THE EFFECT OF RESIDENTIAL SOLAR PHOTOVOLTAIC SYSTEMS ON HOME VALUE: A CASE STUDY OF HAWAI‘I

Sherilyn Wee October 19, 2015 Seminar in Energy And Environmental Policy

Motivation

Literature

Methods

Data

Results/Discussion

Conclusion

Annual Installed PV Capacity 140 120

MW

100 80 60 40 20

20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 201 15 4 YT D *

0

*Hawaiian Electric Companies as of September 2015. Source: Hawaiian Electric Companies, KIUC.

Motivation

Literature

Methods

Data

Results/Discussion

Conclusion

Electricity Prices & PV Costs Electricity Rate 45

PV Cost 10 9 8 7 6 5 4 3 2 1 0

40 30

2014$/watt

2014¢/kWh

35 25 20 15 10 5

Hawaii Res Elec Rate Source: EIA, 2015; Feldman et al., 2012.

U.S. Res Elec Rate

20 14

20 13

20 12

20 11

20 10

20 09

20 08

20 07

20 06

20 05

0

PV System Cost

Motivation

Literature

Methods

Data

Results/Discussion

Conclusion

Payback Period and IRR (2014) 3-Person Household with $75,000 Income, $2011 Oahu

Maui

Assumed System Cost per Watt Assumed Electric Rate

34 ¢/kWh

Estimated Monthly Electric Bill

$178

Hawaii

$3.8/W 36 ¢/kWh 40 ¢/kWh $191

Kauai 41 ¢/kWh

$210

$215

Payback Period (in years) Using a 5% Discount Rate State Tax Credit

3.7

3.4

3.1

3

No State Tax Credit

6.8

6.3

5.6

5.5

Internal Rate of Return Over 25 Years

1!

State Tax Credit

23.3%

24.7%

26.5%

27.0%

No State Tax Credit

14.9%

15.9%

17.2%

17.6%

!

Source: Coffman et al. (2016). A Policy Analysis of Hawai‘i’s Solar Tax Credit Incentive. Renewable Energy, 85, 1036-1043.

Motivation

Literature

Methods

Circuit Saturation Levels

Source: Hawaiian Electric Companies.

Data

Results/Discussion

Conclusion

Motivation

Literature

Methods

Data

Results/Discussion

Conclusion

Literature •  Hedonic Method •  Energy Efficiency Improvements and Indicators •  Solar PV Price Premium •  Hoen et al. (2011, 2013a) •  $5.5/watt •  New Homes: $2.3 – 2.6/watt; Existing Homes: $6 - 7.7/watt •  Dastrup et al. (2012) •  3-4% premium, larger in environmentalist communities •  Hoen et al. (2013b), Desmarias (2013) •  Income and cost valuation methods •  Hoen et al. (2015) •  CA + CT, FL, MA, MY, NC, NY, PA, 2002-2013. •  $4/watt ($15,000 for 3.6 kW system)

Motivation

Literature

Methods

Data

Results/Discussion

Pooled OLS nt; ts the sale price of home ! in quarter !, in neighborhood !; ately reports the value of PV as a percentage of !the sale price; s whether lnthere !!"# is=a PV ! +system !! !"!"present; + !! + !! + !! !!"# + !!"# ter and year in which the home was sold; !!! hborhood (zipcode) in which the home was sold; t ! − 1 home and property characteristics; and om disturbance term tant; ents the sale price of home ! in quarter !, !in neighborhood !; mately reports PV as a percentage of!"#the ln !!"#the=value ! + !of !! ! + sale !!"# price; ! !"!" + !!" + tes whether there is a PV system present;!!! uarter and year in which the home was sold; eighborhood (zipcode) in which the home was sold; a neighborhood-by-time effect characteristics; at the zip code and quarter-year level. ent ! − 1 home and property ndom disturbance term !

ln !

= ! + ! !" + ! +

! !

+!

(1a)

Conclusion

(1a)

(1b)

Motivation

Literature

Methods

Data

Results/Discussion

Conclusion

!

Fixed ln !!" Effects = ! ! ! + !! !"!" + !! + !

!! !!"# + !!" !!! !

ln !!" = ! ! ! + !! !"!" + !! + !

!! !!"# + !!"

(2a)

!!!

me-invariant home identification dummies based on the street number, street (2a) ent number, lot number, and tax map key of each property.

me-invariant home identification dummies based on the street number, street ! nt number, lot number, and tax map key of each property. ln !!" = ! ! ! + !! !"!" + !!" + ! !! !!"# + !!" !!! !

ln !!" = ! ! ! + !! !"!" + !!" + !

