Arizona State Solar Power Rebates, Tax Credits, and Incentives

sedona Arizona State Solar Power Rebates, Tax Credits, and Incentives

Updated 1/2012

Solar Legislative Score:  Arizona State Solar Power Rebates, Tax Credits, and Incentives Arizona State Solar Power Rebates, Tax Credits, and Incentives Arizona State Solar Power Rebates, Tax Credits, and Incentives Arizona State Solar Power Rebates, Tax Credits, and Incentives

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.

AZ Summary final Arizona State Solar Power Rebates, Tax Credits, and Incentives

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:

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.

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:

Arizona ROI Arizona State Solar Power Rebates, Tax Credits, and Incentives

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:

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

Read the 19 brilliant comments below or add yours!

Pingback on November 10th, 2007.

[...] Arizona [...]

Tony Identicon Icon Tony
Comment on January 7th, 2009.

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.

John Identicon Icon John
Comment on January 18th, 2009.

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.

Scott Smusz Identicon Icon Scott Smusz
Comment on April 8th, 2009.

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!

Guin Identicon Icon Guin
Comment on August 3rd, 2009.

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.

Pingback on October 2nd, 2009.

[...] Arizona [...]

Pingback on October 6th, 2009.

[...] issues that need to be addressed before we have a uniform policy. One site for up-to-date info is http://www.solarpowerrocks.com/arizona/. Much of Cochise County obtains its electrical energy from Sulphur Springs Valley Electric [...]

Forrest Deleot Identicon Icon Forrest Deleot
Comment on October 8th, 2009.

Can you please explain what Tennessee has to offer in regards to incentives for larger commercial solar pv systems.

Pingback on October 19th, 2009.

[...] same could be true if you’re buying solar in Los Angeles, Boulder, Colorado, Philadelphia, and Phoenix, Arizona. The local solar rebates and incentives in these and other cities are a  great investment, yet a [...]

Comment on November 18th, 2009.

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.

Comment on November 19th, 2009.

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!

jerry Identicon Icon jerry
Comment on December 1st, 2009.

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 Identicon Icon Lars Pettersen
Comment on December 21st, 2009.

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

Brad Traver Identicon Icon Brad Traver
Comment on December 27th, 2009.

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.

Comment on December 27th, 2009.

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.

Paul Identicon Icon Paul
Comment on January 1st, 2010.

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?

Comment on January 1st, 2010.

Paul,

I’d love to tell you one way or another, but this is beyond our expertise. Please consult with a tax person. Sorry.

Mallik Identicon Icon Mallik
Comment on February 16th, 2010.

If I were a residential solar panel installer , which top three state should I be targeting ?

Comment on February 16th, 2010.

Check out our State by State report card and go for the top. Although that data’s a little old now, much still applies.

Terri Identicon Icon Terri
Comment on May 4th, 2010.

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.

Michael Identicon Icon Michael
Comment on August 7th, 2010.

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.

Comment on September 10th, 2010.

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.

George Identicon Icon George
Comment on January 4th, 2011.

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!

Comment on January 28th, 2011.

Hey thanks for the great solar article. I am doing some research for my blog and this really helped.

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