Arizona Solar Panels: Solar Power Rebates, Tax Credits, and Incentives
Sedona, Arizona
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 special solar deals page. You can get discounted pricing as low as $5,000/kW! This is paired with strong Arizona incentives below.
2012 Update
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 panel 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 panel installation is about 10 years. While that’s pretty good, there’s room to improve.
Arizona Solar Panel 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.
Arizona Solar Panel Rebates
You can tell Arizona is really trying to encourage its residents and businesses with a very generous solar panel rebate program. Arizona’s solar panel rebates give 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! Arizona’s solar panel rebates are all pretty generous.
Check your utility’s handouts below:
| Utility Company | Rebate amount | Cap |
|---|---|---|
| TEP | $750/kw | $15,000 |
| APS | $750/kw | $75,000 |
| SRP | $1350/kw | $6,750 |
| Electric District #3 | $1350/kw | $10,000 |
| Trico | $1500/kw | $15,000 |
| UES | $1600/kw | No more than 50% of costs |
| Mohave Electric Cooperative | $2000/kw | Lesser of $30,000 or 40% of costs |
| Sulphur Springs Valley EC | $2000/kw | 40% of costs |
This means for each kW you install, you can expect to receive the amount listed next to your utility up to the cap amount.
Arizona Solar Panel Tax Credit
Every resident in Arizona who installs solar panels gets a $1000 State Tax Credit that you can use towards 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. A sample calculation follows below.
Arizona Solar Panel Tax exemptions
Arizona solar panels also get two other great benefits from the state: 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 Arizona’s utilities don’t hit their targets for solar panels, 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 solar panels are finally governed by a net-metering standard policy, and that’s great. 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.
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 solar panels can generate in Arizona, 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 Arizona solar panels to be installed and 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!)
- Arizona Solar Panels State Rebate: subtract $7,500 ($1,500/kW x 5)
- Arizona Solar Panels 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.
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I am a strong proponent of using all options available to reduce utility costs. the one BIG complaint I have with the current rebate / tax structure is that there are more options available to reduce initial out of pocket costs for companies than individuals. The exact size solar system that I install will cost me more out of pocket than a company. there are more homes than businesses. shouldn’t the push to solar or wind power be directed, at the least, equally ? Reducing CO2, reducing stress on the existing grid, etc is the same regardless of where similar solar systems are installed. If you ask me, all new homes in southern CA, Nevada, Arizona, New Mexico, Texas should come with solar panels on the roof. With government restrictions on new power plant construction, local battles against their construction (NIMBY), power companies should PUT them on any home that agrees to them. Run the house and any and all excess is pushed to the grid for everyone else to use. 8 hours a day I’m at work so little if any electrical device is in use.
What gets me is that the utility companies control the rebates. Sulpher Springs won’t rebate anyone who wants a off-grid system. The lack of net-metering also means that during the day when I’m at work, the majority of the electricity generated by my system will go into the grid, to someone else’s building, and Sulphur Springs will get paid for my electicity that I won’t get credit for.
In the last 3 years I’ve wittnessed the cost of a solar systems for residential use DOUBLE in price! What the heck do you think the reason? We are being ripped off again! Solar companies are gouging the customer and taking all the incentives up front and the customer ends up paying through the nose. I hate these people and I hate the utilities companies. I’ll build my own system and screw you all!
The new net metering law went into effect, and now Sulpher Springs will have to pay for any power that goes back into the grid, as long as you didn’t sign the agreement that went with the rebate on the system. Don’t take the incentive, and you get the net-metering pay.
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Can you please explain what Tennessee has to offer in regards to incentives for larger commercial solar pv systems.
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Although the current incentives are good (and real money), the payback analysis is flawed (as of 2009). If you are on any of the TOU plans, power you generate is credited to the future purchase of the SAME TIME CLASS of power. That is, power you generate at on-peak times is not applied to off-peak use. APS has only one plan without this gotcha – their “Standard” rate. Also, for every KWh you buy from APS, you pay for “system benefits”, transmission, and delivery charges per KWh but you don’t get paid back for these charges when you put the power back on the grid. You only get credited for the “generation” part of the calculation. Unfortunately, the bottom line is that the power company is in business to make money and they will play numbers games as necessary in order to make what they want from you.
Good info, Richard. Thanks! These are always estimates we do with software, but they do get out of date. The differences here, as you noted, could extend your payback time, depending on your usage, time of usage, and utility. Thanks again for commenting!
