Your 2019 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 2019 **
Arizona, with Lake Powell, the red rocks of Sedona, Flagstaff’s impressive mountains, and one of the seven natural wonders of the world, has a lot to protect by building up its renewable energy resources. It’s also got a lot of sun, and thankfully, the Arizona legislature had the foresight to put some good renewable energy policy into place here. Recently, the Environment Arizona Research Policy Center credited Arizonans with having the highest solar capacity per capita in the nation as well as being largely responsible for tripling solar use in the US over the past three years. When life gives you lemons (or summers that rival walking on the sun), make lemonade. Well played, Arizona, well played.
There have been some other recent developments in Arizona, too. If you're a customer of APS or TEP (Phoenix or Tuscon areas), your electric company might want to put solar panels on your roof for free. What's the catch? Well, the financial implications are less rosy than if you buy outright, but if you're a TEP customer, you can get solar for free and lock in your current rate for 25 years (subject to the terms outlined in the article linked to above).
Listen, things are pretty good for home solar owners in Arizona right now. But while the legislature's been on cruise control with renewable policy, they've let rebates and tax exemptions go by the wayside, and the state's net metering rules are under constant assault by APS and ther utility comapnies. If Arizona wants to keep growing its solar landscape, there's plenty of room to improve. That's why Arizona's getting a C for solar in 2017.
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.
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. The good news in Arizona is you're choosing the best of three very good options, with savings that stack up to huge piles over the life of each of the three options. 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 Arizona's utility rates, that equals about $1,550 out of your pocket and into the utility company's coffers every year. If you invest in a 7.8-kW solar system of 24 325-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.
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 $24,000, 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 almost $25,000 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 $24,000. 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 $7,200 (30% of $24,000) for a new price of $16,800.
- After the tax credit we subtract your first year’s energy savings, which we estimate to be about $1,375. That reduces your cost after the first year to only $15,425.
- Over the 25-year life of your system, you'll see a total net profit of $24,807, after the system pays for itself.
- And don't forget... your home's value just increased by almost $17,000, 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 208 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 $24,000. 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 $1,370, but your loan payments will total $2,220, for a difference of $850, or about $70 per month.
- That's not so bad when you consider your federal tax savings for the year will be $7,200! On top of that, Arizona offers an income tax credit of $1,000.
- You'll come out over $7,400 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 $15,691 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. 208 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 is one of the best places in the country for solar PPAs... for now. There have been some strong efforts from the state's utility companies to impose huge fees for every home with a solar system, but they haven't seen much success, yet.
For now, choosing a PPA can save you about $21 per month, which might not sound like a lot, but adds up to big 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 $9,500 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:
15% by 2025
While Arizona does have a renewable portfolio standard, it isn't all that ambitious compared to some other states in the Union. 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.
But 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 AZ really wants to show us how it's done when it come to solar, we're gonna need some strong new standards here, and quick!
What's an RPS? Your state legislature paves the way for strong solar energy incentives to flourish by setting standards for renewable energy generation within their territories. Those standards are called the state’s renewable portfolio standard (RPS). If utility companies do not meet these standards, they must pay alternative compliance fees directly to the state. Many utilities then determine the best ways to source their energy from renewable sources that are less expensive than this fee.
An RPS is a mandate that says "Hey utilities! Y'all now have to make a certain percentage of your electricity from renewable sources. If not, you'll have to pay us huge fines." The consequences are good, because utilities usually try to meet these RPS standards by creating solar power incentives for you, the homeowner. Read more about Renewable Portfolio Standards.
RPS solar carve out
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.
What's a solar set aside? A solar set aside guarantees a specific portion of the overall renewable energy mix generated comes from the sun. For those states with progressive standards, high alternative compliance payments, and clear solar carve outs, the faster those areas become ripe for solar.
Some states have higher alternative compliance fees than others, and some states have more progressive alternative energy standards and deadlines than others do.
For instance, New Jersey has an overall RPS of 22.5% by the year 2021. That requires local utilities to source 22.5% of their energy mix from renewable sources by the year 2021. Pretty good. However, New Jersey also has a specific solar set aside of 4.1% by 2028. That’s the type of firm commitment which really gets the industry rolling forward. No wonder why New Jersey is one of the hottest solar markets right now!
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.
Why are electricity prices so important? Because that is what solar power is directly competing against. The cost to produce power with solar is relatively constant (of course how much sun hits your area has an effect), so if you are paying $0.40 per watt for power, then you make FOUR TIMES AS MUCH as the guy or girl paying $0.10 per watt electricity.
The caveat here is that if the $0.10 per watt person has a HUGE rebate, they may be better off than the $0.40 per watt person. Because of that, states without any renewable standards tend to be heavily reliant on cheap coal for electricity, and also have very low electricity prices. When electricity prices are artificially low, that hinders the ability of solar energy to achieve meaningful payback in the state.
Arizona Net Metering
Some utilities offer
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. They've even been caught texting members of the committee 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 increaing the share of renewable energy they use. What's up, AZ?
What is net metering? Net metering is the billing arrangement where you can sell excess electricity back to your utility for equal the amount you are charged to consume it. The more customer friendly net metering policies, the higher the grade.
The grade here specifically reflects individual solar system capacity, caps on program capacity limits, restrictions on “rollover” of kWh from one month to the next (yep just like cell phone minutes), metering issues (like charges for new meters), Renewable Energy Credit (REC) ownership, eligible customers and technology (the more renewables the better), being able to aggregate meters across the property for net metering, and safe harbor provisions to protect customers from solar tariff changes.
