A Comprehensive Guide to Arizona Solar Incentives (2024)

Introduction

With an average of 300 days of sunshine per year, Arizona is an ideal state for harnessing solar energy. To encourage the adoption of solar power, Arizona offers several incentives that can significantly reduce the cost of installation and maximize long-term savings. Here’s a comprehensive look at the major solar incentives available in Arizona.

Key Takeaways

• Arizona offers a state tax credit covering 25% of solar installation costs, up to $1,000.
• The federal Investment Tax Credit (ITC) provides a 30% tax credit on the total cost of a solar system.
• Solar energy equipment in Arizona is exempt from property and sales taxes.
• Local utilities offer additional incentives, such as rebates for installed solar capacity and energy saved.
• Arizona’s net billing program allows homeowners to receive credits for excess power generated.
• The average payback period for solar panels in Arizona is about six and a half years, with significant long-term savings.

Arizona State Tax Credit

Arizona residents can take advantage of a state tax credit that covers 25% of the cost of solar installation, up to $1,000. If the tax credit exceeds your tax liability for the year, the unused portion can be carried forward for up to five years. However, this credit does not apply to residents who lease their solar systems or participate in a Power Purchase Agreement (PPA).

Federal Tax Credit

In addition to the state tax credit, Arizona homeowners can benefit from the federal Investment Tax Credit (ITC), which offers a 30% tax credit on the total cost of a solar system. For example, a $15,000 system would yield a $4,500 tax credit. Note that this credit is non-refundable, so if it exceeds your tax liability, the remainder can be carried over to the next year. The ITC is set to decrease to 26% in 2033 and 22% in 2034 and is scheduled to expire in 2035 if not renewed.

Tax Exemption on Property Energy Equipment

Arizona provides a property tax exemption for solar energy equipment, ensuring that the added value from installing a solar system does not increase your property taxes. This exemption covers various types of solar equipment, including solar panels, solar water heaters, and solar thermal process heat systems.

Sales Tax Exemption on Energy Equipment

The state also offers a full sales tax exemption on eligible solar equipment, excluding batteries and other non-essential components. This exemption applies to the initial purchase and installation of solar devices such as wind-electric generators and solar photovoltaics.

Local Incentives

Various local utilities in Arizona offer additional incentives to encourage solar adoption:

• Mohave Electric Cooperative SunWatts Renewable Energy Incentive Program: Provides a $0.05 rebate per watt of installed solar capacity, up to $2,500.
• Trico Electric Cooperative SunWatts Incentive Program: Offers a rebate of $0.40 per kWh of energy saved with solar water heaters for the first year.
• Sulphur Springs Valley EC-SunWatts Rebate Program: Gives a $0.50 rebate per kWh of energy saved with solar water heaters for the first year.

Net Billing

Arizona’s net billing program allows homeowners to receive credits for excess power generated by their solar systems. Unlike net metering, which credits at retail rates, net billing credits are based on the utility's avoided cost. Here’s how to enroll:

1. Apply for interconnection with your utility company after your solar system is installed.
2. Once approved, sign a net billing agreement outlining the terms.
3. A bi-directional meter will be installed by your technician to track energy usage and generation.

Projected Solar Savings

Combining state and federal tax credits, net billing, and local utility incentives, Arizona residents can achieve substantial savings on solar installations. The average payback period for solar panels in Arizona is about six and a half years, after which homeowners can enjoy over 18 years of free energy, given that most solar systems last 25 years or more. Over the lifespan of a solar energy system, Arizona residents can save thousands of dollars on energy costs.

Conclusion

By leveraging these incentives, Arizona homeowners can make solar energy an affordable and financially rewarding investment. With the state's abundant sunshine, comprehensive tax credits, and rebate programs, now is the perfect time to consider installing solar panels. Not only can you reduce your carbon footprint, but you can also enjoy significant financial savings over the life of your solar energy system. For personalized advice and detailed assessments, consult with a solar expert to get started on your solar journey today.