Do solar panels increase the value of real estate?

Solar panels are an important part of the goal of the Dutch government to emit 49% less CO2 in 2030 than in 1990. To stimulate the transition to sustainable energy, the SDE ++ subsidy (Stimulation Scheme for Sustainable Energy Production) will be used between 29 September and 22 October 2020. opened up, the successor to SDE +.

The subsidy scheme is one of the many factors that make it interesting for companies to install a solar installation on the unused roof surface. The green electricity – for own use and the returns from feed-in – and the sustainability image also make installations on roofs of real estate interesting for buyers and tenants. But will real estate with a solar installation also be worth more? And does the model in which you do that still matter?

Real estate valuation

Alex Muhring, Managing Director at Zoncoalitie (right in photo), speaks with Jaap van ‘t Hul, Associate and appraiser at Cushman & Wakefield (left in photo), about the influence of solar panels on the valuation of real estate.

Muhring explains: “We see three options in the market. Real estate owners choose full ownership of the solar installation on their roof, they lease an installation or they rent their roof to a third party. Which shape best suits a customer depends on a number of factors. One of these is the valuation of real estate. ”

Property

A fully owned installation has advantages and disadvantages. It requires the investment in purchase and maintenance, but at the same time the entire proceeds are allocated to the owner. Muhring: “I compare it to a birthday cake. The more guests at your party, the more pieces of cake you have to divide. Your own share will therefore become smaller. But if you are the full owner of the panels on your roof, then all the proceeds are for you. ”

Van ‘t Hul adds: “And that makes the investment interesting for companies: in my cases I see that the subsidy accounts for approximately 75% of the proceeds. The subsidy has a term of 15 years, so we include this in the valuation of real estate during that period. The proceeds from the panels basically consist of the electricity yield and the subsidy. In the valuation, we take into account the annual revenues and costs during the subsidy period. An installation is usually depreciated over 15 years (which is also the SDE period). We find it debatable whether there is still a residual value. ”

First 15 years

Muhring: “But in the first 15 years you don’t have to worry about unexpected costs. Almost 99 percent of our customers do not have to worry about the system after installation. Provided it is installed properly, of course. We always have a technical audit carried out by an independent consultant after installation. Then you can be sure that the home insurance is in the right place. ”

Lease

Another form that is becoming increasingly popular is leasing a solar installation. There are various providers who offer an installation in different forms. Tailor-made advice is therefore advisable.

Van ‘t Hul: “The conditions of the lease contract are decisive for the valuation of real estate. If the subsidy goes to the lease party, we do not include the installation in the valuation. Even if the panels can be taken over after 15 years. ”

Muhring: “When leasing you have an extra party at the table, so you hand over a piece of the cake. But the big advantage is that you don’t need a starting budget yourself. A monthly amount is sufficient and in most cases you will save energy costs immediately. This form is mainly chosen by companies for liquidity reasons. ”

Rental

The third option is to rent out the roof. This option is for companies that do want to generate sustainable energy, but do not want to invest in an installation and do not use the green electricity (entirely) themselves. The roof is then rented out to a third party for the installation of solar panels.

Muhring: “Renting out the roof for solar panels is a bit more complicated. For example, a notarial building right will have to be established, which can make an exit more difficult. In addition, you will have to deal with another party that does not necessarily have the same interest as the owner or tenant for a longer period, in a strongly changing energy climate. We advise customers to always be the person entitled to an SDE application, then you keep the choice open for a while and you can always choose to transfer it when opting for roof rental. ”

Pays off from 2,000 m2 onwards

“But in almost most cases we see that professional real estate investors also purchase the installation themselves after granting the subsidy. This way they keep the whole cake. Some real estate funds choose a rental model because they are concerned that their tax status will change. To be sure, we sometimes request a ruling from the tax authorities. In reality, we see that much more is possible than real estate funds themselves initially think. Another disadvantage of this model is that, given the higher transaction costs, it actually only pays off for roofs from about 2,000m2. ”

Van ‘t Hul: “An advantage of roof rental is of course an additional fixed income, without you having to do much for it. When choosing this model, particular account must be taken of contract agreements about the building rights. It is more common that objects, such as a transformer house, for example, fall under the right of building. A solar installation on the roof is in fact the same construction. ”

If we look at which model does the most for the property valuation, then that is a solar installation owned. As Alex says: with this model you take the whole cake. Especially when you consider the financing benefits for the installation of the system.
Jaap van 't Hul, Associate and appraiser at Cushman & Wakefield

Which model is the best option?

Van ‘t Hul: “When we talk about the value of a solar installation, we can divide it into direct and indirect value. The direct value consists of the income (proceeds and subsidy) minus the costs, discounted over the remaining subsidy period. The indirect value is more subjective, but it is very important for many companies. Solar panels have a sustainable image and that makes real estate interesting, both for purchase, rental and as an investment object. If we then look at which model does the most for the real estate valuation, then that is a solar installation owned. As Alex says: with this model you take the whole cake. Especially when you consider the financing benefits for the installation of the system. ”

Picnic

Muhring: “Take Picnic as an example: a company in the retail / logistics sector. Often situated on the outskirts of the city and with a substantial roof area. They use cold and freezer storage and drive around in electric cars. A solar installation on the roof not only supplies them with electricity for the cold and freezer storage, they also charge electric vehicles. They are therefore not dependent on the market prices for kWh. And it fits completely in the sustainable image. This is where we are moving towards as a country. Ownership of the solar installation is already the case for 85% of our customers. ”

The future

With the new SDE ++ subsidy, solar panels yield approximately 6.5 to 7 euro cents per KWh. That is a halving of the subsidy about five years ago: 14.7 eurocents per kWh. Does it still pay to invest in solar panels?

Finally, Muhring: “The fee per kWh is indeed falling, but on the other hand, the applicability of sustainable energy is being further stimulated. For example, we now receive a lot of questions about overloading the power network and negative feed-in tariffs. With the SDE ++ subsidy, it will soon be interesting to invest in electricity storage in the form of batteries, for example. ”

Van ‘t Hul concludes: “Solar panels on real estate are the future. There are investment funds that have the objective of investing only in sustainable real estate and solar panels are an important part of that. The climate debate plays a major role and it is only getting bigger. Companies adapt their policy accordingly. A study by ING and Maastricht University speaks of Green Premium and Brown Discount. When the tipping point has been reached that sustainable power supply on roofs of real estate is the norm, real estate without solar panels will automatically be undervalued. “

Geschreven door

Monique Febus

Marketing Manager