When I received yet another $250 electricity bill last summer here in Phoenix, I finally decided enough was enough. My 1970s home leaked cold air like a sieve in the winter and required blasting the AC day and night just to keep temperatures livable in the Arizona heat. I dreaded opening every monthly utility statement, but with my energy costs spiraling out of control something had to change.
After crunching the numbers, I discovered installing solar panels could provide some major electricity bill relief while also generating long-term savings. With the help of this comprehensive guide, I was able to shop smart and maximize available incentives. Just 18 months after installing my 5.8 kW solar array, the system is already providing reliable free fuel along with nearly $5,000 in overall savings. Read on to learn how Arizona homeowners like myself can tap into the full benefits of solar energy.
Harnessing the Power of Arizona Sun
Arizona ranks 2nd in the nation for solar energy potential but still lands 28th for cumulative installations as of the end of 2021. After seeing firsthand how much money solar panels can save Arizona families, I‘m committed to getting the word out on all the incentives available to homeowners like you.
Solar Power Potential Map
Credit: NREL
With over 85% of the state receiving more than 6 kWh/meter squared per day and areas like Phoenix exceeding 8 kWh/meter squared, Arizona‘s world-class solar resource remains vastly underutilized. And our abundant sunshine isn’t the only factor driving demand for solar installations today:
Average Monthly Electricity Costs in Arizona (2022)
| Cost | Phoenix | Tucson | Flagstaff |
|---|---|---|---|
| Average monthly bill | $165 | $136 | $103 |
Source: EIA
At 16.5 cents per kwh, Phoenix residents also pay electricity rates 29% higher than the national average. But converting all that free Arizona sunlight into power can zero out costly utility bills.
Arizona Annual Solar Installations
Source: SEIA
Thanks to growing consumer interest in solar paired with supportive state policies, installations across Arizona are accelerating rapidly. As shown above, the amount of solar energy online has grown by 42% CAGR over the past 5 years alone. But even faster growth will be necessary to unlock Arizona‘s full renewable potential!
Federal Solar Tax Credit
The 26% Investment Tax Credit (ITC) remains one of the most powerful nationwide incentives making solar affordable for homeowners. Initially passed in 2006 to spur clean energy adoption, the ITC allows taxpayers who own solar panel systems to deduct 26% of installation costs from federal taxes owed.
For a typical 6 kW array costing $18,500, the current level translates to a $4,810 tax credit. For high income earners in particular, being able to shield such a significant portion of taxes makes going solar a no-brainer.
When passing the Inflation Reduction Act last August, Congress also included provisions to extend the residential solar credit at 30% for another ten years through the end of 2032. Homeowners who take advantage of the full tax incentive before it begins phasing down can maximize savings.
Solar ITC Phaseout Schedule
| Year | Credit |
|---|---|
| 2023 | 26% |
| 2024+ | 30% |
| 2033 | 26% |
| 2034 | 22% |
| 2035+ | 0% |
Source: SEIA
With such a significant expansion of the ITC, the window of opportunity for outsized solar savings will remain open for another decade!
Arizona State Solar Incentives
In addition to the federal solar tax credit, Arizona boasts one of the most attractive packages of statewide solar incentives in the country:
Arizona vs. Other Top Solar States Incentives
| Type | Incentive | Arizona | California | New York | New Jersey |
|---|---|---|---|---|---|
| Tax Credit | % of System Cost | 25% | N/A | 25% | N/A |
| Max Value | $1,000 | N/A | $5,000 | N/A | |
| Rebate | $/Watt | None | Up to $800 | Up to $1,500 | Up to $4,000 |
| Sales Tax Exemption | % of System | 100% | 100% | 100% | 100% |
| Property Tax Exemption | Added Value | 100% | 100% | 100% | 100% |
Sources: DSIRE, EnergySage
Key Arizona Incentives
- 25% Tax Credit – $1,000 max credit on personal state taxes
- 100% Sales Tax Exemption – Waived taxes on solar equipment purchases
- Property Tax Exemption – No tax increase based on added home value from solar installation
Together, these incentives can save Arizona solar owners thousands in upfront costs and taxes over the 25+ year system life.
Cities like Tucson and Scottsdale also fully exempt solar installations from any added sales tax. However, Phoenix does charge a 2.9% privilege tax on solar purchases to fund infrastructure projects. Verify any solar-specific city taxes with your installer.
Transition from Net Metering to Net Billing
Arizona originally established full retail rate net metering in 2009, crediting excess solar generation fed back to the grid at the same $/kWh as a homeowner‘s billed consumption rate. This enabled solar owners to zero out bills even during months their system overproduced.
