Arizona State Solar Power Rebates, Tax Credits, and Incentives

Updated 1/2012

Solar Legislative Score:

Welcome to the Arizona solar incentive and rebate information page. If you have any questions, our network of solar experts are on call to assist you. Simply sign up for personalized assistance on our solar group purchase page. Being part of the program will also entitle you to discounted pricing as low as $5,000/kW. This is paired with the very strong Arizona Solar incentives below.

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. Another thing it’s got is a lot of sun, and thankfully, the Arizona legislator has come through with new solar incentives and (mostly) solar friendly policies. For their efforts, we give them a solid “B”. Why? Well, that’s mostly because the payback timeframe for a residential solar installation is about 10 years. While that’s pretty good, there’s room to improve.

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 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.

State Rebates

You can tell Arizona is really trying to encourage its residents and businesses with a very generous rebate program. We’re talking a Cadillac solar rebate program that gives many residents thousands of dollars of cash towards their purchase price with varying caps based on the installation size of your system.

You’ll notice I said “Many.” That’s because each utility has their own program and most give around $1,500/kw, although people in the Sulphur Springs Valley EC Utility can get $2,000/kw with the SunWatts Rebate Program! They’re all pretty generous.

Check your utility’s handouts below:

This means for each kW you install, you can expect to receive the amount listed next to your utility up to the cap amount.

State tax credit

Every resident gets a $1000 State Tax Credit that you can use towards State income taxes. And of course, you Arizonans also benefit from the Federal 30% Investment Tax Credit, as well. There’s no cap on the federal tax credit, and you’ll deduct that after you subtract your rebate. A sample calculation follows below.

Tax exemptions

A beautiful thing for all you Arizona residents is that your solar purchase is exempt from sales tax, and you will be exempt from higher property taxes due to the increased value of your home when you install solar!

Utility Policies and Prices

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 2.25% of that needs to come from residential sited renewable generation of electricity – like solar panels.

If they don’t hit their targets, they are levied with substantial fees. Therefore, they’re willing to offer those juicy rebates you see above.

We should note, those rebates were a whole lot juicier just 2 years ago. APS customers received rebates of up to $3000/kW in 2009. Now, those residents can expect just $750/kW for 2012.

Why is this? The utilities are confident they’ll be able to hit their targets by 2025 now and aren’t offering residents as much cash. Time to increase those renewable portfolio standards!

The average cost of electricity in Arizona stands now at about $0.11/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 timeframe for solar decrease dramatically.

Net-Metering and Inter-connection

After a long struggle, Arizona finally has a net-metering standard policy, and that’s great. What’s net metering? Why, 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.

Even better, unlike a certain neighboring State (Cough! California. Cough!) Arizona is offering net metering with no limit on the number of customers who can get it. All they ask is that you don’t get more solar than 125% of your current electric needs.

Even better, for that extra 25% of power that your panels can generate, the utility is going to pay you extra cash at the end of the year. The rate is going to vary and has to be approved by the Public Utility Commission, but hey, it’s going to be something. That means that if you go all the way and buy a system that takes care of 125% of your current electric needs, you’ll not only get free electricity, but some spending money on top. Very nice, AZ politicians!  You Rock, mostly.  See more details about the program here.

While that’s good news on the net-metering front, there are fragmented policies in terms of how easy it is to connect to the grid. The bureaucratic headaches haven’t been completely eradicated, but things are getting markedly better for solar installers in Arizona to get installations processed as quickly as possible.

Example 5kW (5000 Watt DC STC) System Return on Investment

How much do all these solar incentives, rebates, and tax credits add up to in Arizona? A bunch. Bags ‘o money, honey. Honest. Let’s take a look at an average 5kW solar installation example in the beautiful solar friendly state of Arizona:

This solar quote is for a homeowner in the Trico utility area and now paying a $100 average electric bill. We’re going to assume an average installed cost before rebates and incentives of $5/watt, due to the recent drop in solar panel prices. Could be more or less depending on competition in your area. So how does that pencil out?

Let me get me my pencil. Wait, what’s a pencil? This is 2012! Here’s how the calculations above work:

• Cost Before Incentives: $25,000 (5kW x $5,000/kW) (Don’t panic!)
• State Rebate: subtract $7,500 ($1,500/kW x 5)
• Arizona State tax credit: subtract $1000
• 30% Federal tax credit: subtract $5,250 (calculated after subtracting rebate)
• Annual electricity savings: subtract $858 annually multiplied by an increase of electricity rates by 1.5% every year thereafter (a 5kW system in Arizona will generate roughly 7800kwh over the course of a year. Since the average price of electricity in Arizona is $0.11/kwh, that amounts to $858 saved per year, or $72 a month in savings!
• Cost after 1 year: $10,392, that’s a bunch better than $25,000!
• Years to Payback: at that current rate of electricity savings annually, you can expect your system to pay for itself in 10 years (Using Net Metering and “Time of Use” TOU rate (Schedule ET-1). That means you get about 80% of your electric costs free after 10 years. Not bad.
• New electricity bill: instead of paying $100/mo, you’re now paying just $28!
• Greenhouse Gas (CO2) Saved: 9618lbs/year, or like not driving 11,500 miles a year, or planting 138 trees!

Other Notes:

• You may save even more, depending on your utility and their net metering program, as mentioned above. As of this writing, the rate isn’t set.
• As always, this quote is general and could be less…or more. Solar is not a one size fits all sort of deal. Therefore, your best bet is to connect with one of our solar experts at One Block off the Grid. They’ll even hook you up with a free customized quote and discounted pricing.
• Your cost will depend on a lot of factors, including your utility, roof type, energy usage, and lots of other things. In fact, check out these 9 ways it could be more expensive.

Consensus

Arizona has come into its own in the solar world and truly encouraging its residents to use its abundant solar energy. We rated her pretty bad in the past, but this year, she’s getting a better 4 suns rating. The reason she’s not getting the full 5 is that we’d like to see the payback timeframe cut to less than 8 years. That seems doable, with a more strict renewable portfolio standard with a solar carve out and a bigger state tax credit. If the tax credit were increased to say, $4,000 instead of $1,000, the payback timeframe would be cut to 7 years instead of 10.

If you have more questions, you can ask them here, but honest, every home is different. The best thing for you to do is to get one of our free customized quotes, and one of our partner installers on the ground can explain all of this and more.  Heck, get 3 quotes and compare. It’s not like it costs you anything but a little time. Free. We like free. You should too.

Click here to get hooked up with a local solar installer for your home or business