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Phoenix, Arizona Solar Power for Your Home – Leases, Loans, Rebates, and Incentives

The Phoenix metro area is often referred to as “the Valley of The Sun,” and if you live there, you’ll probably never forget that. The place gets so much sunshine that it makes seeing a rain cloud like witnessing a miracle (unless that miracle knocks your power out for 2 days). Living in Phoenix in the summertime is sometimes almost like sharing a traumatic experience with 1.4 million of your closest friends, but at least you’ve got Sonoran hot dogs and Sugar Bowl ice cream to help make it through.

It’s not all bad, of course, and our favorite thing about all the sun in Phoenix is that it makes solar power such a smart idea. Going solar in Arizona’s Urban Heart means super-low power bills and a big profit over the life of a system. Solar is such a good deal here that even APS, your friendly neighborhood electric monopoly, has gotten in on the deal by offering solar for free to some homeowners in its service area.

With all the financial benefits, solar makes sense here—and not just for people with thousands of dollars to spend. In fact, you can go solar for as little as $0 down with a solar lease. Or, if you have some equity in your home, you can take out a loan to pay for solar that will be paid back with the savings. And of course, there’s always the option to purchase a system outright and reap all the financial benefits from day one.

Your Solar Strategy in Phoenix

Figuring out the best way to go solar can be a little daunting. From loans and leases to power-purchase agreements, there are a lot of options out there. To help you pick the one that might be best for you, we’ve created the handy decision tool below.

We’ll ask you a few simple questions about you and your home. Once you’re done, we’ll recommend the option that we think will work best for you. Further down this page, we provide cost estimates and example return-on-investment calculations for all the various options:



Lifetime Return For 3 Different Methods of Going Solar in Phoenix, AZ

The chart above shows the 25-year returns for an investment in solar whether you choose to purchase a system with cash or pay over time for a lease. As you can see, the purchase option leads to the highest dollar-amount returns over time, but it also requires a big up-front investment. If you take a home equity line of credit (HELOC), though, your payments over 20 years will be offset with the electric bill savings and SREC sales. You’ll still get the 30% federal tax credit for solar—and Arizona’s $1,000 rebate—just like if you purchased a system. That means you won’t have to put any of your own money down to get solar, and although you’ll see less “profit,” you’ll still save a ton.

The final option represented is a lease, and it’s definitely the simplest. Instead of dealing with loans and investment rates of return, you can sign a $0-down lease and start saving money immediately. In the first year, the savings are only about $10 per month, but as electricity prices rise, so do the savings. It means less money over time than the other methods, but it does save a lot of complications and still saves you over $6,000 in 20 years.

Let’s walk you through how each option could work for you:

 Option 1: Solar Lease or Power-Purchase Agreement

Solar leases and Power-Purchase Agreements (PPAs) can be really great for people who don’t qualify for a tax break or who want to incur less risk (with less reward). The company that installs your system will own the panels and collect the tax credits and SREC sales to make it worth their while. You’ll get cheaper energy bills and a happy feeling from the environmental benefits you’re bringing to the world.

Here are some of the advantages of a solar lease in Arizona:

  • No money down
  • A monthly payment that rises by a smaller increment than electricity prices do
  • The lease is transferable if you decide to sell your house.
  • You just have to find an installer, sign on the dotted line, and then save money
  • The installer takes care of everything, including maintenance and repair

With a lease, you sign an agreement to pay a low monthly price for 20 years. The installation company owns the system, but you get all the electricity it provides, which reduces your electric bill by about the same as your lease payment. Over time, your lease payment rises by a small amount (usually 2.5%), while the cost of electricity historically goes up by about 3.5% per year. That means by the last year of a 20-year lease, you’ll be saving about $520 on electricity, just for having a roof!

A PPA is similar to a lease in that the installer puts their panels on your roof, but instead of a fixed monthly payment, you agree to buy all the electricity the system generates for a little cheaper than the retail price. You pay a little less now, and, just like with the lease, you save more in the future as your costs rise slower than utility rate increases, somewhere between 1% and 2.5% per year.

Here’s the other major benefit of leases and PPAs: because the installation company owns the system, they insure it, and they do all the maintenance and repairs as needed. That takes away a ton of responsibility for you. All you have to do is get quotes from installers in your area, sign up for a lease or PPA through them, and get solar for no money down! You can sign a 20-year agreement with a low monthly payment that will lock in your savings long into the future.

Our example assumes your agreement will run for 20 years with a 2.5% annual increase in payments. You put no money down. And though the savings aren’t major in year 1, they add up over the term of the lease, and each year, the savings get a little bit bigger as electricity rates climb. By the end of the lease, over $6,000 of your money will stay in your pocket. Talk about a sweet deal!

 Option 2: Solar Purchase

Okay, so you’ve got some cash and you’re ready to buy. An outright purchase is the option that returns the most money over time, because you own the system from day one and reap all the benefits. You’ll get the 30% Federal tax credit, Arizona’s own tax credit, and great electricity savings, all of which add up to a decent payback time and good return on your investment.

In our example, you’re paying the $20,000 cost of a system up front, but at the end of year 1, your tax credits and energy savings will reduce that cost by nearly $8,000. When all is said and done, this is one of the most solid investments you can make, with tens of thousands in possible returns. That being said, even if you have the money, you should look into option 3 below. The advantages of taking a loan to pay for an income-generating asset cannot be overstated; it’s just a really amazing investment.

