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Arizona Solar

Arizona is one of the sunniest places in the United States and boasts over 170,000 solar system installations across the state. As much of Arizona is desert, that’s a lot of solar opportunity. In addition to favourable climate, Arizona state government policies favor solar tax incentives. Despite relatively low energy prices and only moderately encouraging utility policies, the tax incentives and sheer abundance of sun make Arizona a favorable place for businesses and residents to install solar panels and battery systems as an investment.

Below we will list some of those incentives, the utility policies associated with interconnection and setup, and special solar financing plans for solar panels and battery systems in Arizona.

Arizona Rebates and Tax Breaks

Here are more details about the incentives available in Arizona:

• Residential Arizona Solar Tax Credit is the principal solar incentive in the state of Arizona. Residential property owners can be reimbursed 25% of the cost of solar panels, solar systems, solar hot-water heaters, etc. The maximum rebate amount is $1,000, and the credit comes off of your income taxes for the year in which you install the equipment.
• The Solar Equipment Sales Tax Exemption is a tax break where you don’t pay any sales tax on solar panels, systems or related equipment in Arizona.
• The Energy Equipment Property Tax Exemption is a tax break where you won’t pay additional property taxes if your property value increases when you add a solar system (and with solar, your property value does go up!).
• The Salt River Project pays up to $3,600 for battery storage systems if you agree to participate in their battery study.

Other Solar Energy Incentives

The US federal government helps residents and businesses pay for their solar systems. The federal investment tax credit (ITC) allows for a tax deduction of 30% of the cost of a solar system currently. Tax credits can be rolled over if you can’t use the whole credit this year. The ITC cannot be claimed for solar leases or power purchase agreements (PPAs) where the third party financier takes the credits themselves, but that is typically baked into a reduced lease/PPA monthly for you. For the actual US government bill, see 4908 of the HR 133 (It’s a giant file, so watch out!).

If you purchased a $20,000 system, your savings from the federal tax credit would look like this:

$20,000 X 0.26 = $5,200 savings

You also would save an additional $1,000 by taking advantage of the Arizona tax credit. So if you spent $20,000 on that system, your cost would go down to $13,800.

Find out about other residential rebate programs in Arizona such as programs for electric vehicles and battery storage incentives by exploring the Arizona Solar Center website or the Governor's Office of Energy Policy.

Utility Policies

Utility policy factors determine what your utility provider pays you for the excess power you produce and what you save on your power bill by reducing electricity usage. Utility policies have the potential to be the most influential factor of the ROI on your installed solar, but in Arizona policies have moved away from favoring residential solar owners.

Utility Policies

One important policy for solar customers is called Net Metering. Net Metering is a billing mechanism that allows solar customers to push electricity to the grid for credit that can be used later, like at night when your solar panels aren’t generating power. This incentivizes people to go solar, provides clean energy for others to use and prevents waste. Some states have poorer net metering policies than others, meaning that credits may not be able to be rolled over to the next month or year, or that you don’t earn full watt-for-watt credit for your excess energy.

Arizona’s Net Metering program is less than favorable, but it does have one. You are not paid full retail credit for your excess energy. Your export rate ranges from $0.03 to $0.11 per kWh, which is below the going retail rate. Your rate is set when you install your solar system and locked for 10 years. Credits can be carried over into the next month and sometimes into the next year, and you can connect a system up to 100 kW in size - an unusually large system size. The exact details depend on your electricity provider’s policies.

Solar Setup Fees

You must have a bi-directional meter (necessary for Net Metering), which is installed at no cost.

Electricity Prices

Electricity prices in Arizona are on the low end, which is great for homeowners but means that margins for savings are slim for going solar. According to the US Energy Information Administration, the average total cost of electricity in Arizona is $0.117 per kWh for residents. The national average for all states is $0.134 per kWh, ranging from $0.967 to $0.288 per kWh. For most Arizonians this means that solar is an investment that pays dividends in the long-term, not always in the short term.

Rate Design

Rate designs are comprised of monthly fees and either a flat or tiered rate you pay for electricity. Good rate designs, which save you money when you conserve energy, are tiered and have low fixed monthly fees. Poor rate designs have flat rates and high fixed monthly fees.

Arizona is about average when it comes to the quality of its electricity bill rate design. It has many tiered rate programs but low fixed fees (around $10–$15 per month).

You still pay fixed monthly fees when you go solar because you are still tied to the grid. Being tied to the grid is a good thing, because otherwise you might not have power at night or if your system stopped working suddenly. Even if you go off of the grid and rely on a battery source, the high cost of the battery would not outweigh the low monthly fee and the savings obtained from a net metering program.

PACE Programs

PACE stands for Property Assessed Clean Energy and is a financing program for solar projects that is tied to the home instead of the homeowner. The PACE program is not available in Arizona - and there are some solar advocates who say the PACE program could be doing more harm than good to homeowners and to the residential solar industry.

Other Energy Financing

Solar systems can be financed by bank loans, solar installer financing, new home mortgages, energy loans and home equity loans or lines of credit, and of course if you have the liquidity or want to take out a private loan buying in cash works too.

In sum, here are the most advantageous solar incentives in AZ:

Arizona Solar Incentives

Arizona provides multiple solar energy rebates and incentives that help to reduce the overall cost of solar systems. Our EnergyPal Advisors can help you navigate all of the solar incentives available in Arizona and also apply them to the available solar panel offerings.

• Arizona offers a 25% credit, up to $1,000, on a solar, solar-battery or battery system. It’s applied to your owed income taxes.
• No sales tax on solar panels, systems and related equipment.
• No property tax on any increase in property value from installing solar.
• The Salt River Project pays up to $3,600 for battery storage systems if you agree to participate in their battery study.

Understanding the solar industry, advantages and possible risks can be complex and changes frequently, so even after doing your own research if you are not sure - that’s not surprising! If you’re interested in seeing if solar will benefit you, talk to your EnergyPal Advisor about financing solar options in Arizona. We regularly source the best deals and terms for our customers.