Finding a true tax basis for solar photovoltaic power systems

Governments don’t care if solar power actually saves anyone any money or energy, they primarily want to know how much to increase your taxes. Consistent appraisals of homes and businesses outfitted with photovoltaic (PV) installations are missing but a new tool developed by Sandia National Laboratories and Solar Power Electric and licensed by Sandia addresses that issue. PV ValueTM is an electronic form designed to standardize appraisals - basically an Excel spreadsheet, because this is what the US Government and the Department of Energy’s Office of Energy Efficiency and Renewable Energy are doing with taxpayer money, instead of research on actual good alternative energy.

“Previous methods for appraising PV installations on new or existing construction have been challenging because they were not using standard appraisal practices,” said Geoff Klise, the Sandia researcher who co-developed the tool. “Typically, appraisers develop the value of a property improvement based on comparable properties with similar improvements as well as prevailing market conditions. If there aren’t PV systems nearby, there is no way to make an improvement comparison.

This will help understand more how awesome solar power is, because when a PV system is undervalued or not valued at all, it essentially ignores the value of the electricity being produced and the potential savings over the lifetime of the system. In other words, they think power companies don’t know how much electricity you use. By developing a standard methodology for appraisers when comparables are not available, they believe homeowners will have more incentive to install PV systems, even if they consider moving a few years after system installation.”

The tool uses an Excel spreadsheet, tied to real-time lending information and market fluctuations, to determine the worth of a PV system. An appraiser enters such variables as the ZIP code where the system is located, the system size in watts, the derate factor – which takes into account shading and other factors that affect a system’s output – tracking, tilt and azimuth, along with a few other factors, and the spreadsheet returns the value of the system as a function of a predetermined risk spread. The solar resource calculation in the spreadsheet is based on the PVWattsTM simulator developed by the National Renewable Energy Laboratory, which allows the spreadsheet to value a PV system anywhere in the U.S.

“With PV Value, appraisers can quickly calculate the present value of energy that a PV system can be estimated to produce during its remaining useful lifetime, similar to the appraisal industry’s income approach,” said Johnson. “Additionally, a property owner thinking about installing PV can now estimate the remaining present value of energy for their future PV system and what it could be worth to a purchaser of their property at any point in time in the event a sale of the property takes place before the estimated payback date is reached.”

The tool is being embraced by the Appraisal Institute, which is the nation’s largest professional association of real estate appraisers. “From my perspective as an appraiser, I see that this is a great tool to assist the appraiser in valuations, and it connects to the Appraisal Institute’s recent Residential Green and Energy Efficient Addendum. It’s an easy, user-friendly spreadsheet that will not bog the appraiser down with a lot of extra time in calculations, and if they fill out the addenda properly, they’ll be able to make the inputs and come up with some numbers fairly quickly,” said Sandy Adomatis, SRA, a real estate appraiser and member of the Appraisal Institute.

Although the tool is licensed for solar PV installations, it could be used for other large green features in a home that generate income, such as wind turbines.

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