Residential Solar Power in Arizona

We've dug deep into AZ's state incentives and built a complete guide to solar power options for the residents of Arizona

Solar Power in Arizona

Solar power is a growth industry across the entire United States. Based on 2014 figures alone, almost $18 billion was invested in the sector across the country, and as one of the sunniest states in the union, Arizona was very involved in that growth. During 2015, approximately was invested in solar installations in the state, bringing the total amount of solar energy installed to 2,453 MW. That means enough solar power is generated to power 348,000 homes, solidifying the state's ranking as second in the nation for total solar capacity.

But, regardless of the state's general attitude about installing solar power on residential properties, deciding whether it is the right move for you and your home is a serious matter. Upfront investment in the installation can be high, making it an intimidating venture for many. However, the costs benefits that are experienced after a successful installation certainly help offset these expenses over time.

Before you make a final decision whether solar power is an ideal solution to your individual electric costs, here are a variety of important points to help you make the right decision for your Arizona home.

Arizona Support for Solar

Arizona's sunny weather means that the marketplace is fairly mature. The state was able to start early, as the long, sunny days means homeowners were willing to consider less efficient solar panels at the beginning of the solar power movement. As of 2017, the Environment Arizona Research Policy Center credited the state's citizens with having the highest solar capacity per capita in the entire country and has been a big part in the nation's ability to triple solar use within the past three years.

As one can expect, a state like Arizona is inclined to be supportive of the solar power industry. However, the renewable portfolio standard isn't as high as one may expect. Utilities are only required to have at least 15 percent of their electricity generated by renewable sources by 2025, which leave the state ranked 24th in regards having stringent requirements in place.

But the requirements regarding the amount that needs to be generated from residential installations, or those supported by private homeowners, is fairly high. This has led some utilities to support programs for free solar panel installations, but the deal resembles more of a rental agreement than a personal solar installation.

Arizona Local Rebates & Credits:

Local RebatesVaries by utility provider
Tax Credits25% capped at $1,000
Performance PayoutsNone :(
Property Tax Exemptions100%
Sales Tax ExemptionsNone :(
To get specific data on your home, enter your zip code:

For example, some homeowners who agree to the installation will receive a discount on their electric bill for the next 25 years. However, that means you aren't getting the full benefit that is associated with the installation as you would if you purchased a solar solution on your own. The arrangement helps utilities meet their residential installation requirements without homeowners actually making the investment.

Homeowners still have the option of doing their own installations, so you aren't forced to enter into these deals if you prefer to install the panels on your own.

Arizona Incentives for Homeowners

The primary form of state incentive for Arizona homeowners that install solar power is a tax credit. Qualified installations that provide at least 5 MW of generating capacity can be completed until December 31, 2021, to be eligible.

The tax credit is fairly complex in nature, as the benefit is spread out over the course of 10 years. The basic benefits are as follows based on the calendar year in question:

  • Years one and two: $0.04 per kWh
  • Years three and four: $0.035 per kWh
  • Years five and six: $0.03 per kWh
  • Years seven and eight: $0.02 per kWh
  • Year nine: $0.015 per kWh
  • Year 10: $0.01 per kWh

Additionally, over the course of 10 years, the tax credit awarded cannot exceed $2 million per year per facility. Though this amount won't be obtained by most homeowners, it is important to note it is there. However, any amount not used in a particular tax year, such as when a homeowner's tax burden is less than the amount of the credit due, the excess can be carried forward for no more than five consecutive tax years.

Along with the tax credit, the purchase and installation of qualified systems may be exempt from sales tax. Further, the value of the solar power installation may not be figured into property tax rates.

Solar Energy for your home!

Local Arizona Homeowner Incentives

In addition to state-based incentive programs, homeowners may qualify for local incentives to help offset the costs associated with the purchase and installation of solar power systems. Most incentives of this nature that are offered in the state of Arizona are through local electric companies.

For example, the Sulphur Springs Valley Electric Cooperative offers net metering options to those who complete qualified solar installations.

However, since the state of Arizona, and most local municipalities, have supported solar installations in the past to meet certain mandated standards, many other opportunities for local assistance are no longer available. That doesn't mean you shouldn't check with your local utilities and government authorities, as every program is managed individually. So, just because one area doesn't offer a credit doesn't mean others won't.