!! !!"# + !!" !!!

(2b)

he interaction of time at the quarter-year level with the time-invariant zip code (2b)

Motivation

Literature

Methods

Data

Results/Discussion

Conclusion

System Size (Permit Value) !

ln !!"# = !! + !! ln !"#$%&'( + !! + !! +

!! !!"# + !!"# !!!

(3a) !

ln !!"# = !! + !! ln !"#$%&'( + !!" +

!! !!"# + !!"# !!!

(3b) !

ln !!" = ! ! ! + !! !"(!!"#$!"#) + !! +

!! !!"# + !!" !!!

(4a) !

ln !!" = ! ! ! + !! !"(!"#$%&'() + !!" +

!! !!"# + !!" !!!

(4b) where !"#$%&'( denotes the value of the building permit(s) issued up until the time of home sale; and !! is the percentage change in sales price from a one percent increase in permit value (partial elasticity).

Motivation

Literature

Methods

Data

Results/Discussion

Conclusion

MLS Oahu SF Sales Records, 2000-2013 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13

0

Source: Honolulu Board of Realtors, 2014.

Motivation

Literature

Methods

Data

Results/Discussion

Conclusion

Oʻahu PV Permits, 2004-2013 40,000 35,000 30,000 25,000 20,000

16,054

15,000

12,625

10,000 5,000

5,037 1

0 2004

12

37

2005

2006

33 2007

No. of Permits Source: Department of Planning and Permitting (DPP), 2013.

355 2008

928

2,172

2009

2010

2011

Average Permit Value (2013$)

2012

2013

Motivation

Literature

Methods

Data

Results/Discussion

Conclusion

PV & Non-PV Home Sales and Transactions Sold Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Total

Non-PV Home Sales 2,845 3,340 3,596 4,315 4,279 4,433 3,838 3,560 2,538 2,611 2,940 2,876 3,025 3,095 47,291

PV Home Sales 5 10 10 11 12 16 13 19 12 20 28 17 62 170 405

Non-PV Transactions 2,850 3,350 3,606 4,326 4,291 4,449 3,850 3,579 2,550 2,629 2,956 2,879 3,027 3,095 47,437

PV Transactions 0 0 0 0 0 0 1 0 0 2 12 14 60 170 259

Repeated Sales of PV and Non-PV Homes   Sold Once Sold Twice Sold 3x Sold 4x Sold 5x Sold 6x Total

Non-PV Home 27,587 6,956 1,577 220 29 6 36,375

PV Home 141 91 26 1 0 0 259

Total Homes 27,728 7,047 1,603 221 29 6 36,634

Sales Transactions 27,728 14,094 4,809 884 145 36 47,696

Total 2,850 3,350 3,606 4,326 4,291 4,449 3,851 3,579 2,550 2,631 2,968 2,893 3,087 3,265 47,696

Motivation

Literature

Data

Methods

Results/Discussion

Conclusion

Summary Statistics  

PV Transaction (n = 259 )

 

  Variable

Description

Mean

SD

Min

Median

Max

Mean

SD

Min

Median

Max

soldpr

sale price (not adjusted for inflation)

$913,385

$512,567

$175,500

$730,000

$3,000,000

$628,850

$440,438

$133,716

$530,000

$3,000,000

adjsoldpr

adjusted sold price in 2013 dollars

$924,284

$518,366

$178,631

$740,000

$3,053,513

$753,675

$516,338

$133,716

$630,000

$4,320,885

lnsoldpr

natural log of adjsoldpr

14

0.46

12

14

15

13

0.53

12

13

15

year built

year the home was built

1986

22

1926

1989

2013

1976

21

1884

1975

2013

age

age of home (year 2013 as baseline)

27

22

0

24

87

37

21

0

38

129

age2 living sqft

age of home squared (1,000s) size of living area (1,000s)

1.2

1.6

0

0.58

7.6

1.8

1.7

0

1.4

17

2.1

0.79

0.63

1.9

6.2

1.8

0.88

0.4

1.6

22

total sqft

total square feet (10,000s)

0.24

0.10

0.06

0.21

0.85

0.21

0.11

0.04

0.18

2.2

land sqft

size of parcel (10,000s)

0.86

1.9

0.20

0.60

28

0.83

1.7

0.06

0.60

48

bedrooms

no. of bedrooms

3.8

1

2

4

9

3.7

1.3

1

3

42

full baths

no. of full bathrooms

2.6

0.83

1

3

6

2.2

0.90

1

2

9

half baths

no. of half bathrooms

2.4

0.50

2

2

4

2.4

0.50

1

2

7

pool

pool feature dummy

0.21

0.41

0

0

1

0.12

0.32

0

0

1

mountain

mountain view dummy

0.60

0.49

0

1

1

0.50

0.50

0

0

1

ocean

ocean view dummy age (months) of PV system at the time of sale permit value at time of sale (proxy for PV system size) adjusted permit value at time of sale in 2013 dollars

