Your 2020 guide to getting solar panels for your home in Arizona
This page is a complete guide to the complicated and sometimes confusing process of installing solar panels on your Arizona home. Since there's a lot to consider, we've separated the page into sections to help you find what you are looking for. If you find this page useful, please share it with someone who might also find it interesting!
** What's new for 2020 **
It's 2020, and Arizona is one of the sunniest states in the country. Just because of this fact alone, you can save a lot of money here with solar. If Arizona lawmakers really want bolster the home solar industry, we're gonna need a much stronger, updated renewable portfolio standard here. The appointees to the Arizona Corporation Commission are not making this process easy, and we're watching what they do this year very closely.
We’re expecting an update to the standard in early 2020. We’ll update this page when that happens. Read on to understand why the standard is so important to a sound solar investment for your home.
Questions? Our network of solar experts are on call to assist you. Simply sign up for personalized assistance on our special solar deals page. You can get discounted pricing as low as $3,500/kW! This is paired with strong Arizona incentives below.
What you'll find on this page:
The Solar Strategy section is focused on the 3 ways of paying for solar in Arizona, so you can decide which is best for you. We've created a tool that asks you a few questions and recommends whether you should pursue a solar lease, loan, or outright purchase. Then, we provide detailed analysis of how each works.
The Policy Information section contains all our latest research on the rules set by lawmakers and the Public Utilities Commission, which determine how easy it is to go solar in Arizona. These policies and rules govern everything from renewable energy mandates to interconnection, and have a huge effect on the viability of solar.
Finally, the Solar Incentives section includes information about money-back rebates and grants, tax credits, and tax exemptions for going solar in Arizona.
Click any of the boxes below to go to that section of the page, or scroll down to read the page in order.
|Your Arizona Solar Strategy|
|Comparing Solar Investment Options|
|Paying Cash for Solar in Arizona|
|Solar Loans in Arizona|
|Solar PPAs in Arizona|
|Solar Purchase Payback Time in Arizona|
|Arizona Solar Policy Information|
|Renewable Portfolio Standard (RPS)|
|RPS Solar Carve-Out|
Your Solar Strategy in Arizona
Figuring out the best way to go solar in Arizona can be a little daunting. From loans and leases to power-purchase agreements, there are a lot of options out there. To help you pick the one that might be best, we've created the handy decision tool below.
We'll ask you a few simple questions about you and your home. Once you're done, we'll recommend a good option. Further down this page, we provide cost estimates and example return-on-investment calculations for all the various options:
How to pay for solar panels in Arizona
The chart above shows the 25-year returns for an investment in solar whether you choose to purchase a system with cash or pay over time with a loan or solar PPA. As you can see, the purchase option leads to the highest dollar-amount returns over time, but it also requires a big up-front investment. If you take a solar loan or home equity line of credit (HELOC), though, your payments over 15 years will be a little more than your savings, but you'll still come out ahead in the end.
The last option is for a solar PPA, or power-purchase agreement, which means you put $0 down on a rooftop solar system and get electricity savings by paying less for the solar energy than you would for dirty power from APS. PPAs can be a good option if you don't have any equity or cash to put down, because they'll still save you money in the long run.
The average homeowner in Arizona uses about 7,000 kilowatt-hours (kWh) of electricity per year, and at APS utility rates, that equals about $1,576 out of your pocket and into the utility company's coffers every year. If you invest in a 7.8-kW solar system of twenty-four 325-watt panels, you could make enough electricity to erase the up-front cost of the system in 11 years and then enjoy free electricity for at least 14 more years as the solar panels keep producing under the original manufacturer's warranty.
A note on where we get our numbers.
The numbers used in the charts are estimates for a home within APS territory as of 2020. Arizona doesn't have standard net metering rules, so APS pays a different amount for the excess electricity produced by solar panels than the state's other electric utilities do. SRP, TEP, and all the rural co-ops in Arizona have different rates.
Numbers for usage and electricity prices come from the U.S. Energy Information Administration. Average output of solar panels comes from the National Renewable Energy Laboratory. Solar bill credits are source from APS's RCP rate rider.
Read on to find out more about each option you have when paying for solar in Arizona.
Option 1: Paying cash for solar
An outright purchase used to be the only way to get solar, and it's still the option that provides the best dollar-for-dollar returns. The reason it's so great is that you own the system from day one and reap all the benefits. The Federal and State tax credit and electricity savings bring your first-year costs way down.
In our example, you put down $25,740, but by the end of year 1, incentives and energy savings will erase a bunch of it. Over 25 years, your system will have produced over $30,000 in income.
But even though that sounds huge, look into the solar loan option too, because taking a loan to buy an income-generating asset means you'll be making money as you pay for it.
