If you’ve spent even the smallest amount of time reading about solar power, chances are you know that solar panels are good for the environment and can substantially reduce your monthly electricity bills. Solar offers other benefits, however.

One that’s being discussed a lot lately is that solar homes tend to sell at a premium relative to non-solar homes. Why?

Andy Black, founder of OnGrid and an industry expert on solar economics, explains
by discussing an example where a homeowner installs a solar energy system that saves $1,000 a year on utility bills:

The rational is that if the $1,000 is not spent on electricity, it is available to be spent on a larger mortgage payment at no net change in the cost of living. The amount of mortgage that can be supported by $1,000 depends on mortgage rates and the tax rate of the borrower.

Black goes on to discuss in detail mortgage- and tax-related impacts (see the full paper, “Financial Payback on Residential California Solar Electric Systems“). He also discusses a commonly cited rule of thumb that a solar photovoltaic (PV) system increases home value by $20,000 for every $1,000 reduction in annual operating costs.

The main takeaway here is that, all else equal, the cost of ownership for a solar home is lower than for a conventional one. That extra cash freed up by the solar panels may be applied to either a larger mortgage, as Black suggests, which supports both the desirability and resale value of the home itself.

To be sure, most of Black’s financial analysis focuses on the country’s largest solar power market, California. As such, not all his case studies will apply in every market across the U.S. Nevertheless, as more homeowners begin to appreciate the value of consistently low electric bills, we expect solar-powered homes to continue to sell at a premium relative to non-solar ones.