0.30

0.46

0

0

1

0.24

0.43

0

0

1

20

14

1

17

73

-

-

-

-

-

$32,751

$20,069

$7,378

$28,900

$120,000

-

-

-

-

-

$33,047

$20,147

$7,510

$29,476

$130,000

-

-

-

-

-

10

0.59

8.9

10

12

-

-

-

-

-

pvage permvals adjpermvals lnpermvals

 

Non- PV Transaction (n = 47,437)

natural log of adjpermval

Motivation

Literature

Methods

Data

Results/Discussion

Conclusion

Pooled OLS Estimates of Log Sales Price on PV  

(4) 0.061*** [0.012] bedrooms -0.041*** [0.003] full baths 0.069*** [0.005] half baths 0.026*** [0.003] living sqft 0.141*** [0.011] total sqft 0.721*** [0.067] land sqft 0.020*** 0.017*** [0.002] [0.002] age -0.005*** -0.006*** [0.000] [0.000] age2 0.040*** 0.053*** [0.003] [0.003] pool 0.180*** [0.005] mountain 0.017*** [0.002] ocean 0.113*** [0.004] Constant 13.379*** 13.016*** 12.594*** 12.571*** [0.002] [0.021] [0.020] [0.018] Transformed PV 27.3% 20.4% 8.1% 6.3% Time Dummy No Yes Yes Yes Zip Dummy No Yes Yes Yes Zip-Time Dummy No No No No Observations 47,696 47,696 47,696 47,696 Sales with PV 259 259 259 259 AIC 74,213 36,114 1,222 -3,570 BIC 74,230 36,851 2,020 -2,737 Adj R-squared 0.00 0.55 0.78 0.81 *, **, and *** indicate statistical significance at the 10%, 5%, and 1% level respectively. Robust standard errors in brackets. PV

(1) 0.242*** [0.029]

(2) 0.186*** [0.019]

(3) 0.078*** [0.012] -0.059*** [0.004] 0.086*** [0.006] 0.032*** [0.004] 0.257*** [0.008]

(5) 0.064*** [0.012] -0.041*** [0.003] 0.067*** [0.005] 0.025*** [0.003] 0.147*** [0.011] 0.689*** [0.067] 0.016*** [0.001] -0.006*** [0.000] 0.053*** [0.003] 0.181*** [0.005] 0.014*** [0.002] 0.110*** [0.004] 12.633*** [0.037] 6.6% No No Yes 47,696 259 -4,705 8,155 0.81

6.6%

Motivation

Literature

Methods

Data

Results/Discussion

Conclusion

Home Fixed Effects Estimates of Log Sales Price on PV  

(1) 0.123*** [0.019]

(2) 0.078*** [0.017]

(3) 0.064*** [0.012] 0.008* [0.005] 0.082*** [0.007] 0.002 [0.009] 0.101*** [0.012]

(4) PV 0.062*** [0.012] bedrooms 0.009* [0.005] full baths 0.077*** [0.007] half baths -0.001 [0.009] living sqft 0.060*** [0.013] total sqft 0.406*** [0.061] age -0.005*** -0.004*** [0.001] [0.001] age2 0.026** 0.022* [0.013] [0.013] pool 0.030*** [0.008] Constant 13.379*** 13.029*** 12.816*** 12.798*** [0.000] [0.071] [0.098] [0.100] Transformed PV 13.1% 8.1% 6.6% 6.4% Time Dummy No Yes Yes Yes Zip Dummy No No No No Zip-Time Dummy No No No No Home Fixed Effects Yes Yes Yes Yes Observations 47,696 47,696 47,696 47,696 Number of addID 36,634 36,634 36,634 36,634 Sales with PV 118 118 118 118 AIC -64,405 -120,626 -134,280 -134,800 BIC -64,396 -120,038 -133,640 -134,142 Adj R-squared 0.00 0.69 0.77 0.77 *, **, and *** indicate statistical significance at the 10%, 5%, and 1% level respectively. Robust standard errors in brackets.