Here’s how the numbers pencil out for an Arizona solar purchase of a 7.8-kW rooftop solar system:
- Installing a typical 7.8kW solar system should start at about $25,740. Don’t worry – even without rebates, your first-year costs will be considerably less than that.
- Since the feds calculate their incentive based on actual out of pocket costs, no rebate means a bigger federal solar tax credit. Subtract $6,692 (30% of $24,000) for a new price of $19,048.
- Arizona has a solar tax credit, too, which will take another $1,000 off, for a new total of $18,048.
- After the tax credits, we subtract your first year’s energy savings, which we estimate to be about $1,576. That reduces your cost after the first year to only $16,472.
- Over the 25-year life of your system, you'll see a total net profit of $30,108, after the system pays for itself.
- And don't forget... your home's value just increased by about $19,000, too (your expected cost after the federal tax credit)!
- In addition to all that cash (and home value), you’ve created some green for the earth as well by not using electricity from fossil fuels. It's like planting 234 trees a year, every year your solar power system is humming.
Keep in mind, the numbers above are based on an average home in Arizona. If you're ready for a custom quote for a solar panel system, our network of experts are on call to assist you. Simply sign up for personalized assistance on our special solar deals page.
Option 2: Using a loan to pay for solar
This is without a doubt the best option when it comes to percentage return on investment. That’s because it relies on using someone else’s money for the purchase price, which is paid back over time. The cost is similar to a new car loan, but because solar makes you money, it's a tremendous investment.
A solar purchase like this makes sense because in Arizona, you can get a solar loan with a fixed rate of 4.5% or lower and a 15-year repayment period.
The reason this works so well is that you don’t have to put any money down, but you still get all of the incentives that go along with buying solar. You'll get the 30% federal tax credit and the energy bill savings will start right away. The bad news is your loan payments will be a little bit higher than those energy bill savings, so you'll end up spending about $70/month for solar in the first year. That difference will come down each year as electricity prices rise, but your system will keep on producing about the same amount of electricity.
Here’s how the numbers pencil out for an Arizona solar purchase with a solar loan:
- Installing a typical 7.8-kW solar system should start at about $25,740. That's how big your loan will need to be to cover it.
- The electricity you'll save in the first year of operation would have cost $1,576, but your loan payments will total $2,363, for a difference of $787, or about $66 per month.
- That's not so bad when you consider your federal tax savings for the year will be $6,692! On top of that, Arizona offers an income tax credit of $1,000.
- You'll come out an estimated $6,906 ahead in year 1, which should help ease the burden of loan payments for a few years, at least.
- After the loan is paid off, your profits stack up just like if you bought the system outright. You'll end up with $20,404 in profits over our 25-year example.
- On top of the green that will stay in your pocket, your system will mean green for the environment, too. 234 trees-worth, every year!
Keep in mind, the numbers above are based on an average home in Arizona. If you're ready for a custom quote for a solar loan, our network of experts are on call to assist you. Simply sign up for personalized assistance on our special solar deals page.
Option 3: Buying the electricity, not the panels with a Power Purchase Agreement (PPA)
Arizona used to be one of the best places in the country for solar PPAs... but not anymore. With the uncertainty caused by the switch from net metering to sub-retail "resource comparison proxy" rates, solar companies have to charge more for every kilowatt-hour under a PPA.
For now, choosing a PPA in Arizona starts at about $.125/kWh, and can save you about $3 per month, which might not sound like a lot, but adds up to a reasonably large amount of money over the 20-year contract.
PPAs work because solar companies can take advantage of tax credits, too, which means they can offer to install panels on your roof for $0 down, and sell you the electricity made by the panels in order to recoup their cost. Electricity from a PPA is designed to be cheaper than what the same number of kWh would have cost you from the utiilty company, and as the latter raises prices every year, a PPA should continue to save you money.
Our ultimate estimate for the savings from a solar PPA in Arizona is just over $5,200 over 25 years. That's no small number, and if you can't make solar work with cash or a loan, a PPA might be a good object for you. There's a lot more to learn about solar PPAs, though, so if you're interested in one, keep reading!
Keep in mind, the numbers above are based on an average home in Arizona. If you're ready for a custom quote for a solar PPA, our network of experts are on call to assist you. Simply sign up for personalized assistance on our special solar deals page.
Arizona Solar Policy Information
Ever wonder why solar seems to be everywhere in some states, but not in others? We did too.
State legislatures and public utilities commissions can enact rules to make solar power accessible for everyone. Favorable rules explain why some of the cloudiest states—New York, New Jersey, and Connecticut, are doing so well with solar, and yet some of those with the most natural solar resources—like Alabama, Mississippi, and Georgia—are doing so poorly.