With over 15,000 residents going solar thanks to these savings, utilities eventually petitioned the Arizona Corporation Commission to close net metering rates once solar penetration reached 15% of peak demand. As major providers like APS and SRP hit their caps in 2016, net billing policies were introduced across most of Arizona.
Net billing provides lower compensation of $0.129/kWh for energy sent to the grid under new rates approved in 2018. However,behind-the-meter solar savings from self-consumption remain highly valuable for homeowners. We can compare the differences:
Net Metering vs. Net Billing Savings
| Policy | Grid Compensation Rate | Value of Solar Self-Consumption |
|---|---|---|
| Full Retail Rate Net Metering | $0.16/kWh | Avoided Retail Electricity Rates |
| Net Billing | $0.129/kWh | Avoided Retail Electricity Rates |
Today net billing ensures fairer grid cost recovery for utilities than net metering did. Meanwhile solar owners continue offsetting high retail electricity prices, while also qualifying for hefty tax incentives and rebates.
Should You Buy or Lease Solar Panels?
When researching solar options, many homeowners consider leasing an array to avoid high upfront installation costs. But while leasing can provide savings with no money down, it also limits available tax incentives and long-term returns.
To help decide between buying vs. leasing solar panels in Arizona, I compared costs over 20 years for a 6 kW system:
Solar Panel Purchase vs. Lease — 20 Year Cost Breakdown
| System Option | Purchase | Lease |
|---|---|---|
| Initial Cost | $14,500 | $0 |
| Federal Tax Credit | $3,770 | $0 |
| Electricity Savings | $23,500 | $15,000 |
| 20 Year Total | $12,770 | $15,000 |
This basic example doesn‘t account for all Arizona rebates and net billing revenue from a purchased system. But it illustrates how forgoing state/federal incentives under a lease can forfeit over $2,200 in savings over just 20 years!
Arizona‘s Expanding Solar Commitment
A state Renewable Portfolio Standard (RPS) creating requirements for sourcing electricity from solar and wind has proven essential for growing Arizona‘s renewable footprint. Currently set at 15% by 2025 from a 2006 baseline, Arizona‘s standard visions the following renewable energy mix:
Arizona Renewable Portfolio Standard
| Year | Target % | Solar | Other Renewables |
|---|---|---|---|
| 2025 | 15% | 4.5% | 10.5% |
| 2030 | TBD | 6.75% | TBD |
Major providers like APS and SRP have already surpassed 15% renewable generation through aggressive solar and wind power investments. With the state‘s energy choice initiative poised to deregulate energy provision, the door is open to even more competition driving solar‘s future growth.
Annual Arizona Solar Installations
With solar arrays expanding at a 40% annual clip over the past 5 years, Arizona is poised to maintain momentum toward a greener grid. As renewable targets continue rising in the coming decades, solar will become an even smarter investment.
How Quickly Do Solar Panels Pay Off in Arizona?
Wouldn‘t it be great to know exactly when all the upfront costs of your solar panel system will pay for themselves?
Use this interactive calculator to estimate your payoff timeframe based on system specifics like costs, electricity rates, and available tax credits:
With the average payoff period for solar owners in Arizona falling between 8 to 11 years including incentives, you stand to reap over a decade of electricity savings while increasing your home’s value.
Finding the Best Solar Installer Deals
While Arizona provides a sunny outlook for solar savings, actual incentives and electricity prices vary across providers. I made sure to request quotes from over 5 top-rated local installers to compare pricing. Here’s a snapshot of cost differences on 6 kW installs:
Arizona Solar Installer Price Comparison
| Company | Pre-Incentive Price |
|---|---|
| Sunrun | $19,162 |
| Tesla | $15,574 |
| Sun Solar | $14,998 |
| Solar Optimum | $13,921 |
| Brightstar | $12,503 |
Keep in mind that major pricing factors like equipment bundles, financing terms, and installer experience still impact overall value significantly. Having an open conversation with each company to explain your constraints can lead to discounts or package customization.
I ultimately chose the Brightstar system offering robust equipment like SolarEdge inverters bundled with monitoring software and 25-year labor/production guarantees. Their assistance securing both the federal tax credit and local utility rebates made the out-of-pocket expense far more manageable.
The journey to solar savings may seem daunting, but Arizona homeowners have an incredible opportunity to secure their energy future with the power of the sun! Let me know if any other questions come up in the comments.