(5) 0.053*** [0.012] 0.007 [0.005] 0.073*** [0.007] 0 [0.008] 0.067*** [0.013] 0.331*** [0.055] -0.005*** [0.001] 0.031** [0.013] 0.024*** [0.008] 12.858*** [0.126] 5.4% No No Yes Yes 47,696 36,634 118 -147,702 -137,675 0.83

5.4%

Motivation

Literature

Methods

Data

Results/Discussion

Conclusion

Sensitivity to Home Prices 20%

Statistically significant at 1% level

$200,000

15%

$150,000

10%

$100,000

5%

$50,000

0%

$0 Quartile 1

Quartile 2

Pooled OLS PV Premium ($)* Pooled OLS PV (%)

Quartile 3

Quartile 4

Home Fixed Effects PV Premium ($)* Home Fixed Effects PV (%) *Relative to the average non-PV home value in each quartile.

Motivation

Literature

Methods

Data

Results/Discussion

Conclusion

Interpretation of PV Premium Median permit value: $30,000 NPV of Electricity Savings •  $14,000 over 9 years (average duration of residence) •  $30,000 over 30 years (typical home mortgage)

Motivation

Literature

Methods

Data

Results/Discussion

Conclusion

Conclusions • 

This study empirically validates that the housing market values PV.

• 

On average, a PV home sold for 5.4% more than a comparable non-PV home.

• 

This translates to an increase of $34,000 in the sales price of the median non-PV home.

• 

The expectation of circuit saturation and the inability to install PV may well be the prime reason for the above full return on investment.

Mahalo

Motivation

Literature

Methods

Data

Results/Discussion

Conclusion

Pooled OLS Estimates of Log Sales Price on Log Permit Value   lnpermvals

(1) 0.024*** [0.003]

(2) 0.018*** [0.002]

(3) 0.008*** [0.001] -0.059*** [0.004] 0.086*** [0.006] 0.032*** [0.004] 0.257*** [0.008]

(4) 0.006*** [0.001] bedrooms -0.041*** [0.003] full baths 0.069*** [0.005] half baths 0.026*** [0.003] living sqft 0.141*** [0.011] total sqft 0.072*** [0.007] land sqft 0.002*** 0.002*** [0.000] [0.000] age -0.005*** -0.006*** [0.000] [0.000] age2 0.000*** 0.000*** [0.000] [0.000] pool 0.180*** [0.005] mountain 0.017*** [0.002] ocean 0.113*** [0.004] Constant 13.379*** 13.016*** 12.594*** 12.571*** [0.002] [0.021] [0.020] [0.018] Time Dummy No Yes Yes Yes Zip Dummy No Yes Yes Yes Zip-Time Dummy No No No No Observations 47,696 47,696 47,696 47,696 Sales with PV 259 259 259 259 AIC 74,210 36,112 1,222 -3,570 BIC 74,228 36,849 2,020 -2,737 Adj R-squared 0.00 0.55 0.78 0.81 *, **, and *** indicate statistical significance at the 10%, 5%, and 1% level respectively. Robust standard errors in brackets.

(5) 0.006*** [0.001] -0.041*** [0.003] 0.067*** [0.005] 0.025*** [0.003] 0.147*** [0.011] 0.069*** [0.007] 0.002*** [0.000] -0.006*** [0.000] 0.000*** [0.000] 0.181*** [0.005] 0.014*** [0.002] 0.110*** [0.004] 12.633*** [0.037] No No Yes 47,696 259 -4,705 8,155 0.81

0.006%

Motivation

Literature

Methods

Data

Results/Discussion

Conclusion

Home Fixed Effects Estimates of Log Sales Price on Log Permit Value   lnpermvals

(1)

(2)

(3)

(4)

(5)

0.012*** [0.002]

0.008*** [0.002]

0.006*** [0.001] 0.008* [0.005] 0.082*** [0.007] 0.002 [0.009] 0.101*** [0.012]

0.006*** [0.001] 0.009* [0.005] 0.077*** [0.007] -0.001 [0.009] 0.059*** [0.013] 0.406*** [0.061] -0.004*** [0.001] 0.022* [0.013] 0.029*** [0.009] 12.696*** [0.043]

0.005*** [0.001] 0.007 [0.005] 0.073*** [0.007] 0.000 [0.008] 0.067*** [0.013] 0.331*** [0.055] -0.005*** [0.001] 0.031** [0.013] 0.024*** [0.008] 12.846*** [0.126]

bedrooms full baths half baths living sqft total sqft

-0.005*** [0.001] 0.026** [0.013]

age age2 pool Constant

13.379*** [0.000]

12.956*** [0.014]

12.712*** [0.043]

Time Dummy No Yes Yes Yes Zip Dummy No No No No Zip-Time Dummy No No No No Home Fixed Effects Yes Yes Yes Yes Observations 47,696 47,696 47,696 47,696 Number of homes 36,634 36,634 36,634 36,634 Sales with PV 259 259 259 259 AIC -64,404 -120,563 -134,193 -134,709 BIC -64,396 -120,072 -133,649 -134,147 0.00 0.69 0.77 0.77 Adj R-squared *, **, and *** indicate statistical significance at the 10%, 5%, and 1% level respectively. Robust standard errors in brackets.