Below is important information about the public policy, rules, and economic reasons that affect your ability to go solar here in Arizona:
Arizona's Renewable Portfolio Standard
15% by 2025
While Arizona does have a renewable portfolio standard, it isn't all that ambitious compared to some other states. At present, the legislature has required utilities to derive at least 15% of their energy mix from renewable sources by 2025. About 15% of that requirement (or 2.25% of total sales) needs to come from residential sited renewable generation of electricity - like solar panels.
Again, that isn't much these days. Arizona hasn't updated its renewable law in years, and it's getting taken over by states like New York, California, Vermont, and Hawaii. If Arizona really wants to show us how it's done when it comes to solar, we're gonna need some strong new standards here, and quick! Luckily, we’re expecting an update to the standard in early 2020. We’ll update this page when that happens.
Arizona's Solar carve-out and SRECs
2.25% by 2025
Arizona’s renewable portfolio standards require utilities to generate a portion of their renewable output from distributed energy technologies -- 30% to be exact. Additionally, half of this requirement must be derived from residential installations. Luckily for you, this requirement can be fulfilled by residential solar systems, but it is not limited to just solar panels.
Arizona Electricity Prices
The average cost of electricity in Arizona stands now at about $0.12/kwh - that's pretty cheap. Too cheap for our comfort, actually. Natural gas is driving those costs down, and the state and feds have been subsidizing coal for too long. Once that price comes up with the associated costs of burning dirty fossil fuels, you'll see the payback time frame for solar decrease dramatically.
Arizona Net Metering
Scrapped for 10 year feed
What’s net metering? It’s the policy that lets you store your extra solar energy with the utility, and they then credit your bill at night when the sun ain’t shining any more. So, no batteries needed.
The trouble here is Arizona Public Service (APS), the state's largest utility company, has done everything they can to kill net metering in the state. Extra fees on solar owners, reduced payments for your electricity, etc. APS employees have even been caught texting members of the Commission responsible for deciding what to do about net metering in the state. Ugly, man.
It's bad enough to earn the state a "C" grade unless and until they can turn things around. We're hopeful that will happen sometime before 2024, but there's no telling what will happen. After all, this is the state that elects anti-solar governors and votes against increasing the share of renewable energy they use. What's up, AZ?
More about Arizona Net Metering
The state legislature's abdication of its responsibility to protect citizens of the state has led to the Arizona Corporation Commission allowing each utility company to set its own renewable energy rates, meaning customers of APS, SRP, TEP, and all the smaller co-ops and utilities in the state have come up with reams of confusing and arcane rate schedules and figuring out which one is best for you almost takes a Ph.D. in electricity rate policy.
Or it would, if not for one small benefit of capitalism: solar installers have a vested interest in figuring all this stuff out and helping you choose the plan that will save you the most money with your home solar system. So they have. The best way to get an accurate picture of how much you can save with solar is to Get multiple quotes from local solar companies, and use their knowledge (and testimonials from their satisfied customers) to guide your decision-making process.
But what about those arcane rate schedules and rules? Here's a rundown of the net metering policies of Arizona's three largest utility companies:
APS Solar Net Metering
APS serves nearly 3 million customers in Arizona, and covers many of the state's most populated areas. As we mentioned above, the utility has been involved in spending hundreds of thousands of dollars to lobby for its preferred candidates on the Arizona Corporation Commission, the body that governs how utilities set rates in Arizona
Despite that underhanded dealing, APS still offers some of the best rates for home solar system owners, which—while not qualifying as "net metering"—do offer some measure of surety in that they lock in solar rates for 10 years.
Currently, APS allows solar owners to sign up for one of 4 time-of-use rate schedules, called Saver Choice, Saver Choice Plus, and Saver Choice Max. Those names are basically meaningless on their own, but what you need to know is they offer, in the order we listed them, decreasing per-kWh charges for electricity and increasing Demand Charges based on your peak usage.
Every APS solar rate schedule includes a set amount the company will credit you for any excess solar energy you generate. Currently $0.1045/kWh, that rate is locked in for 10 years for customers whose systems are installed before 9/1/2020. If you like reading long, complicated documents full of numbers and legalese, here's a PDF with more information on the rider.
Demand charges are fixed costs on your energy bill based on your maximum electricity usage (or "demand") during the peak hours in any given month (3-8 pm Monday through Friday except holidays). The key with APS solar metering is to minimize your energy usage during peak times, so you can be sure to pay lower costs to APS.
One method of lowering usage is to install your solar array on a west-facing roof to capture more of the late-afternoon sun, but even then, you'll probably need electricity from the grid before 8 p.m. for much of the year. Another way is to install a home battery system like the Tesla Powerwall.
Even after all of the above, solar can still save you a lot of money in APS territory. Get quotes from top solar companies to see how much you can save with solar for your home.
