Are solar panels in Arizona worth it?

A solar energy system is a good investment to cut down your electricity bills and gain your energy independence. Over time, you will be able to return on your initial investment and see the rewards through your savings. Arizona is great for solar energy, and we’ll explain how beneficial solar is if you’re living in the Grand Canyon State.

Arizona’s Climate and Location

One of the biggest advantages to going solar in Arizona is the amount of sunlight you get compared to any other part of the country. According to data from Current Results, Yuma gets 90% of the sun per year with 242 sunny days. This is backed up by data from the World Population Review that notes Arizona as having 5,755 kilojoules per square meter (kJ/m^2) of average annual sunlight. This is important as large amounts of sunlight, especially peak sunlight hours will yield the most efficiency and power output from your solar energy system.

Arizona’s Net Billing Program

Saving money on your power bills is the main draw of solar energy. The energy your solar energy system generates will offset the amount you draw from the grid. If your solar energy system is grid-tied, the extra energy your solar energy system generates will be fed into the grid. The amount of energy you put into the grid is counted as credits. These credits are used whenever you draw power from the grid. This is the basis for the net-metering policy which is common throughout the U.S. 

While Arizona does not offer net metering, it does offer a net billing program. The net billing program is similar to net metering policies. What’s different is the amount the electricity you have produced is worth. Typically, net metering will price the electricity you generate at full retail value. Net billing, however, puts this amount typically below market value. As the state’s investor-owned utilities are required to offer a different compensation rate structure. While you may not earn as much with your system compared to other states, you will still see plenty of savings on your electricity bills.

Your utility company will purchase your excess solar at an “excess generation credit rate” which is less than the retail price of electricity. The purchase comes in the form of credits, which count toward your future electricity use from the grid. Your energy will generally be worth between 75% – and 90% of its full retail rate. Although this amount will depend on your utility company’s retail rate of electricity and excess generation credit rate.

Instantaneous netting

It should also be noted that the program also has Instantaneous netting. This means that your utility will count the energy you produce and consume in short intervals, such as every hour. This also affects your solar savings, as generally, net metering will count credits monthly or even yearly. However, instantaneous netting will start counting and using these credits as soon as you switch between generating excess electricity and consuming electricity.

While these policies aren’t as solar-friendly as net metering, you will still see savings on your electricity bills. To give you an idea of the savings you might get from solar in a month with net billing, we’ll give a hypothetical scenario. Say your solar energy system produces about 24 kWh of electricity per day and your regular bills before solar were $120. Your utility company’s excess generation credit rate is about 80% of the retail cost. With instantaneous net billing, about 12 kWh fully offsets the amount you used for the whole day. The remaining 12 kWh is credited to your account at the excess generation credit rate, which amounts to $34.56 in excess credits. Combined with the roughly $43.2 saved directly from the solar energy system, your savings total $77.76 in a month. Dropping your $120 down to $42.24 before miscellaneous fees. This is still a considerable amount of savings despite lower rates than net metering.

A solar plus storage system will further increase your savings.

Having an energy storage solution in your solar energy system will help boost the amount of savings you can net with your solar energy system. Due to the lower payout of the net billing program, it would be better to store the energy you generate and use it when you can’t generate power. This way, you will make the most out of the energy you generate, rather than getting less value out of it through credits.

Solar Incentives in Arizona

Net billing isn’t the only incentive that Arizona provides for solar energy. There are federal and state incentives you can use to reduce the costs of purchasing and installing your solar energy system.

Federal Solar Tax Credit (ITC)

You can take advantage of the Federal Solar Tax Credit. This federal tax credit can be claimed on your federal income taxes for a percentage of your solar photovoltaic (PV) system’s cost. The program provides a 26% tax credit for systems installed between 2020 to 2022, and 22% for systems installed in 2023.

Residential Solar and Wind Energy Systems Tax Credit

Arizona’s Solar Energy Credit is available to individual taxpayers who install a solar or wind energy device at their Arizona residence. The credit provides 25% of the cost of their solar or wind energy system, with a $1,000 maximum allowable limit regardless of the number of devices installed.

Tax Exemptions

Purchasing a new solar energy system will let you skip paying sales taxes. This exemption is for 100% of the sales tax on eligible equipment. Residential rooftop solar panels and solar water heaters are just some of the equipment included. You can save up to 5.6% right away.

There is also the Energy Equipment Property Tax Exemption. Which lets you avoid paying increased property taxes when installing a new solar energy system. This is also helpful since a solar energy system also increases the value of your home.

Get started with solar energy today

If you are looking to start your transition to solar energy, we are here to help. Our website also has a free online estimate tool that generates a personalized report for you from a simplified questionnaire. That report will contain the potential savings you can net, and the cost of a solar energy system installed on your property. You can also contact us directly via phone at +1 (844) 354-8387 or via email at info(at)goelitesolar.com for more information regarding solar energy for your property.