No No Yes Yes 47,696 36,634 259 -147,702 -137,675

0.83

0.005%

Motivation

Literature

Methods

Data

Results/Discussion

Conclusion

Appendix – Quartile Results Pooled OLS

Fixed Effects

  Quartile 1 Quartile 2 Quartile 3 Quartile 4 0.080*** 0.012* 0.019** 0.014 PV [0.018] [0.007] [0.010] [0.033]   -0.018*** -0.004*** -0.009*** -0.052*** bedrooms [0.004] [0.001] [0.001] [0.004]   0.024*** 0.001 0.006*** 0.057*** full baths [0.004] [0.002] [0.002] [0.005]   0.016*** 0.002 -0.005** 0.041*** half baths [0.003] [0.001] [0.002] [0.007]   0.155*** 0.029*** 0.043*** 0.085*** living sqft [0.009] [0.003] [0.004] [0.010]   0.541*** 0.064*** 0.150*** 0.319*** total sqft [0.065] [0.024] [0.025] [0.066]   0.007*** 0.002* 0.005*** 0.010*** land sqft [0.001] [0.001] [0.001] [0.002]   -0.007*** -0.001*** -0.001*** -0.005*** age [0.000] [0.000] [0.000] [0.001]   0.039*** 0.009*** 0.010*** 0.069*** age2 [0.004] [0.002] [0.002] [0.007]   0.050*** 0.013*** 0.026*** 0.169*** pool [0.007] [0.003] [0.003] [0.007]   0.023*** 0.002 0.000 -0.020*** mountain [0.003] [0.001] [0.002] [0.007]   0.048*** 0.006*** 0.013*** 0.119*** ocean [0.004] [0.002] [0.002] [0.008]   12.759*** 13.363*** 13.542*** 13.261*** Constant [0.038] [0.008] [0.028] [0.027]   Transformed PV 8.3% 1.2% 1.9% 1.4% Time Dummy No No No No Zip Dummy No No No No Zip-Time Dummy Yes Yes Yes Yes Observations 22,704 7,896 9,044 8,052 Sales with PV 65 65 64 65 AIC -17,723 -24,723 -20,780 1,538 BIC -8,576 -18,642 -14,473 6,343 Adj R-squared 0.70 0.12 0.22 0.51 *, **, and *** indicate statistical significance at the 10%, 5%, and 1% level respectively. Robust standard errors in brackets.    

  Quartile 1 Quartile 2 Quartile 3 Quartile 4 0.144*** 0.033** 0.041* 0.098* PV [0.049] [0.014] [0.024] [0.055]   0.043** 0.000 -0.019 -0.046*** bedrooms [0.017] [0.003] [0.012] [0.015]   0.106*** 0.030*** 0.024 0.046*** full baths [0.026] [0.011] [0.015] [0.016]   0.048* 0.013 -0.008 0.024 half baths [0.026] [0.010] [0.023] [0.021]   0.046 0.129*** 0.048* 0.086*** living sqft [0.049] [0.021] [0.025] [0.021]   0.113 0.246*** 0.326*** 0.126 total sqft [0.127] [0.067] [0.121] [0.107]   -0.004 -0.005*** 0.004 -0.009*** age [0.007] [0.002] [0.004] [0.003]   -0.002 0.050*** -0.066 0.079** age2 [0.079] [0.019] [0.048] [0.031]   0.018 0.022** 0.044*** 0.046 pool [0.021] [0.009] [0.016] [0.029]   12.545*** 12.908*** 13.479*** 14.338*** Constant [0.157] [0.080] [0.104] [0.166]   Transformed PV 15.4% 3.3% 4.2% 10.1% Time Dummy No No No No Zip Dummy No No No No Zip-Time Dummy Yes Yes Yes Yes Home Fixed Effects Yes Yes Yes Yes Observations 5,892 8,086 3,398 2,592 Number of homes 3,892 5,462 2,509 1,456 Sales with PV 11 48 29 30 AIC -16,504 -33,820 -16,093 -5,995 BIC -14,145 -30,006 -14,542 -4,489 0.83 0.83 0.76 0.684 Adj R-squared *, **, and *** indicate statistical significance at the 10%, 5%, and 1% level respectively. Robust standard errors in brackets.