We are thinking about building in oracle, az but the electrical utility, BIA San Carlos Irrigation Project, does not allow net metering. I believe the only utility in state after january 1, 2010 to not allow. Anyone with suggestions on how to get SCIP on board?
Lars Pettersen, Peoria, Arizona. Very informative except for SRP caps out at $13,500 where APS goes to 50% up to $75,000 Great webb site!! From American Way Solar, Lars Pettersen
I’m penciling out whether to pay APS the $15k they want to bring power to my site (so I could install a grid-tied system)or to go with an off-grid system. It comes down to whether APS will make good on the $2/watt rebate they advertise for off-grid systems. Have you heard of any difficulties getting this rebate? Thanks.
Brad, We haven’t heard of any issues. But just be sure that you or your installer comply with all of the code requirements and any other regulations. If you put panels up and claim to them that they will generate so much power, be sure that’s accurate and that your angles, wires, and other inefficiencies are taken into account. Don’t try to fudge anything, because there’s a good chance they will audit all of your figures before giving you the rebate with a site visit.
Hope that helps.
I signed a contract for solar panels and paid half in October. Installation was promised in December. Panels were not delivered, so installation is delayed until well into 2010. I want to claim the tax credits for 2009–can I?
Paul,
I’d love to tell you one way or another, but this is beyond our expertise. Please consult with a tax person. Sorry.
If I were a residential solar panel installer , which top three state should I be targeting ?
Check out our State by State report card and go for the top. Although that data’s a little old now, much still applies.
Just to give an update, the excellent incentives by the larger utilities have been severely slashed which is bad news for we installers trying to sell solar. APS has gone from $3/watt up to 50% of the system down to $2.15/watt which was supposed to last for awhile, however, even though this was news was just released we already received an email from APS stating that with all of the apps put on hold while the corporation commission ruled on its request to lower its incentive, the 3 megawatts set aside for that $2.15/watt have already been used up and so now they are at $1.95/watt for any future systems. SRP’s i thought was great to, until I realized that they have a cap of $13,500, which makes their true rebate average about $1.75/watt or so depending on systems size. So AZ is not rocking near as hard as it did. Just thought you would like the update.
We are planning to install a Solar-Wind Off-Grid system in the near future. Location: Navajo County, near Holbrook.
I figure my out of pocket will be $25k (Plug & Play).
We are Canadian.
Are we exempt from Arizona / USA Solar/Wind Rebates, or are we able to receive these Rebates as well?
We are planning on a permanent move to the state, eventually becomming Nationalized Citizens.
Any advice is greatly appreciated.
Michael,
You are eligible to receive an Off-Grid rebate as long as you are a current subscriber to the local Utility Company. Navajo County, is that APS? Are you currently tied to the grid? You can start by contacting your utility company. If you are not a current rate-payer then I would find out who your provider would be and contact them. Sorry I couldn’t be much help. Feel free to check out http://www.dsireusa.org for all rebate information.
I bought a 5000 Watt solar sytem for my house in Prescott Valley. It was turned on 9/10/2010 and has generated some power evry single day even in heavy rain and snow. From Sept thru Dec it has generated more power per month than used from APS. My electic bills for those months was the minimum of $9.50. I just recieved by net metering results from APS which shows 830KWh credit for the year and a $51 credit to my account for only 3.5 months (the worst 3 months for solar). Bottom line, APS will be paying me!
Hey thanks for the great solar article. I am doing some research for my blog and this really helped.
“State Rebate: subtract $7,500 ($1,500/kW x 5)”
I live in Arizona, I am installing a PV system, and I have never heard of this state rebate. I went to the DoR website, and still couldn’t find. Can you please pass me a link?
I second Adams’ comment. I study solar energy policy in AZ, and have never heard of any state rebate, let alone one for as much as $7500. Please share the source of this rebate, or recalculate to give an accurate cost of solar installation in AZ. Thank you.
I was talking with a mate last week that’s studying to become a domestic electrician, I think he is in an apprenticeship right now. They couldn’t
stop complaining about the job though, it appears a lot of his job was
in poor conditions or he ended up carrying out a lot of paperwork.
He will get used to it all!
APS rebate is not correct. It’s only $0.10 a watt now.
http://www.aps.com/main/green/choice/choice_66.html