Federal Incentives for Homeowners

Homeowners can also qualify for incentives through various federal government programs. Most commonly, these are awarded as tax credits for qualifying installations. As of 2017, the AITC tax credit available equals 30 percent of the qualified costs associated with the installation. This includes expenses related to equipment as well as any related labor charges for proper installation.

The size of the credit is not restricted as long as it qualifies. That means homeowners will receive the full 30 percent no matter what the final total of the installation reaches. In cases where the tax credit exceeds a taxpayer's total liability for the tax year, any remaining credit is carried forward to the next tax year. The goal is to increase the chance that the taxpayer gets the full value of the tax credit, or at least has access to more of it if their liability is generally low.

However, the solar energy system must be installed on a homeowner's primary residence in order to qualify for the credit. That means solar installations on vacation or rental properties are not eligible to apply for the credit.

Further, the tax credit is set to change in the years to come. The 30 percent tax credit remains in place for installations that are completed by December 31, 2018. After that, the tax credit decreases to 26 percent for installations that complete between January 1, 2019, and December 31, 2020. Then, between January 1, 2021, and December 31, 2021, the tax credit falls again, compensating for only 22 percent of the qualifying costs.

Beyond December 31, 2021, there is no specified amount for the tax credit. That means it is possible it won't be available at all. Alternatively, the compensation may remain at 22 percent or lower to another currently unspecified point.

Savings on Arizona Monthly Utility Bills

Often, the biggest benefit associated with installing solar energy systems are realized on the homeowner's monthly utility bills. As of 2017, Arizona ranks 19th based on the average cost per kWh, currently sitting at $0.12. However, some of the rate is based on increased use of natural gas across the state. Should those usage levels change, residents of the state may see their electric rates rise, making solar installations even more valuable.

However, even at current rates, utility bill savings for using solar are notable. To help put those costs in perspective, considering the following information.

As of 2015, the average amount of electricity used in a home in the United States was 10,812 kWh. That means a household in Arizona that uses the average amount of electricity pays approximately $1,297 over the course of a year. That equals a little more than $108 every month.

So, for every kWh you create in solar power, you save yourself $0.12 off of that total electric bill. To help demonstrate the savings based on a solar energy installation, begin by understanding the potential of a single solar panel. One 250-watt panel that receives four hours of full sunlight during a day produces 1 kWh every day, or 30 kWh approximately one month. Based on a 30 day month, that is a savings of $3.60 on your bill. Over the course of a year, you save $43.80 with just one panel.

If you increase the number of panels to five, you can save $18 in a 30 day month, or $219/year. 20 panels bring in savings of $72 and $876 respectively, while 30 panels bring in a savings of $108 and $1,314 respectively. That means most households can cover their electricity needs with around 30 250-watt solar panels installed on their homes if they use amounts similar to the average American household.

If you want to calculate your savings more effectively, you can review your average usage on your utility bills. This will help you determine how many panels you may need to bring your bill to $0.

Return on Solar Investment in Arizona

Your utility bill will be lower once you get your solar energy system installed and brought online. However, it does take time to recover the costs associated with installation. Some of the costs are recuperated in tax credits or similar incentives, but your utility bill savings can be included when determining your return on investment.

If we forgo figuring in tax credits, as these values vary dramatically depending on your individual tax situation, we can determine how many years it takes to compensate for the cost of installation. For example, if the costs associated with installation reach $15,000, and you experience an annual electric bill savings of $1,314, it will take just over 11 years to recover the funds. However, the application of tax credits in the figures do shorten that time.

Now, if you add in the benefits of using your solar energy system over the next 20 to 40 years, you have many years of primarily profit. In fact, most of your maintenance costs can be easily covered by your long-term savings, leaving your thousands and thousands in additional return.

The choice to install a solar energy system is a personal one, but it is important to understand that certain incentives are not guaranteed to be available over the long-term. If you are considering a solar installation on your Arizona home, contact a reputable installer for details regarding the costs in your area. Then, you can review the costs and determine if the potential savings are worth it to you. Then, you can make an informed decision about the use of solar in your home.

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