SRP Solar Net Metering
SRP currently offers a plan called "E-27," which is a time-of-use rate that also features increased monthly flat fees and demand charges, but offers the benefit of extremely low per-kWh rates. Therefore, if you can limit your monthly peak usage by reducing air conditioning and other electrical use from 1-8 pm during the summer and 5-9 am/5-9 pm during the winter, you can save quite a bit compared to your pre-solar bills.
SRP also offers a battery storage incentive program that offers direct rebates to homeowners who install solar batteries. The current incentive offers $150 per kWh of storage, up to $1,800 maximum, but it may be wise to wait: SRP has proposed doubling the current battery incentive. At $300/kWh, that would account for about half of the cost of the battery itself (not including installation). At that price, home batteries begin to make a lot more sense, especially given their ability to eliminate your daily peak usage and reduce demand charges associated with the E-27 rate.
Finally, SRP's board has passed new alternatives to its E-27 plan that could end up saving solar owners a bit of money, at least to begin with. The new plans are set to take effect later in 2019, so check with local solar installers to find your best option.
TEP Solar Net Metering
TEP currently offers its solar-owning customers a payment of 9.64 cents for every kWh of excess electricity they send onto the grid, which isn't too bad, considering. They also offer time-of-use billing that can help solar owners save money during peak and off-peak hours alike, with ultra-low off-peak rates.
The export rate is locked in for 10 years, and considering TEP's relatively low rate of increase in retail electric prices (1.3% over 20 years), it's a good deal. But that 9.64 cents/kWh is 2019's rate, and it will change—very likely for the worse—each year after today. It behooves solar-interested homeowners to get quotes for solar today, and lock in that rate for the next 10 years before TEP lowers it.
Arizona Interconnection Rules
While there's good news on the net-metering front, there are fragmented policies in terms of how easy it is to connect to the grid which vary from utility to utility. The bureaucratic headaches haven't been completely eradicated, but things are getting markedly better for Arizona solar panels to be installed and processed as quickly as possible.
Arizona Solar Incentives
Next to high electricity prices and net metering, solar incentives have traditionally been the most important factor for whether home solar power makes financial sense in a state. In the past, some states with otherwise lousy policy had tremendous incentives that drove down the up-front cost of going solar so much that homeowners could save oodles of money even without net metering or a good RPS.
These days, the big incentive most people can get is the Federal Solar Tax Credit that earns you 26% of your total system costs back after just 1 year. State incentives play less of a role than in the past, but some really good ones are still out there, ready to help homeowners go solar and save money before you know it.
Let's see how Arizona measures up:
The availability of state solar incentives for residential solar systems was sourced from the Database of State Incentives for Renewables and Efficiency, utility company websites, and the state public utility commission.
Arizona Solar Power Rebates
Varies by utility
With its strong RPS, Arizona once had a great variety of solar panel rebate programs offered by nearly all the state's electric utilities. However, many of those generous solar panel rebate programs have been exhausted because utilities are getting close to meeting their requirements for off-site solar electricity production.
The good news is some rebates still exist for certain homeowners. The bad news is that they only exist for customers of a handful of rural electric co-ops. If you're a customer of any of the co-ops listed below, you're in luck. Get yourself a quote as soon as possible so these rebates don't slip through your fingers!
Here's a current list of Arizona solar power rebates:
|Utility Company||Rebate Amount||Cap|
|Duncan Valley Electric Cooperative||$.05/watt||$500|
|Mohave Electric Cooperative||$.05/watt||$2,500|
Pretty limited, eh? We'd like to see a return to smart solar incentives that help get panels up on home roofs, but that won't happen without Arizonans banding together to demand new laws. Get involved with Vote Solar in Arizona and demand better solar laws from the legislature and the ACC.
Arizona Solar Tax Credits
25% capped at $1k
Every resident in Arizona who installs solar panels gets a State Tax Credit of 25% of the total system cost, up to $1000, to be used toward State income taxes. And of course, you Arizonans also benefit from the 26% Federal Solar Tax Credit as well. There's no cap on the federal tax credit and it can be claimed over multiple years if necessary.
Property Tax Exemption
As a homeowner with solar panels in Arizona, you get two other great benefits from the state: your solar purchase is exempt from higher property taxes due to the increased value of your home and...
Sales Tax Exemption
Low-income Solar Programs
Grade: FLearn more about low-income solar programs available in the U.S.
The consensus on Arizona solar power rebates and incentives
While things aren’t as good as they used to be in Arizona, it’s still a top state for solar, for more reasons than just its latitudinal positioning. Still, without good net metering rules, a solid solar carve out and great tax exemptions can only take you so far. We commend Arizona for its forethought, but wonder what’s going on now, when so many more people could benefit from strong net metering protections?