Rise of Solar Powered Homes

The count of homes powered by photovoltaic (PV) systems is rising. And while solar-powered homes remain a small share of the total housing stock, that share is growing through a combination of policy incentives and homebuyer preferences.

Among the top features homebuyers are seeking in a home is energy-efficiency. In fact, in a 2012 NAHB study of homebuyer preferences, energy-efficiency elements ranked as top items sought in a home.

Helping to encourage such market preferences, state/local governments, along with the federal government, offer a number of tax and rebate incentives that reward investment in energy-related residential features. For example, in 2005 Congress established a 30% tax credit for power production property installed in a home, including solar panels. Also known as the section 25D tax credit, this program promoted a total of $1.5 billion in solar property in approximately 100,000 homes in 2010, according to IRS data.

And thanks to data from two studies from the Lawrence Berkeley National Laboratory (“Tracking the Sun VI” and “SEIA/GTM Research U.S. Solar Market Insight 2012 Year in Review”), we can examine the state-level counts of solar-powered single-family homes.


The map above charts the share of the single-family housing stock in each state that possessed PV systems as of 2012. States in white did not have a specific breakout, but in general these states represent small totals – no more than 3% of the national total of solar-powered homes.

The largest count of solar-power homes is in California, with a total of more than 143,000 houses. Arizona is second with almost 24,000, and both Hawaii and New Jersey have more than 15,000 homes with PV systems.

Clearly, homes in states located in the West are more likely to have installed PV systems. Interestingly, another concentration lies in the Northeast and Mid-Atlantic regions, where perhaps higher average incomes allow homebuyers to achieve the housing preferences identified above. Additionally, the state of New Jersey is worth noting as having higher share due to the combination of state renewable energy rules and monetary incentives.

Another factor determining regional patterns is the local cost of power. Areas of the nation with relatively higher power costs, such as the Northeast, make solar and other residential power production property a more attractive option.

The future of solar power for housing remains bright in the short-run. The section 25D credit is scheduled to remain in law until the end of 2016. And increasingly builders are selling homes with solar power features or the infrastructure required for future installation.

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11 replies

  1. Nice post Rob,,,, It looks like the carrot approach (federal, State, utility incentives & financing) has driven consumer and builder choice with solar,,, w/o mandates. Without these artificial market stimulants, the ROI of solar is 2-5+ decades long when you look at true costs — and we’d never see the impressive market penetration numbers like you have shared.

    It appears however that federal & State policy is upside down and way out of balance,,, catalyzing investment low ROI solar vs high ROI home/building energy efficiency measures. The federal tax credit for new homes (45L) offers a mere $2000 for the risky investment by the builder. Further, the $500 tax credit for existing homes (25C) does not cause consumer action but instead encourages “free-ridership” by those who’ve already decided to buy w/o knowledge of the tax credit.

    Thus, misaligned tax policy is often driving people and businesses to put solar panels on “tents” – leaky and energy inefficient homes/buildings – particularly when installed on existing/older homes and buildings.

    To balance things out, and as a better and more fiscally responsible use of taxpayer dollars, we need a new 45L homes tax credit that’s on par with the total/fully loaded spend on solar,,, one that remains performance driven but adds multiple “tiers” as a bridge from code minimum to Net-Zero-Energy Homes. With solar, total incentives have taken what might be a 50-70 year payback down to less than 10 years in many cases. We need a similarly proportional investment open to home builders so that they can choose to build homes that are 20%, 30%, 50% better than code or even “solar-ready” while recouping their out-of-pocket costs (risk) along the way in proportion that we see with solar. BTW-The monthly/annual energy savings from these highly energy efficient homes can then fund the installation and eventual replacement (yes, they need replacement) of solar — w/o incentives. That’s better and smarter public policy. Do this, then step back and watch the home building industry respond.

    For existing homes, remodelers and homeowners need an enhanced 25C tax credit that includes an optional “pay-for-performance” path that is lean, waste- and pain-free to implement, and not limited to an elite and narrow pool of contractors as we saw in Home Star. A program that’s perfection on paper and designed, by non-practitioners and non-contractors, to catch alleged cheaters will have no meaningful market penetration. Remember, existing IRS rules subject ALL tax-payers to audit, verifications, and remediation where necessary — that’s enough. Deep incentives from $2000-$15000 for tiers of energy savings in existing homes is what’s needed for the consumer to make the buy decision and,,,, traditional contractors (insulation, HVAC, remodelers) should be open to delivering this so as to broaden consumer choice and increase competition — we cannot limit access to a handful of contractors in small pockets of the country.

    If policymakers want to see solar-like market penetration numbers for energy efficient new and existing homes, then it’s time to lead. It’s all achievable with off-the-shelf practices and technology,,, no research needed.

    Let the wrath flow from the energy-efficiency and solar industry,,, and would someone mind starting my car for me?

    • Thanks for the comment Jay. The tax weighted benefit of 25D is higher than 45L, which has suffered from short term extensions and the basis adjustment. I would argue for more focus on older homes, which is where the low hanging fruit is located. Tiered incentives is interesting.

  2. I want to know about SOLAR Panels for my home


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