If you’re the kind of person who can afford a purchase and you don’t like paying interest (even if it makes you more than you pay), read on:

Here’s how the numbers work for a solar purchase in Phoenix:

  • Installing a typical 5-kW solar system should start at about $20,000. Don’t worry – that number is going to get way smaller after year 1.
  • First, the state’s tax credit will put $1,000 back in your pocket. You can take the credit over two years if you don’t owe $1,000 in state taxes this year.
  • And the federal government will give you a 30% tax credit, too. That’s another $6,000 off. Just like the AZ credit, you can take it over two years.
  • The electricity you’ll save in the first year of operation would have cost $936. That’s enough to pay for date night once a month.
  • All those savings and incentives mean the first-year cost of your 5-kW system is just $12,064.
  • With a conservative estimate of 3.5% per year for the future rise of electricity prices, your investment will be fully paid off after 11 years, and you’ll be making a big profit until 2039 or later.
  • Your total profit in our 25-year estimate will be a stupendous $23,457! The rate of return on your investment will be 9.41%, which is more than one-and-a-half times as good as an investment in an S&P 500 index fund.
  • And don’t forget… your home’s value just increased by close to $19,000, too (your expected annual electricity savings over 20 years), and thanks to Arizona’s property tax exemption for solar, you won’t pay taxes on any of it!

Remember: these figures are estimates. Your home is unique, and how much money solar will save you depends on that uniqueness. Thankfully, we know some experts in New Jersey. Just sign up for personalized savings estimates and one of them will be more than happy to go over all those details and help you craft a plan to get the maximum savings from a solar power system in your home. Your quote is 100% free, so go ahead and shop around… grab two or three, or five, and compare all your possible options.

 Option 3: Solar Purchase with HELOC

This is without a doubt the best option when it comes to percentage return on investment. That’s because it relies on using someone else’s money for the purchase price, which is paid back over time. This assumes a few things about you and your current situation:

  • You can get a home-equity line of credit (HELOC) for $20,000, with a fixed rate of 5% or lower and a 15-year repayment period.
  • You’re willing to make payments that cost about $75 more than your energy bill savings (the difference will get smaller over time).
  • You love making money without much risk.

The reason this works so well is that you don’t have to put any money down, and your loan payments are about half covered covered by your monthly electricity savings. The payments add up to about $158/month to start, while your savings will be about $78/month. That means you’ll actually be spending $80/month to get solar, which might seem like a bummer, but it’s all in the name of big savings down the line.

Once the loan is paid off in year 15, the profits from your system will skyrocket, ending up at almost exactly $15,000 over 25 years. If you can afford to put a few thousand down and take a smaller loan, you can avoid a bunch of interest and reduce your loan payments to about what the bill savings are. That’ll increase your profit, too.

Here’s how the numbers pencil out for a Arizona solar purchase with a HELOC:

  • Installing a typical 5-kW solar system should start at about $20,000. That’s the amount you’ll need from a HELOC.
  • At the end of the year, you’ll have paid $962 more than your energy savings, but you’ll get both the state and federal tax credits. That’s $7,000 you won’t be paying in taxes this year.
  • All those savings and incentives mean you’ll actually come out way ahead after the first year. You’ll have solar on your roof and an extra $6,483 in your pocket.
  • Each year as electric rates climb, the difference between your loan payments and energy savings will decrease by about $35, which means you’ll feel a little richer as you go.
  • When your loan’s paid off in year 15, you’ll own the panels completely and be saving $1,600 per year.
  • Your total profit in our 25-year estimate will be an estimated $14,988! See? We told you the monthly payments were worth it.
  • Don’t forget… your home’s value just increased by close to $19,000, too (your expected annual electricity savings over 20 years), and thanks to Arizona’s property tax exemption for solar, you won’t pay taxes on any of it!

Remember: these figures are estimates. Your home is unique, and how much money solar will save you depends on that uniqueness. Thankfully, we know some experts in New Jersey. Just sign up for personalized savings estimates and one of them will be more than happy to go over all those details and help you craft a plan to get the maximum savings from a solar power system in your home. Your quote is 100% free, so go ahead and shop around… grab two or three, or five, and compare all your possible options.

Additional Information about Solar Power in Phoenix

Phoenix Solar Power Rebates

Arizona has had a long history of offering good rebates for homeowners who go solar, but those days are sadly over for APS customers. The company currently offers no rebates for rooftop solar, but don’t get too sad about that. The reason there aren’t any is that solar equipment is being produced more widely than ever before, and prices for solar have fallen by huge amounts over the past decade. Those declines in cost are directly related to the previous availability of incentives (like rebates). So the incentives worked, and solar is cheaper than ever before!

Phoenix Tax Credits for Solar

Arizona has long had a pretty generous personal tax credit for homeowners who install solar. The state offers a credit of up to 25% of system costs, but it’s capped at $1,000, which effectively means anyone who installs a rooftop solar system more than a few panels in size will get a $1,000 tax credit. The credit can be taken for up to 5 years if you don’t owe $1,000 to Arizona in the first year.

Phoenix Tax Exemptions for Solar

Arizona also recognizes the value of solar with some really sweet tax exemptions. All sales tax is waived on a solar purchase, saving you over a thousand dollars at the time of sale. And with the state’s property tax exemption for solar, the value added to your home by the solar panels on your roof will not raise its assessed value. That’s great, considering the research from around the country that shows buyers are willing to pay more for a house with solar. 20 times the annual utility savings, in fact.

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