Harnessing Arizona’s Abundant Sunshine with Solar Incentives and Rebates
Arizona is renowned for its year-round sunshine and vast desert landscapes, making it an ideal location to harness solar energy. In fact, Arizona ranks as the sunniest state in the nation, leading former Governor Janet Napolitano to dub it “The Persian Gulf of solar energy.” With generous solar incentives, rebates, and the federal solar tax credit, Arizona homeowners have compelling reasons to embrace solar power.
Arizona’s Solar Incentives, Rebates, and Benefits
Federal Solar Tax Credit
Arizona property owners can take advantage of the Federal Investment Tax Credit (ITC), a substantial incentive for purchasing solar panel systems outright. Currently, this credit amounts to 26% of your system’s cost, but it will drop to 22% in 2023. If you invest in a solar panel system by the end of 2032, the federal tax credit is 30% of the total cost, including equipment, labor, and permitting. For example, if your solar energy system costs $20,000, you’d be eligible for a $6,000 federal solar tax credit (30% of the cost). By 2033, the federal tax credit will decrease to 26%, making it advantageous to go solar sooner.
Renewable Portfolio Standards
Arizona’s Renewable Portfolio Standards (RPS), also known as the Environmental Portfolio Standard (EPS), mandate that utilities acquire a certain percentage of the state’s power from renewable energy sources like wind, solar, biomass, and geothermal by 2025. The goal is for 15% of Arizona’s power production to come from renewable sources by that year. To meet these standards, utilities often offer solar incentives to homeowners to encourage solar panel installations instead of paying fees.
Solar Energy Carve-Out
Within the RPS, the solar carve-out specifies the portion of energy that must come from solar by a specific date. In Arizona, the solar carve-out requires 2.25% of energy to be solar-generated by 2025.
High Electric Rates
Arizona’s electric rates rank 18th in the nation for high costs, with only 32 states having cheaper rates. One study found that Arizona has the second-highest monthly electricity bill, averaging $131.40. Investing in solar energy can be a cost-effective solution, making Arizona’s expensive electricity prices an appealing incentive for solar power adoption.
Net Metering and Net Billing
While full retail net metering is no longer mandatory in Arizona, existing solar homeowners may be eligible to retain their net metering rates for a set period, depending on their location and utility. For new installations, utilities offer net billing, which credits homeowners for excess energy at a rate slightly lower than the retail electricity rate.
Residential Solar Energy Credit
Arizona homeowners who install solar panels can claim a residential solar energy credit, allowing them to save on their system’s cost. This state tax credit provides a 25% rebate, capped at $1,000. If the credit exceeds your income tax owed for the installation year, you can carry it forward for up to five years, complementing the 30% federal solar tax credit.
Sales Tax Exemption
Solar panel purchases in Arizona are exempt from sales tax, covering 100% of the tax on qualified equipment like rooftop solar panels and solar water heaters for residential use.
Property Tax Exemption
The Energy Equipment Property Tax Exemption ensures that homeowners won’t face higher property taxes due to the added value of their solar energy system. To claim this exemption, provide your district appraiser with procurement and installation records at least six months before property assessments for the installation year.
With Arizona’s abundant sunshine and attractive solar incentives, now is an excellent time for homeowners to explore switching to solar power. Discover which Arizona solar incentives and rebates you qualify for today!
