Will a Windmill increase my property value?
Ben B.Boothe
We have been looking carefully at energy efficiency and how this relates to economics. The question arises, “If I put a windmill at my house, or business, will it change the value of the property?”
The answer is yes, definitely yes!
As real estate appraisers, brokers, and environmental consultants, we have looked at this from all three angles.
But this is the most direct and effective way to look at it from a value and investment return standpoint.
Consider a house in the U.S.A. is reportedly valued at $150,000.00.
That house will typically use 80 Kilowatts of electricity per day. 80 x 30 = 2,400 KWh per month, and if you are paying 16 cents per kWh your electric bill should run about $384. $384 x 12 = $4,608 annual electric bill.
Now, let’s say you put up a small windmill. We can install a windmill that will produce about 720Kwh per month, in a good wind speed area. At 16 cents per kWh this would reduce the electric bill about $115 per month.
$115 x 12 = $1,380 annual savings on the electric bill. If wind speeds are higher, or if electricity increases in cost, the savings will continue to rise.
Now in appraisal regulations, the way to estimate value is to capitalize the cash flow.
In the case of the above Value=Income divided by rate. Assuming a capitalization rate of .065% and a savings of $1,380 the value of that savings is: $1380 /.065 = $21,230.
So the windmill cost about $5,000, will save you $1380 per year, and will increase the value of your home by a minimum of $21,230. (If wind speeds are lower, you could say a range of $18,000 to $21,000)
This does not take into consideration the Federal Tax incentives, the rebates that are granted when you install an energy efficient system or the state and federal programs that will reimburse you for some of your expense. These vary by state, with California being one of the most progressive and generous states, but other states like Iowa are catching on and increasing rebates and financial incentives. For example, California will pay on average about 20% of the cost for your windmill or solar panels.
But even without these, a windmill installation will increase your property appraised value by about 13% to 15%.
Plus you will likely be able to “depreciate” and recover the full cost of the windmill by deducting it from your income taxes over a 5 to 7 year period.
Not bad!