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.
Interconnection rules are a little technical, but they basically allow you to “plug in” to the electric grid with solar panels on your roof. The more complex, out of date, or nonsensical the state rules are for plugging into the grid, the lower the grade.
Specifically, the grade reflects what technologies are eligible, individual system capacity, removing interconnection process complexity for smaller systems, interconnection timelines and charges, engineering charges, prohibiting the requirement of unnecessary external disconnects, certification, spot interconnection vs. wide area interconnection, technical screens, friendliness of legalese, insurance requirements, dispute resolution, and rule coverage.
Solar Incentives in Arizona
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 30% of your 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:
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 are the 2014 Arizona utilities' solar power handouts:
|Utility Company||Rebate Amount||Cap|
|Duncan Valley Electric Cooperative||$.05/watt||$500|
|Mohave Electric Cooperative||$.05/watt||$2,500|
|Sulphur Springs Valley Electric Cooperative||$0.25/watt||$2,500|
How do solar rebates work? Similar to getting a rebate card from your local big box store for a dishwasher purchase, state legislatures also provide rebates for solar panel purchases to spur on investment and create new jobs. If you purchase the solar panel system yourself, you qualify for this free cash, which many times is a lump payment back to you. Some solar installers like to take this amount directly off the total installed price, and they'll handle the paperwork for you to make things a lot less complex.
The availability of state and utility rebates were sourced from the Database of State Incentives for Renewables and Energy Efficiency. The better the rebates, the higher the grade.
Arizona Solar Power 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 30% Federal Solar Tax Credit as well. There's no cap on the federal tax credit and you'll deduct that after you subtract your rebate. Sample calculations follow below -- keep scrolling!
About state solar tax credits: State tax credits are not technically free money. However, they are 'credits' and not 'deductions' which means that if you have the tax appetite to take advantage of them, then they can be a 1-to-1 dollar amount off your taxes instead of a fraction of the cost of the system. So that means they can be an important factor to consider. In certain circumstances, state tax credits can provide a very powerful incentive for people to go solar.
(Keep in mind, we are not tax professionals and give no tax advice so please consult a professional before acting on anything we say related to taxes)
The availability of personal tax credits for solar energy were sourced from the Database of State Incentives for Renewables and Energy Efficiency. The higher the tax credit amount, the higher the grade.
Solar Power Performance Payments
While there are some utilities in Arizona offering flat out cash for the electricity you send back to the grid, they do so only by taking away the valuable solar rebates offered. Because of this, we rated this section of incentives as basically non-existent for homeowners, as anyone in their right mind installing residential solar would rather take the up-front rebate.
Explanation of performance payments: Performance payments represent a big chunk of the financial rationale for going solar, and in many instances they make your decision a wise one. For certain states, if you’ve got solar panels on your roof, not only will you be cutting your electric bill down to size, but you'll be getting paid additional cash from your utility company. Pretty awesome, huh? Not only are you generating electricity for yourself, freezing your own popsicles with sun, and feeling like you’re doing something smart for your children or any of the other 4 reasons people go solar, but you are getting PAID!
Utility companies are paying people with solar panels on their roofs because their states say they have to, otherwise they will pay a fee. Therefore, the payment amount to homeowners is typically a little bit less than the amount they would be billed for by the state. For states with these alternative compliance fees, Solar Renewable Energy Credit (SREC) exchanges have popped up. In the above chart, we outlined an estimate of yearly payments a homeowner might expect from the utility company for the SREC credits from their solar energy system.
Expected SREC payments were calculated by using the latest trade values in the SRECtrade database. The availability of feed-in tariffs were sourced from the Database of State Incentives for Renewables and Energy Efficiency. The higher the expected monthly payments, the higher the grade.
We've got a great article if you like to read more about what SRECs are and how to earn them.
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...
About solar property tax exemptions: Property tax exemption status is a pretty big factor when putting together your investment considerations. Some argue that solar power adds approximately 20 times your annual electricity bill savings (if you are owning the system and not leasing). Other studies seem to indicate a home price premium about equal to the cost of installing the system, minus any incentives like the federal solar tax credit.
For many average-sized solar power systems on a house, that can mean adding $20,000 to your home value. And if you don't believe us, believe the bean counters: Many banks and solar financing companies now offer traditional style equity-based home loans for installing solar. An additional $20,000 in property tax basis in many states amounts to a big chunk of change owed back to the state. However, many states have complete exemptions from added taxes when you install solar on your home!
The availability of a property tax exemption for solar energy was sourced from the Database of State Incentives for Renewables and Energy Efficiency. Grades in this category are basically all-or-nothing. Either you got it or you don't. Thankfully, many states have "got it.".
Sales Tax Exemption
Well, Arizona used to offer a sales tax exemption for solar panels, but it ended as of December 31st, 2016. We'd put a (sad trombone) here, but this is serious business. Sales tax is responsible for about $1,000 of the final cost of your system. Boo, Arizona!
What's the deal with solar power sales tax exemptions? When states give you a sales tax break on solar, we notice. You should too. State sales tax exemption status for the purchase of solar energy systems were sourced from the Database of State Incentives for Renewables and Energy Efficiency. Sales tax exemptions, if present, were all 100%. A handful of states are completely exempt from sales tax regardless, and therefore received ‘A’ grades by default (OR, DE, MT, AK, and NH).
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?