. So what happens when an individual attaches an asset to their property? Solar installations are a major asset added to any building or property, an asset which over time will pay for itself in energy generation many times over during its long life.

Why is it then that property appraisers do not take these permanent fixtures added to a property into account?
The answer is simple: They don’t know how to.

Here’s how:
Since electricity rates increase over time, these rates can be fore-casted over the 30 year project life (25 of which are covered by warranty). Since energy rates tend to double every ten years, it is safe to simply double the current rate for this calculation. The averaged value of projected rates over 30 years can be multiplied by the annual electricity generated by the project. This value is again multiplied by 20. In other words, the solar installation is worth twenty times the 30 year averaged annual electricity production value.

So, the next time your appraiser decides to put a big fat ZERO next to the value of a solar installation, promptly hand him this formula to get a rough estimate (if he is unwilling to perform the task of using current energy rates, applying an indexed inflation for 30 years, then averaging those numbers):
(Double the current retail energy cost (cost per kWh) X annual production of the system X 20)
= The value of the solar electricity installation for resale.

If the appraiser still places a ZERO, fire him and get one who knows what he is doing. The value of your investment rests on his ability to multiply.

James Huff
CEO, abakus solar USA inc.

Comments are closed.